Jump up ↑ Salinger (Editor), Lawrence M. (2005). Encyclopedia of White-Collar & Corporate Crime. 2. Sage Publishing. p. 880. ISBN 0-7619-3004-3. Archived from the original on February 24, 2017. https://books.google.com/books?id=0f7yTNb_V3QC&lpg=PP1&dq=isbn%3A0761930043&pg=PA880#v=onepage&q&f=false. Retrieved 13 June 2016.
Dynamic Essentials was an MLM promoting “Royal Tongan Limu,” a seaweed extract. The company was dissolved by its parent after it was ordered to pay $2 million in fines and destroy almost $3 million in unsold inventory for falsely claiming the product could cure cancer, arthritis, and attention deficit disorder (ADD), among other ailments.
Clearly, there’s a disconnect between what most people think about MLM and what the women who are actually participating in these companies experience. And we may be doing a disservice to these business owners by characterizing all MLM companies as scams.
Consumers of an MLM company’s products/services can, in theory, be merely end-user retail consumers. End-user retail consumers are non-participants of the MLM company, with their relationship to the MLM company being nothing more than in a capacity of consumers. In actual practice, however, the overwhelmingly majority of consumers of MLM products/services are the participants. They are the very “salespeople” within the MLM who had been recruited by a fellow participant positioned above them in the MLM pyramid structure.
While participants’ movement up the pyramid of an MLM can be accomplished in theory, and indeed this is one of the distinguishing factors between MLMs and traditional pyramid schemes (besides featuring actual sales of products or services), said upward movement is so extremely improbable as to render it practically impossible, despite all efforts and investments of time and money by a participant.
Some variation on this structure is common at most MLMs. Financial analysis on Pink Truth, a website that analyzes Mary Kay and other MLMs’ business practices, estimates that as a LuLaRoe seller advanced up the ranks, had 10 people below her, and garnered 3% of her recruits’ inventory-buy value, she could make a bonus of $1,500 a month—but only if her downline spent about a combined $35,000 on merchandise. That’s why struggling sellers used to be told to buy more inventory: Not only did their higher-ups get a cut of each bulk buy, but if their downline didn’t hit the minimum purchase mark, no one got a bonus. “The entire year that I did LuLaRoe, I was pushed to continue buying and buying more and more and more, no matter how the sales declined, and that buying more and more was the only solution to get more sales,” Sophie says.
Investigate companies. Choosing the right company is key to your success. Quick and easy internet searches can usually answer many of the questions you may have. Do some research to determine which company is best for you personally. Some questions you should ask yourself when researching companies are:
After a slew of complaints, LuLaRoe rolled out a Happiness Policy in April 2017, which states that customers can get a credit, cash refund, or replacement pair (but not the same pattern) for defective leggings purchased between January 2016 and April 2017. However, many are saying their refund checks have still not been issued, even though they were told they’d arrive several weeks ago.
The most cult-like thing about MLM is that it manipulates members’ existing beliefs and desires, and tricks them into believing they are exercising free will. MLMs are able to coerce people into willful and compliant self-destruction on a staggering scale: we’re talking quitting or getting fired from a six-figure full-time job due to an MLM, alienating everyone you know due to your constant sales pitches, investing your own or someone else’s life’s savings into an MLM, ruining your credit or losing collateral by borrowing heavily to fund an MLM, and even theft to support an MLM habit. Suicides related to MLM have been reported.
And typically I did. Instead, with other companies, you can get rep pricing without signing up! I’m not averse to MLMs that have special products that you can’t get elsewhere, but I don’t see it being good to get roped in to end up even going into debt to buy more just to stay “active” with a company.
But wait, did you know the average MLM associate quits after just 4 months? That means that you will need to recruit 5 new people (another 125 prospects) every 4 months just to keep from going backwards. And guess what, this applies to your entire organization!”
In mainstream terms, it’s most similar to franchising, where a business operator buys the rights to a specific brand and in turn receives support from the company that owns the brand. But there are two big differences:
Stern decided to get out after she realized she had $20,000 in unsold wholesale inventory sitting in her living room. “It clicked for me that if you order 30 items, they send you 10 quick movers and the rest sit. It’s a false sense of actually being successful,” she says. “I noticed all these people started going out of business. I started getting scared that my inventory would be worth nothing, and I would be stuck with $8,000 on my credit card.”
I have been taken to task for making this point too strongly–and do not wish to imply that all MLM leaders have criminal records–but it does pay to do some research here. Are the idols you are being asked to worship in MLM worthy of respect, or contempt? Have they been prosecuted or sued for exploiting people in the past? Have they done prison time?
Thus the MLM organization becomes exploitative, and many high-level MLM promoters have been shut down, the “executives” incarcerated, for selling the fraud of impossible success to others. Other, larger MLMs have survived by hiring large batteries of attorneys to ward off federal prosecutors, even bragging about the funds they have in reserve for this purpose.
I recommend you consult with a professional before ingesting any essential oils. Consult a Medical Doctor, Naturopath, or clinically trained Aromatherapist who knows you and is aware of your medical history, as well as any medications you are on. With this information, the professional can tailor a regimen that works for your body.
Whether they realize it or not, consultant leaders often use time-honored cult tactics of denial and blame to keep women within their sorority. A famous series of experiments from the 1950s conducted by Soloman Asch in England showed that three out of four people will deny evidence right in front of them if the majority says it’s not true. In the study, individuals were placed in groups where they were constantly contradicted by other members. When this happened over a length of time, they would start to agree with the majority—even though it was clear that the opposite was true. In MLMs, “you’re trained to avoid people who question whether this is a viable business or not,” Brooks says. “Which is exactly the same technique that cults use—they try to isolate you from people who question your belief system. I’ve been contacted by a number of people who deal with cult survivors, and some of their clients are former MLM people.”
One of the main issue with people who are against Network Marketing is that there is a potential for abuse by unscrupulous businesses that take advantage of them, pocketing their money and returning very little in the way of dividends to the investor. One of the key areas of abuse with Network Marketing is what is known as the ‘Pyramid Schemes,’ so it would be right at the outset to explain what Network Marketing is and the difference between legitimate Network Marketing companies and Pyramid Schemes.
The basic question that needs to be asked is this: If this product or service is so great, then why isn’t it being sold through the customary marketing system that has served human society for thousands of years? Why does it need to resort to a “special marketing” scheme like an MLM? Why does everyone need to be so inexperienced at marketing this! Is the product just a thin cover for what is really a pyramid scheme of exploiting others? But more on that later.
The above title is meant to be absurd. Most people, no matter how jaded, would not foist such a con on their own mothers. Even if people don’t know the specifics of what is wrong with MLMs, intuition often warns us: “Don’t tamper with that relationship.” The first marks for recruitment are the gullible, or the “expendable” friends. But successive moral compromise, experience, and desperation… may yet lead to “good old Mom.”
Manes invested about $4,000 into her Arbonne business, which she maintained for a year. By the end, she’d only made $600. “I had vendor shows, so I had to purchase product for display. Obviously, I used the products that didn’t sell… but I wouldn’t have initially bought them,” she says. “I also felt pressure from my upline to purchase more to make the business successful. It was constantly said that you should have the latest products and try everything before you sell it.”
There is an undeniable camaraderie among MLMers. But for everyone else, “there goes the neighborhood.” It is saddening to see people being encouraged against all instinct and common sense to chase after an illusory “pot of gold,” but what can be done?
The combined number of recruits from these cycles are the sales force which is referred to as the salesperson’s “downline”. This “downline” is the pyramid in MLM’s multiple level structure of compensation.
Mannatech, a dietary supplement MLM notable for featuring future US Presidential Candidate Ben Carson as a spokesperson, later accumulated more than $15 million in fines and settlements for falsely claming their products could cure cancer, diabetes, autism, AIDS, and other diseases.
Here’s what we know for sure: Popularity is definitely one of the best ways to determine what’s going on in the marketplace. It plays a part in the movies we see, the music we download, and sometimes even where we invest our money.
In June 2016, Sophie (name changed) quit her job in the suburbs of Fort Worth, Texas to sell for LuLaRoe, a rapidly growing clothing company that offers self-employment opportunities to American women in the form of hawking hyper-hued apparel. LuLaRoe’s consultants told her—and tens of thousands of other mostly rural and suburban women over the past five years—that she could provide for her family, join a sisterhood of supportive women, and find meaning in her life again through the conduit of colorful, stretchy fashion—all for a reasonable upfront investment of around $5,000.
Essentially, the idea is that any given upline collects a cut of the sales from every member of their downline. As a result, the only path to solvency for the upline is to make sure that the downline recruits as heavily as possible, with as deep a pyramid beneath them as possible – as opposed to conventional businesses, where the path to solvency is to sell sufficient product to consumers.
“Retailers can generate a sense of excitement among consumers because the garments they purchase are unique to them,” says a LuLaRoe spokesperson. “Many retailers report that they use the unexpected nature of the shipment to build excitement among existing and new consumers for their new inventory. This also fosters a sense of cooperation among retailers as retailers will often refer consumers to other retailers to help consumers find the patterns that they seek.”
Marketing innovations are not rare in the modern world, as evidenced by the success of Wal-Mart, which found a more efficient and profitable way to distribute goods and services than the status quo, providing lasting value to stockholders, employees, distributors, and consumers. But this is not the case with any MLM to date, and after 25 years of failed attempts, it is time to point out the reasons why.
Hyperbole is not limited merely to product claims, however. When MLMers turn to their competitors it can get ugly indeed. Some of the most outlandish rumors of modern history can be traced to MLMs. In recent years, for example, the international rumor that the president of a major real-world corporation was a Satanist, and that the logo of his company contained occult symbols, turned out to have a commercial motive and was traced to specific Amway distributors. These were successfully sued in 1991, but the rumor persists. And how much else of the MLM negative “sales pitch” is fabrication or outright lie? Not all the negative selling claims are as scandalous or widespread as the previous example, but the MLM culture produces so much of this stuff it would be hard to prosecute it all.
But the people who succeed at MLMs would probably succeed in other small businesses too – they have the right network and skills, and (importantly) they got into this particular MLM in their area early.