Thus, a parallel or “shadow” pyramid of motivational tapes, seminars, and videos emerges. These are a “must for success,” and recruits are strong-armed into attending, buying, buying, and buying all the more. This motivational “shadow pyramid” further exploits the flagging recruits as they spiral inexorably into oversaturation and failure. The more they fail, the more “help” they need from those who are “successful” above them.
If it turns out that there is a “run” on ReVo products, and they sell out in mid-June, then they have miscalculated demand and will miss out on profits they could have made. The more serious problem, however, is overestimating the saturation point for the product. If they make 10M units, and sell only 2M units, this may be the end of ReVo as a company.
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
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.
A few people do make big money from MLMs. And these people are often trotted out in promotional videos, celebrated at annual events, and very publicly ‘rewarded’ with prizes like prestigious cars (although these ‘prizes’ aren’t as generous as they first appear – you simply get a discount on the lease which you must take out in your own name, and if your sales fall, the discount ends…). You also need to promote the company on the car they ‘give’ you.
This is a list of companies which use multi-level marketing (also known as network marketing, direct selling, referral marketing, and pyramid selling) for most of their sales.
Any business must carefully consider supply and demand. For example, if the ReVo Corporation thinks that it will have a full-fledged fad on their ovoid sunglasses next summer, perhaps they should plan to build and distribute, say, 10M units. This involves gearing up factories, setting up distribution and dealer networks, and carefully managing the inventories at each level so that ReVo will still have credibility with their distributors, retail outlets, and the public the following year.
With the company’s rules shifting and no small-business training offered to consultants, it’s easy to let enthusiasm blindside reality—and if you’re drowning, you’re fighting against a riptide of consultants to save yourself.
None of these conditions exist anywhere in the real world. Markets change, trends come and go, customers are fickle and demanding, and competitors constantly enter/exit the market. There isn’t an endless supply of people willing to serve as self-appointed salespeople in any market, anywhere – some of us have better things to do than sell overpriced supplements to our friends on Facebook. And there are almost always plenty of competitive alternatives to every consumer product. So what inevitably follows is point #4…
What if I recruit more distributors – then can I stop selling? Assume each new guy manages to expand the business by 10% – again, EXTREMELY generous. With two sellers, total sales are $12,000 so I make $600 doing nothing, and each distributor in my downline makes $600 in direct profit. Even if each distributor increases sales by 10%, I’d still have to recruit at least 10 people and DOUBLE my total sales in order to profit least as much as before while doing nothing. With ten distributors and me at the top, total sales are $20,000. I make my $1,000, and they each make $200 (10% profit).
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.
Jump up ^ Ryan (Editor), Leo; Wojciech, Gasparski (Editor); Georges, Enderle (Editor) (2000). Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. p. 75. ISBN 0-7658-0037-3.
“As of the end of first quarter 2017, approximately 90% of all retailers who started an independent fashion retailer business since the time LuLaRoe was founded still maintain their businesses today,” says a LuLaRoe spokesperson. “We are very proud of this figure.” In part due to this high retention rate, the market is becoming saturated, both online and off. Multiple retailers now often live within a few blocks of each other—and how many pairs of leggings does one neighbor really need? “They’ve flooded the market with so many consultants, nobody is making money, and everyone is so stressed out,” Sophie says. “Now it’s like, ‘Oh, there’s another consultant down the street.’”
Traci Costa, Chief Executive Officer, President and Director of Peekaboo Beans Inc., can speak to that disparity. Not long after Costa founded her company, a kids’ clothing retailer, in 2005, she realized she needed to rethink her sales strategy. She’d tried the boutique route, but found the experience impersonal, and she didn’t feel like she could compete in the online space. That left only one viable option: direct sales.
“One of the unique facets of this business is that the victims are also perpetrators,” Brooks says, speaking generally of MLMs. “You’re trained to recruit your friends and family and neighbors.” He points out that when you onboard someone underneath you, especially if they live in your town or are in your friendship group, you are essentially creating a competitor. It’s as if you open a Subway sandwich shop and then encourage your neighbor to open a Subway right next door—and everyone is already sick of sandwiches.
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.
^ Jump up to: a b “FalseProfitsHomePage”. Falseprofits.com. Archived from the original on March 8, 2010. Retrieved March 5, 2010.; Robert L. FitzPatrick & Joyce K. Reynolds, False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes (Herald Pr, 1997).
Network marketing is a business model that depends upon a network of distributors for growth, such as in multilevel marketing. It is a direct selling method that features independent agents that make up a distribution network for goods and services. Some network marketing systems are based on tiers that denote how many levels deep a sales and distribution network goes. In two-tier or multi-tier examples, the people that make up the top tier of a distribution network are also encouraged to build and manage their own networks of salespeople. Each network creator (or “upline”) then earns a commission on their sales revenue, as well as on the sales revenue of the network they have created, otherwise known as “downline.” There are many examples of reputable network marketing operations, though some have been criticized of being pyramid schemes and have been banned in some countries as a conduit for consumer fraud.
To represent MLM distributorship as a “business opportunity” or “additional income stream” or “side hustle” – let alone claiming that it’s a way to get rich – is manifestly deceptive and a complete misrepresentation. To succeed in an MLM, you must essentially con your downline into buying tickets for a plane that has already taken off.
FLARE spoke to a handful of young Canadian women, most of whom said they make money on their businesses. For some, this additional income covers “extras” they might not have been able to afford on the paycheque from their day jobs. Take Stella & Dot stylist Elyse Berendson, a 29-year-old preschool teacher who joined the company to supplement her income.
The origin of multi-level marketing is often disputed; but multi-level marketing style businesses existed in the 1920s, 1930s California Vitamin Company, (later named Nutrilite) or California Perfume Company (renamed as “Avon Products”).
So, as the saying goes, “Get in early!” This is a rationalization on the level of “getting in early” on the L.A. looting riots. If profit from the sale of products is fundamentally set up to fail, then the only money to be had is to “loot” others by conning them while you have the chance. Don’t miss the “opportunity,” indeed!
Would a rational person, abreast of the facts, go to work selling any product or service if he or she knew that there was an open agenda to overhire sales reps for the same products in the prospective territory?
LuLaRoe also says it invests “considerable time, resources, and talent” to support its “independent retailers,” as it calls its consultants. If they experience financial or psychological hardship through operating their businesses, it says it’s not the company’s fault. “Retail is not for everyone,” says a LuLaRoe spokesperson. “Retailers own their own business and make their own decisions…The success of any business depends on its leader’s own respective and independent business goals, and the strategies they employ to achieve those goals.”
Jump up ↑ David Ingram (September 7, 2012). “Medifast unit settles false ad claims for $3.7 million”. Reuters. https://www.reuters.com/article/2012/09/07/us-usa-medifast-settlement-idUSBRE8860X720120907. Retrieved 2012-09-09.
Well, I’ve been an MLM rep for a number of different companies, including YL and doTERRA (DT), so here are my thoughts about MLMs–mainly regarding the oils companies, but some of my thoughts extend to other MLMs as well. I did some research into BeYoung but chose not to become a rep of their company.
Jump up ↑ Sepkowitz, Kent (December 5, 2014). “Honey Boo Boo, Snake Oil, and Ebola: The Weird World of Young Living Essential Oils”. Daily Beast. http://www.thedailybeast.com/articles/2014/12/05/honey-boo-boo-snake-oil-and-ebola-the-weird-world-of-young-living-essential-oils.html. Retrieved January 16, 2015.
If you’ve been thinking about, or already are using, essential oils, at one time or another you’ve likely wondered if you should be part of Young Living, doTERRA, or some other multi-level marketing (MLM) company to get “the best essential oils” at a discount.
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.
MLMs also appear to prey on the weak and vulnerable with promises of wealth and an easier life. They are touted as an ‘income opportunity’ and yet, very, very few people DO apparently make any money out of them.
“I realized if they’re making the money that they say they’re making all over their Facebook pages and how it’s life changing, why can’t it change my life?” Kayla assumed she could just buy a couple of hundred dollars’ worth of leggings to get started, but she found out that she was required to buy a startup inventory package, which costs between $4,900 and $6,000. “Initial inventory packages are designed to provide sufficient inventory to help retailers succeed,” says a LuLaRoe spokesperson. “If a retailer can’t afford it, a retailer should not buy it.”