As noted, many MLM companies do generate billions of dollars in annual revenue and hundreds of millions of dollars in annual profit. However, the profits of the MLM company are derived to the detriment of the overwhelming majority of the company’s non-salaried workforce (the MLM participants). Only some of the profit is then significantly shared with none but a few individual participants at the top of the MLM participant pyramid. The earnings of those top few participants then allows the creation of an illusion of how one can potentially become financially successful if one becomes a participant in the MLM. This is then emphasized and advertised by the MLM company to recruit more participants to participate in the MLM with a false anticipation of earning margins which are in reality merely theoretical and statistically improbable.
No one can perfectly predict “X,” and the situation is not nearly as simple as considered here, but the objective for marketeers is to forecast “X” as closely as possible in order to provide lasting value to all parties involved: to avoid missed opportunities as well as waste, loss, or failure.
In an October 15, 2010 article, it was stated that documents of a MLM called Fortune reveal that 30 percent of its representatives make no money and that 54 percent of the remaining 70 percent only make $93 a month. The article also states Fortune is under investigation by the Attorneys General of Texas, Kentucky, North Dakota, and North Carolina with Missouri, South Carolina, Illinois, and Florida following up complaints against the company. In 2013, the FTC’s court-appointed receiver determined that Fortune was nothing but an illegal recruitment MLM and that least 88 % of the members did not even recoup their enrollment fees and that more then 98% had lost more money then they ever made. Refund checks mailed out totaled over $3.7 million.
Whole New Mom, LLC is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.
For example, when a hypothetical 20-something, Priya, buys skincare, makeup and bath products from Arbonne at a discount and sells it at the suggested retail price, she earns a commission of about 15 percent. But Priya can also earn a percentage of commission on whatever Sarah, a friend she recruited to the company, sells. Word-of-mouth is one of the key strategies in direct sales, so both Priya and Sarah are likely reaching out to their friends and families — and, increasingly, online social networks — to both move product and recruit for their respective sales teams.
But the rest of the business world didn’t always take her seriously: “I took my company public on my own, raised millions on my own,” she says. But “it’s very challenging being a woman in the financial industry trying to raise money for a kid’s clothing company. Investors would ask, ‘Do you sew the clothes?’ Or say, ‘You have a home party business.’ All I do, all day long is prove myself.”
Read your contract carefully. Don’t sign anything right away. Take some time to read over and understand the entire contract. You may even want to consult a lawyer or accountant to make sure you’re getting a fair deal and that the company is legitimate.
The minimum order is 30 pieces at a time, and LuLaRoe requires sellers to buy a minimum of 33 pieces a month ($346 in wholesale leggings, for example) to maintain active status. This means that if a retailer sold 30 pairs of leggings a week, it would take them just under three months to make back their initial $5,000. As they also need to use their revenue to restock an additional 33 pieces a month ($1,038 worth of leggings over 11.5 weeks), it would therefore take another month or so of selling 30 pairs of leggings a week to start turning a small profit. (There is a more detailed mathematical breakdown of different business models here.) “Just like anyone starting a new business, there is risk involved and not everyone is guaranteed success,” LuLaRoe CMO Lyon says.
Talk to a mobster, and he will tell you that he is “merely misunderstood in his benevolent intentions.” “We are just trying to ‘build our business.'” “It’s all a conspiracy to make us look bad.” “The Feds are out to get us because they are jealous or afraid of our new way of life.” “Why, look at all the good we do!” “We are looking more legitimate every day.” “Here’s a statement from a famous DA that the Mob is really a good organization and no harm ever comes from it.” “We’ve even got a minister to endorse us now!”
Given the above, the ‘business opportunity’ promised by MLMs can often look like a gift from heaven to mums. We’re told that, with a tiny investment (compared with starting your own business from scratch) you can join an established business that promises a comfortable, easy income – and even great wealth.
Metabolife was an MLM founded by convicted meth cooks that sold primarily supplements containing ephedra, which can cause serious adverse cardiac effects. Ephedra was banned in 2004 after several high-profile deaths, and the company folded; its founder was later found guilty of tax evasion and lying to the public and the FDA regarding ephedra’s safety.
The main sales pitch of MLM companies to their participants and prospective participants is not the MLM company’s products or services. The products/services are largely peripheral to the MLM model. Rather, the true sales pitch and emphasis is on a confidence given to participants of potential financial independence through participation in the MLM. This is referred to as “selling the dream”.
Scheibeler, a high level “Emerald” Amway member: “UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, ‘only about 90 made sufficient incomes to cover the costs of actively building their business.’ That’s a 99.7 percent loss rate for investors.”
You see, there are lots of other people who need to sell the same products as you to make money too. And quite possibly living in the same area, with the same pool of potential customers as you. So if you have the misfortune to sign up to an MLM that’s already popular in your area or social circle, you’ll probably find it hard to recruit customers.
Jump up ^ Pratt, Michael G.; Rosa, José Antonio (2003). “Transforming work-family conflict into commitment in network marketing organizations”. The Academy of Management Journal. 46 (4): 395–418. doi:10.2307/30040635.
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.
Independent non-salaried participants, referred to as distributors (variously called “associates”, “independent business owners”, “independent agents”, etc.), are authorized to distribute the company’s products or services. They are awarded their own immediate retail profit from customers plus commission from the company, not downlines, through a multi-level marketing compensation plan, which is based upon the volume of products sold through their own sales efforts as well as that of their downline organization.
“I wouldn’t be where I am today without the knowledge I gained from [Michael’s] live events and training CDs. Two MUST-HAVE [programs] in your CD library should be ‘The Total Success Pack‘ and ‘Building a Better Life.’ I’ve listened so many times I’ve lost count. PRICELESS information for your journey to success in business and in life… ‘Easy to do. Easy not to do’ The choice is yours.”
“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.”
Imagine that Wendy’s became suddenly possessed by the idea that “everyone needs to eat,” and opened four Wendy’s franchises on the four corners of an intersection in your neighborhood. Who would benefit from this folly? The consumer? Certainly not the franchises; they would all lose. Wendy’s corporate? Perhaps temporarily, by speculative inventory sales while the unfortunate franchises were under the delusion that they could all make money. But in the end, the negative image of four outlets dying a slow death would likely offset the temporary inventory sales bubble. Even the most unreflective of the hapless franchisees would think twice about doing business in such a manner again. This is why real-world distributorships and franchises are contractually protected by territory and/or market.
Jump up ^ “The Bottom Line About Multilevel Marketing Plans and Pyramid Schemes” (PDF). FTC. Archived from the original (PDF) on May 8, 2012. Not all multilevel marketing plans are legitimate. Some are pyramid schemes.
According to the Direct Selling Organization, she’s one of more than 20 million Americans who participated in direct sales in 2016. It’s a booming business, racking up an estimated $35 billion that year, a 30% increase from 2010. You might have been roped in yourself and not even realized it: If you’ve ever received a perky Facebook message from an old friend inviting you to a party at her house, had a cousin say she has a business opportunity that could help you take control of your life, or been handed a colorful business card outside of Target by a woman spilling with compliments, you might have been charmed by an MLM seller.
Many readers will share the experience of observing MLMs divide families, friends, churches, and civic groups. Lifelong friends are now “prospects.” The neighborhood is now “a market.” Motives change, suspicions rise, divisions form. The question is begged: “Is it worth it?”
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.
It may help to read books successful businessmen for ideas an inspiration. Do remember, however, that just because something worked for one person doesn’t mean it will work for you. Read these books for ideas, but take advice with a grain of salt.
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.
Network marketing, also known as Multi-Level Marketing (MLM), is a business model where independent contractors buy into a company and earn a commission on the products they sell. The profession appeals to many people because they can be their own boss, set their own hours, and work towards their own success. It is a big commitment, but network marketing can be a very lucrative career.
Although each MLM company dictates its own specific “compensation plan” for the payout of any earnings to their respective participants, the common feature which is found across all MLMs is that the compensation plans theoretically pay out to participants only from the two potential revenue streams. The first stream of compensation can be paid out from commissions of sales made by the participants directly to their own retail customers. The second stream of compensation can be paid out from commissions based on the sales made by other distributors below the participant who had recruited those other participants into the MLM; in the organizational hierarchy of MLMs, these participants are referred to as one’s “down line” distributors.
Targeting vulnerable or disadvantaged groups (ethnic minorities, recent immigrants, non-English speakers, ex-cons, recovering addicts, poor communities, high school/college students, women), often accompanied by love bombing
“Hmmm… To ask for a refund, then, is to admit defeat. Others appear to be doing O.K. at this. I’m no failure! Perhaps I should go to another motivational seminar or strong-arm and alienate one more friend to join. I wasn’t fooled! I’m no failure!”
Not so with the MLM crowd. Pick up any brochure or videotape for an MLM and you are more than likely to see a cheesy, obvious, and blatant appeal to greed and materialism. This is offensive to everyone, even die-hard materialists. Typical is an appeal to “the American dream.” Usually there will be a mood shot of a large new home, a luxury car, a boat, perhaps a beautiful couple boarding a Lear jet, and so on.
MLM culture feels unmistakeably totalitarian. The organization is tightly controlled by the top 0.1% of the pyramid, and absolute loyalty to one’s upline is strictly enforced. Open criticism of the company or its leadership is discouraged. Members denigrate non-MLM employment and belittle non-MLM jobs. MLM gatherings, often referred to as “seminars” or “conventions” or “business retreats,” look nothing like any of these things – instead they feature chanting, ecstatic speeches, testimonials, and highly produced audiovisuals, often for hours on end.
“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.
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.
“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.”
Jump up ↑ Ohlheiser, Abby (September 24, 2014). “FDA warns three companies against marketing their products as Ebola treatments or cures”. Washington Post. https://www.washingtonpost.com/news/to-your-health/wp/2014/09/24/fda-warns-three-companies-against-marketing-their-products-as-ebola-treatments-or-cures/. Retrieved September 26, 2014.
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!
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.
Jump up ↑ “Attorney General Abbott Shuts Down Pyramid Scheme That Marketed Bogus Fuel Pill”. April 2, 2007. https://web.archive.org/web/20070402211346/http://www.oag.state.tx.us/oagNews/release.php?id=1906.
Promoting products or pseudo-products of dubious or very low intrinsic worth (supplements, cosmetics, financial products, Bitcoin, videos/seminars, software, subscriptions, coupons/discounts) at very large markups, with low profit margins (often less than 1%) for the “distributor”
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”).
In a normal business, the purpose of commissions is to encourage sales; in an MLM, the purpose of sales is to encourage commissions. Everyone wants to be at the top (earning commissions), and nobody wants to be on the bottom (selling). The fatal flaw of pyramid schemes (and MLM, by extension) is that there has to be a bottom somewhere. If everyone recruits, and nobody sells, that’s a pyramid scheme – in all but name.
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.
“I was urged to stop paying my bills to invest in more inventory. I was urged to get rid of television. I was urged to pawn my vehicle. I just had to get on anxiety meds over all of it because I’ve started having panic attacks.”
Many LuLaRoe Facebook groups have the word “addiction” or “addicts” in their titles: Christine’s LuLaRoe Addicts Anonymous, LuLaRoe Addicts, LuLaRoe Addiction VIP Boutique. It’s supposed to be a joke, but it’s truer than many women realize.
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.
The main issue with MLMs is in the way they usually work. Rather than your profit coming from the actual products you sell, it comes from recruiting people into the business as sellers under you (your ‘downline’) and making commissions on their sales (and their downlines).
When glitzy recruitment videos yield to the reality of suburban cul-de-sacs, people selling for MLMs can be plunged into debt and psychological crisis. Joining a MLM is appealing to women who find hope in their promises of a better life: freedom, economic independence, and an endless supply of cheery trinkets. Despite professing quick-income prospects though, it’s difficult for MLM consultants to earn more than pocket change. When glitzy recruitment videos yield to the reality of suburban cul-de-sacs, people selling for MLMs can be plunged into debt and psychological crisis.
One such success story is Nicole Haas of Williamsburg, Virginia. A bubbly blonde and former personal trainer, she put $12,000 on a low-interest credit card to start her LuLaRoe business in January 2017. Through working 25 to 30 hours a week, she paid off her credit card in May and now puts $3,000 a month in her family’s account, less taxes. “It’s changed my life,” she says. “It’s changed who I am as a person.”
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.
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: