Amway has a direct sales recruitment styled business model where independent business owners (or IBO’s) can make money by recruiting other IBO’s into the business. Because of all the recruitment that goes on, I have been seeing people asking is Amway a Ponzi scheme? And if this is what I want to address in this short post.
I will be going over the compensation plan that Amway has in place and will try to explain it as best as possible to make it as easy to understand as possible. I am not affiliated with Amway in any way so I am not going to be making this business seem better than it really is. I will be going over the truth of the matter.
Amway Business Opportunity Review
Amway was founded way back in 1959 and operates in over 100 countries. It is one of the biggest direct selling companies that I know of it. I’m not going to get into all the products and everything, I will save that review for another day, but if you don’t already know Amway has many products in the beauty, nutrition, and home products categories.
The point of this review of course is in the business opportunity that Amway offers. Amway does not sell products and stores, rather they have massive teams of direct sellers running around all over the world selling their products for them. In addition to this they also use a MLM compensation structure which means that IBO’s can recruit in other IBO’s and make money off of what they do. This is the part of the business model that is so alluring. Because you can recruit in other IBO’s to join beneath you and earn money from their work.
The MLM part of Amway is what has so many people questioning its legitimacy and asking whether or not this is just a Ponzi scheme
A Look at The Compensation Plan
When I first started looking into the Amway compensation plan it seemed to very confusing, like many MLM compensation plans are. But it is actually very simple and non-complicated. I think I was just expecting it to be complicated so it seemed as if it was at first. But anyway, here is how it works… Here is how IBO’s make money with Amway.
There are three basic ways to make money with family, making retail sales, signing up preferred customers, and recruiting in new Amway IBO’s beneath you.
When you become in Amway IBO you will be able to buy products at a discounted price. What you can then do is turn around and sell those products at a higher retail price. You will keep the difference between the two prices.
Signing up preferred customers
You will also be able to sign up customers that choose to purchase Amway products on a recurring monthly basis, which are called preferred customers. You will make commissions from their purchases on the recurring basis that they purchase.
And of course the “Ponzi scheme” part of it all… The part where you can recruit in other Amway IBO’s and make money off of what they do. I will get into it more in a second, but basically the point of recruiting in other IBO’s beneath you is to earn more points and to have higher group volume numbers, which you will earn commissions off of.
Its All About Points & Group Volume
For each Amway product that you purchase for retail reselling you will earn PV, which stands for point value. You will also learn PV from the products that your preferred customers by. And… You will also earn PV from the products that the IBOs in your downline buy for resell.
The more points you earn the higher commissions you earn. This is called a stairstep breakaway compensation plan. Here is a table that shows the amount of points earned on a monthly basis and the corresponding commission percentage, or what they call performance bonus.
The commissions that you earn will come from for group volume, which is the volume of products sold from you and your downline. So pretty much the compensation plan is all about getting more points and more group volume. And of course the more group volume that you get the more points you get, so you can see that it really favors recruitment of other IBO’s.
Amway is not a Ponzi scheme because it is not some made-up enterprise that claims to be making money in a way that it really is not. Amway does sell real products and this is how they make their money. Yes, recruitment is a big part of the business but this does not make it a Ponzi scheme.
Amway more closely resembles a product based pyramid scheme, which are pyramid schemes that sell legitimate products as a cover-up for their real purpose. I’m not saying that Amway is one of these, I am just saying that it more closely resembles one.
I don’t in fact think that Amway is a pyramid scheme nor a Ponzi scheme because it has been around for so long and continues to operate legally. There is no way that a massive company like this would be able to fly underneath the radar for so long and not get caught.
It is also worth mentioning that there is no cost to join Amway and there is no minimum purchase requirement.
HOWEVER… This does not make it a great opportunity that you should jump on.
The Reality of the Amway Business…
When you look into MLM opportunities like this they always seem so amazing. It is very luring to think about all the money that you can make by recruiting in other IBO’s and earning money off of what they do. However, what none of these MLM opportunities tell you is that they are harder to make money with. Let me explain.
With MLM’s like this commissions flow from the bottom of the pyramid to the top. The amount of money you make is largely dependent on how big your downline is. And with a pyramid -like structure such as this there are always going to be many more people at the bottom with little to no downline, then at the top receiving tons of commissions from the work of their group. These people at the bottom will have money being taken away from them and paid to their up-line… Which makes it harder for them.
I review mlm opportunities all the time and it is always the same story when it comes to this. There is a long list… Herbalife, It Works, Shakelee, Youngevity, and many money… and they always have a very uneven income distribution with very few making the majority of the money.
So while there is a lot of potential to make tons of money on opportunities like this, they are much more difficult than they seem and their structure pretty much ensures that most people are going to struggle and fail, which is why MLM’s like this have such high turnover rates.
Conclusion on Amway – Good Opportunity or Not?
Not a Ponzi scheme or a pyramid scheme… but is it worth joining?
MLM’s like Amway are good opportunities for some people but I would say they are not for the majority of people. It takes a certain type of person to be good with a business model like this at relies so much on recruitment. The bottom line is that if you want to make good money with this you’re going to have to recruit and if you do not think you would be good at recruiting, then this might not be a good fit for you.
Personally I avoid MLM’s for this very reason. I wouldn’t be any good at recruiting so they just would not be worth it for me. But the decision is up to you if you want to join.
Something else that you might want to look into if you are looking for a work-from-home job is how I make money online. I make a living online and I enjoy what I do. Here is a guide I wrote on what I do, how it all works, and how others can get started if they are interested.
Questions, comments, concerns? Leave them below in the comment section and I’ll get back to you soon ?