- Business and Employment
Amway System: History, Money, Points, Court Cases & Information
History of Amway
Amway was started by Rich DeVos & Jay Van Andel in 1959 in Michigan. Originally the company sold little more than soap powder (SA8) and LOC cleaning liquids.
The Old Amway
The older generation would probably remember Amway better as a group that sold cleaning supplies and forced you to buy large amounts of stock and sell them from your garage. There wasn't a lot of organization or system and if you didn't sell your stock you were left with a lifetime supply of cleaning products, not much money and often, few friends.
The New Amway
In the year 2000, Amway came under new management from the younger generation. Amway officially became an online business. Instead of forcing Amway members to buy stock wholesale then sell it on, often leaving them out of pocket, Amway now allows members and customers to simply order online, with delivery straight to your door.
Customer - Someone who buys from Amway at retail rates only and is not eligible for any discounts or earnings. Usually a customer is linked to an IBO and the IBO pockets the difference between wholesale and retail.
IBO - Independent Business Owner. Someone who is part of the Amway business, buys at wholesale rates and is able to promote it to other people as well as earning discounts and money.
The Plan - The demonstration of exactly how Amway works and why people should join - shown to potential members.
Upline - People who are above you in the pipeline and usually have had more experience in the business than you.
The Business - The Amway business is often referred to like this to make it appear enigmatic and avoid the associations with Amway.
There are quite a few different self help style programs that allow you to access Amway - these include ones such as Network 21 and Dream Builders.
These programs are the backbone of Amway access - they provide organization as well as promotional materials and self help materials which is intended to help build your self confidence and self esteem as well as make you a better sales person of Amway items.
There are countless programs of this sort around today - most will show people the plan without actually mentioning Amway till the last minute. They try to convince people of how they can make money through this system without mentioning the "A" word since Amway still has a bad history with a lot of people.
Amway Court Cases
There have been quite a few court cases brought against Amway including a recent court case involving Amway UK and a group of Emerald level members. The members claimed that they weren't getting close to the amount of money that they'd been promised and also that they'd been cut out of receiving money from sales of promotional self help items. They claimed that this was never discussed, but an unwritten understanding was that a lot of money was made by selling these self help items, and they'd receive part of that money, on top of the small earnings they were getting from selling amway items.
The Point System
There is a basic point system within Amway which allows you to earn various bonuses and rewards. To receive anything through this system you generally need to spend in excess of "100 points" per month. Recently Amway announced that unless you bought the minimum of 100 points per month, you would not be eligible for any earnings through the system and any bonuses would be passed on to your upline.
How much is a point worth? Amway claims that 100 points is about equal to $200 - however what they don't mention is that you get more points for buying Amway exclusive items. That means that if you only use Amway to buy your storable groceries you may only earn 10 points for spending $150. To get the 100 points you have to buy exclusive items such as cleaning products, Emma Page jewelry or their exclusive line of energy drinks.
How Amway Works
Amway revolves around a pipeline system. When you become a paying member, you are placed into an already growing pipeline. If you don't wish to invite other members you can simply buy products at wholesale prices and not participate in any other way.
While you do nothing more than shop, members of your upline continue to add members below you. Based on the amount of money going through your pipeline, you can earn extra discounts (up to 21%) on top of the wholesale prices you are already paying.
You can only earn discounts through the first pipeline - you need to begin another pipeline before you can start earning a percentage of sales. Your upline will decide when you're ready to begin your own pipeline based on how many people you've signed up so far.
There is a basic system involving gems. For instance a member with three pipelines is called an Emerald while seven pipelines gives you the title of Diamond.
You can't simply build pipelines at random, however. You need to build each pipeline at the same time. This means that if you wish to place two people in the third pipeline you'll need to place two in pipeline one and two.
Is Amway a pyramid scheme?
Legally - no. Since in the first pipeline, people are joined below you, if you received money from this it would be classed as a pyramid scheme - instead the most you can earn from the first pipeline is up to 21% discount. This is why you have to start a second pipeline before you can earn any money - because starting a second pipeline means you've actively been working in the Amway system.
Of course, according to the majority's definition of a pyramid scheme, many people would still say it is, but uses a loophole to continue doing business.
Amway stories online
There are thousands of websites claiming supreme knowledge and total truth about Amway. However I'd warn you to beware which ones you believe. Of course, like all websites on a controversial topic, some are true and many are not.
A good example of this is the Sidney Schwartz site "Amway: The Untold Story". This site generally ranks high in any search on the Amway topic and contains literally hundreds of pages of information including many pages of comments from former Amway members.
However upon further research it turns out that Sidney Schwartz was taken to court back in the 90s over this website and was forced to close it. If you look carefully at the site you'll find that it is a mirror - or copy - of the original site. After spending hours on the site I discovered that there was no information that dated from later than 1999 - several months before the new Amway was released.
There are some true stories out there on the internet - however if you plan to research them I'd recommend you do so carefully - whether the information you find is good or bad. Always check the date and what country the story came from.
The amway price saving
Amway claims that you can save large amounts of money through their system. This isn't entirely untrue - it just depends on how you look at it.
An Amway customer pays retail price for all items while an Amway IBO pays wholesale price. An Amway IBO can also earn up to 21% discount on top of this.
However there is very little difference between the price a customer and an IBO pays for most of the regular items (ones that Amway has to buy in) such as - foods, toiletries etc.
Only items that are Amway exclusive - such as cleaning lines, some makeup lines and jewelry lines receive large amounts off for IBOs.
Basically Amway claims that due to the fact that their exclusive items are cheaper than similar items of different brands, you are saving money. Of course this can be open to interpretation.
For example, Amway washing powder (SA8) is quite expensive - but you use much less than normal washing powder and many people claim that it is one of the best quality washing powders on the market. However, it's still very pricey compared to most washing powders.
However don't get your hopes up about the 21% discount just yet - it takes about $30,000 going through your pipeline before you're eligible for this discount.
After hours researching Amway online, being a member for a short time and talking to plenty of other members or ex members, this is one area I cannot fault Amway on.
They have some exclusive products, including cleaning and weight loss products. Every person I've talked to, and I myself agree, that Amway products are of very good quality and do a great job of whatever they promise.
The only problem? Since selling Amway exclusive products is the best way to earn large amounts from Amway, you need plenty of customers. Why? Because 1. Nearly all Amway exclusive products are sold in concentrated forms, meaning that customers won't need to buy more for quite awhile and 2. They are good quality but very expensive, in particular things like the laundry powder (think ~$50+ for a small box which will last you 6-12 months.) These two things stop people buying regularly and sometimes discourage them from buying more.
So... can you get rich through Amway?
The simple answer - Yes. But when is an answer ever simple? Like all legitimate and scam businesses out there, someone always makes a profit at some stage - if they didn't no one would be willing to encourage others to join.
The best way to describe Amway is working as a sales person without a retainer - you'll be working on commission. Of course if you put in enough hours you can make money, but unless you have either:
- Plenty of luck (or fantastic sales skills) for getting new members and customers or
- The willingness to try over and over and over and over again till you finally through hard work get some money
You may not ever make more than $50 from joining. And remember you have member fees, fees for joining their training programs, buying their books and CDs and more.
When in training for bringing other people into the business, you'll likely be told that only about 1-5 people out of every 100 you show the plan to, will actually join. So to get 10-50 new members, you'll have to show the plan to 1,000 people.
So yes, you can make money through Amway but there are definitely easier ways. Sure you could be one of the 2% of Amway members who manage to quit their day jobs and make enough money to live off Amway. However chances are more likely you'll be in the 98% who keep those 2% rich by joining then leaving in disgust when it's a lot harder than you expected.