Such a transparent appeal should make people suspicious. “Why the bait?” “Are they trying to ‘get my juices going’ so that my brain turns off?” “Couldn’t they show people doing more wholesome things with the money they make?” “If this is really a legitimate opportunity, why not focus on the market, product, or service instead of people reveling in lavish materialism?”
And it’s working. In 2015, MLM companies generated $2.55 billion in sales, a 10 percent increase from a decade before, says Linda Herron, the interim president of the Direct Sellers Association of Canada (DSA). These businesses are overwhelmingly female: 83 percent of the direct sellers in Canada are women, something you’ve likely noticed if your Facebook feed looks anything like mine.
So concerned, we felt the need to write this article, as we know mothers are a big target group for MLMs (read on to find out why). So if you are considering joining one, please do read this first – and forward to any friends tempted by promises of ‘income opportunities’.
Jump up ↑ Taylor, Jon (2011). /00017-57317.pdf “The Case (For and) Against Multilevel Marketing” (PDF). Consumer Awareness Institute. https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00017 /00017-57317.pdf. Retrieved 2018-04-08.
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Revenue and total profit of the MLM company is thus largely generated from the pockets of participants within the MLM pyramid who are simultaneously both salespersons and consumers at once. Only an insignificantly small proportion of revenue and total profit is derived from non-participant retail consumers who are outside of the MLM participant pyramid. Many MLM companies will not disclose what percentage of its consumers are simultaneously their own participants. Other MLMs do not keep said figures because they do not differentiate between participant consumerism versus non-participant retail consumerism.
“Success as a retailer results only from successful sales efforts, which require hard work, dedication, diligence, leadership and perseverance,” says a LuLaRoe spokesperson. “Success will depend upon how effectively these qualities are exercised. As with any business, results will vary. In addition to the factors above, retailer success is influenced by the individual capacity, business experience, expertise, and motivation of the retailer.”
So why are MLM promoters obscuring this? Who is in control of the supply “knob,” carefully and skillfully managing the size of the distribution channels, number of salespeople, inventory, etc., to insure the success of all involved in the business? The truth is chilling: nobody.
Give your team members good commissions. By compensating your recruits well, you’re ensuring that they have a good incentive to sell. That way, they’ll earn more money for you and for themselves. It will also help keep them around longer, which is good for you- you want to keep talented sellers on your team so keep your business successful.
Christina Hinks, an aspiring journalist and the former moderator of the Facebook group, attempted to draw attention to LuLaRoe practices she found problematic. She has been collecting and documenting LuLaRoe issues at her blog, Mommygyver, which went from product reviews to educating readers on the risks of MLMs and inventory loading, revealing fat shaming by consultants, sharing stories of women who claim to have been victimized by LuLaRoe, and posting screenshots and stories of shenanigans by consultants and leaders at the top.
When it comes to selling product, MLM sales reps are probably no more aggressive or obnoxious than ordinary salespeople. Since most are not salespeople by nature, and it is characteristic that MLMs attract few people with any experience selling this particular product or service, they usually sell through pre-fab “parties” or home “demos.” Thus, sales pressure is exerted by situation, if at all.
Imagine a neat new product called a Widget that will sell for $100 (a fixed price, to keep it simple). Now, while everyone could use a Widget, not everyone will. Some will be afraid of anything new. Some will be loyal to existing brands. Some will want to buy an inferior product for less money. Some will want a more expensive product for prestige, regardless of quality. The reasons go on and on, and the fact is that only “X” Widgets will sell at $100.
The difference between a MLM and a pyramid scheme can be blurry, both legally and practically. It’s never been legally defined in the US by a statute, but the FTC defines it as whether a consultant can make an income by selling to the public alone without having to recruit consultants underneath them. “Not all multilevel marketing plans are legitimate,” the FTC states in its literature on MLMs. “If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
The Pyramid-Scheme-Alert (PSA) organization offers consumer information on MLMs, news of legal cases, analytical tools, insightful articles, and an opportunity to affect new laws and social change by membership and contribution. You can do your own evaluation of any MLM program or suspected pyramid scheme.
Shortly after, Stern began to pull in anywhere from $18,000 to $24,000 a month in sales. She was working 80-hour weeks with seven women selling underneath her. “The moment I woke up, I was taking pictures and answering questions,” she says. “My husband had to do the food shopping. My daughter has dance one day a week. While she was dancing, all the other moms would talk, but my face was always in my phone. I was uploading albums, or I was part of a multi-consultant sale.”
Both recommend internal use of oils liberally, with doTERRA even having a Slim and Sassy blend that they recommend taking internally numerous time per day, for a long period of time, in order to aid weight loss. There are protocols on the internet recommending internal use of grapefruit oils by YL reps in order to lose weight.
Study your products and know them well. It’s your job to sell these products, so you should dedicate yourself to knowing everything about them. You’ll need to plan how you will pitch the product to potential customers, how to answer any questions or doubts they may have, and any relevant research or studies that support your product.
One can’t help but wish that the “neighborhood” could be like it once was. But an MLM storm has blown through, ruining valuable relationships with no regret or conscience. And brace yourself, another one is coming. Perhaps it is in that smiling face approaching you, or in that nice letter you just received from a “friend”?
Indeed, one of the biggest complaints we’ve heard about MLMs is that once someone joins one, they see every social interaction as an opportunity to make their sales, or add to their downline. Friendships have ended and relationships have broken up through this.
Network Marketing distributes goods and services through distributors, which may include hundreds, thousands and even hundreds of thousands of distributions networks. Distributors may buy products from the company for pennies on the dollar, and then sell the products, or they may simply sell the goods and/or services for the company and receive a commission on the sales.
If you are a materialist, you only have to get over the cheekiness of the presentation. But if you do not wish to promote such ideas, if you consider them sinful, then this puts you at the focal point of a moral dilemma. Do you wish to be a salesperson for materialism?
MLM has its origins in direct selling, which developed in the rural United States, where supply lines were limited and retail options were scarce. In the olden days this meant the Avon lady going door-to-door, or the woman down the street holding a Tupperware party, but in the modern era direct selling can more broadly refer to any retail business that is conducted person-to-person (including electronically) rather than at a retail store.
Jump up ↑ Cohan, William D. (November 18, 2014). “How a Strange, Secretive, Cult-like Company Is Waging Legal War Against Journalists”. The Nation. http://www.thenation.com/article/190881/how-strange-secretive-cult-company-waging-legal-war-against-journalists.
The great thing about Network Marketing is that it usually involves a small initial investment and can return high dividends on that investment. Usually, the original investment is only a few hundred dollars. This initial investment will allow you to purchase a product sample kit, and begin to sell the products to friends, family, and others. The Multi-Level component of Network Marketing comes into play, in that most Network Marketing opportunities also ask their representatives to recruit other sales representatives. The new recruits are considered the representative’s downline, and they will usually generate income directly from their sales as well as from those whom they have recruited.
If money is needed that badly, why not simply ask friends and family for help rather than taking money from them under false pretenses–and also selling them a bill of goods? By “sponsoring” them, you have not only conned them and profited at their expense, you have made them feel like losers, since they are not able to make a success of the hopeless MLM concept.
While issues of morality and ethics can be tricky to discuss, materialism and greed are universally condemned by every major religion, and even by most of the irreligious. This does not mean people are not materialistic or greedy; in fact, the common caution to not overdo it is strong evidence that we are.
As non-employees, participants are not protected by legal rights of employment law provisions. Instead, salespeople are typically presented by the MLM company as “independent contractors” or “independent business owners”. However, participants do not possess a business in the traditional legal sense, as the participants do not hold any tangible business assets or intangible business goodwill able to be sold or purchased in a sale or acquisition of a business. These are the property of the MLM company.
There is some stigma attached to networking marketing, especially with regard to multi-tier and multilevel structures, which attract pyramid schemes. Still, the appeal of network marketing is that an individual with little skill but a lot of energy can create a profitable business for themselves with little monetary investment. A good rule of thumb, according to the Federal Trade Commission, is that single-tier network marketing operations tend to be more reputable, but multi-tier schemes in which people make money based on the number of distributors they recruit — rather than self-generated sales — can be problematic. Some reputable examples of single-tier network marketing operations are Avon, Mary Kay and Excel Communications.
MLM presents itself as a “business opportunity,” with products that are ostensibly sold to the general public. However, it doesn’t resemble any other retail business at all, and what it does strongly resemble is a pyramid scheme – the underlying mathematics of the two are identical. MLM has also been described by regulators as a form of gambling or lottery. Some MLMs resemble cults. The MLM industry denies that MLMs are anything other than normal, legitimate businesses, and unlike pyramid schemes, MLMs operate openly and (just this side of) legally in most countries.
In a classic and severe case of crank magnetism, MLMs are notorious for specializing in products of dubious value (supplements, essential oils, laundry balls) and making pseudoscientific, questionable or outright false claims.
While this is the most difficult point to make, it is perhaps the most important. Anyone who has any experience with an MLM has strong feelings, either for or against, and this is the problem. Polarization runs deep.
I started checking out various oils companies because I didn’t want to recommend any company without fairly checking out the competitors. I felt it would be a disservice to my family and to my readers.
Draw up a business plan. When you have a few potential companies in mind, write out your plan for building and expanding your business. Even before you’ve officially aligned with a company, it helps to have this plan figured out early. Thant way you can hit the ground running when you do eventually start at a company. Keep these things in mind when designing a business plan:
But the dialog usually never even gets to this. The fact that MLM is in a mad dash to oversupply is largely chided as mere “stinkin’ thinkin’.” Expert MLMers know how to quickly deflect this issue with parable, joke, personal testimony, or some other sleight of mind.
But one woman’s trash may be another woman’s treasure. New consultants are reporting getting boxes full of old merchandise that appears to be from merchants who went out of business—the ugly stuff others couldn’t sell. “While LuLaRoe may resell some inventory returned in original packaging and in new condition to its employees in its company store,” LuLaRoe CMO Lyon says, “LuLaRoe prefers that product that is returned in original packaging and in new condition be used for donations or giveaways only.” Consultants dispute that claim, posting pictures of “new” merchandise with old patterns and tags that have been marked up by other consultants.
Ami Chen Mills Shaking the Money Tree captures the “stink” of MLM pathology and culture most vividly. Hold your nose, and dive into major deja-vu at http://www.metroactive.com/papers/metro/10.03.96/cover/multilevel-9640.html
Jump up ↑ “Women say they were branded and traumatized by secret group’s doctors”. CBS. https://www.cbsnews.com/news/nxivm-women-say-they-were-branded-traumatized-group-doctors/. Retrieved 13 November 2017.
MLMs have been made illegal in some jurisdictions as a mere variation of the traditional pyramid scheme, including in mainland China. In jurisdictions where MLMs have not been made illegal, many illegal pyramid schemes attempt to present themselves as MLM businesses. Given that the overwhelming majority of MLM participants cannot realistically make a net profit, let alone a significant net profit, but instead overwhelmingly operate at net losses, some sources have defined all MLMs as a type of pyramid scheme, even if they have not been made illegal like traditional pyramid schemes through legislative statutes.
an endless chain of new distributors: a standard franchising model is protected and franchisees buy into a specific segment of the market with the understanding that they will not be directly competing with other franchisees within the same brand – MLM imposes no such limits and actually encourages exponential growth
Thankfully, getting out is easier than it used to be—sort of. Thankfully, getting out is easier than it used to be—sort of. LuLaRoe has started providing free shipping so that consultants who want to leave can return their inventory and get back what they paid, as long as those items are in perfect condition and in their original packaging. This sounds reasonable—except that retailers generally have to unbox, hang, and photograph each item in order to have a shot at selling it, meaning a lot of their unsold inventory isn’t eligible for a refund.