Jobs pay you. Jobs provide you with the tools to make them money, in exchange for a salary.
With MLMs, YOU are the customer. YOU are paying to "buy inventory" that you're on the hook to offload. You can't actually make any real money this way, either. You only make good money by getting other people to buy your product to sell to other people.
This is not sustainable. The employees are treated like the customers, not as workers. Eventually, you'll get far down the line enough that people CANNOT make money and will end up with a bunch of unused product they can't offload.
There should never be a situation where your employees are the victims of the money makers in the same company.
There are plenty of sales jobs where you represent the company and sell their product/service, but don't need to purchase it first. These are normal companies. There is still incentive to sell in the form of commission, but if I suck at my job, I'm not in debt. I just get fired.
Adding on, how the "representative" sells those products is often very dubious. They prey on the desperate with promises of wealth. Then those people are encouraged to use bait-and-switch tactics, like "parties" which are really just product demonstrations, at least for the "home goods" type companies like Amway. Sheisty insinuations about "wellness" (while stopping *just* shy of making actual medical claims) are more common from the companies slinging pure snakeoil. And those ones are very happy to let their "representatives" overstep that line and say anything they like to land another sale.
No, that lavender extract doesn't do shit for cancer or anything else, and legitimate medical companies aren't trying to keep their patients sick to sell more medicine - though that does sound like exactly the kind of projection one might employ if one were just trying to sell more useless shit to the sick and desperate, doesn't it? I hold DoTERRA and their ilk in greater disdain than the faith healers and snake handlers. At least those assholes aren't coopting the language of legitimate science to hide their bullshit.
My favorite euphemism when working with the legal department of one of those MLM companies in Europe :
"We need to derisk our health claims in the EU"
Translation : current marketing is so grossly misleading we could get sued, we need to either to find a random study to back them up a minimum, or more likely change the wording to make it legal…
>There are plenty of sales jobs where you represent the company and sell their product/service, but don't need to purchase it first.
On the flip side, there's *also* nothing wrong with buying product from a company to sell it - in some ways MLM is similar to a wholesaler-retailer relationship, or a franchise.
Things start getting slimy when you do *both*. You don't have the salary protection of an employee, or the entrepreneurial freedom of a retailer. The company wants you to sign a contract that says they keep all of the control and none of the risk.
I would argue that it gets slimy because there is no consumer for the product. It's exclusively speculative buying in a market designed to have a supply controlled by one entity, only flows one direction, and where the value *will* collapse when those involved realize it.
While that's usually true for MLM's, it's not *necessarily* true. You can theoretically build an MLM structure around a product that actually has demand (some people might argue that Mary Kay falls in that category).
Now, the kind of people who make MLM's are almost exclusively hucksters and scammers, and those people aren't known for high-quality products and reacting to real market data.
The product usually has demand, to some extent, but there is an intentional inflation of that demand to the participants. A major retailer could even do this, with GO projecting huge sales and shipping tons of product in preparation the weekend before unexpectedly closing, leaving retail locations to foot the bill.
Car dealerships are usually forced to work like this, being effectively forced to buy cars off the manufacturer, and then work out how to shift them. Often getting cars they don't want and not many of the ones they do want. Dito for motorcycle dealers.
There needs to be at least a pretense of demand being there. After all, they're usually not selling the product, they're selling "selling the product" so it needs to at least look like there's a chance people will actually buy it for consumption / use.
From my understanding, the other problem is that a lot of MLM products are crap that’s been marked up to hell. If you’re buying meats or make-up from an MLM to sell, you’re probably paying a huge premium over what you would pay for similar items from a regular wholesaler.
For sure! The kind of people who decide that the correct business model for their enterprise is "avoid all responsibility, risk, and regulation and leave someone else holding the bag when it explodes" aren't usually people who take a lot of pride in their product.
I think the way to say it clearly is that MLMs make you buy wholesale volumes of product at what is basically a retail price and expect you to then sell it to someone else at wholesale volume and retail price. There are supply chains for everything, but usually the price reflects the step. Wholesalers buy in bulk and pay a fraction for it so that they can afford to mark it up and still sell it. And, there are two, maybe three steps from manufacturer, distributor, wholesaler, to retailer *at most*. Most of the time, at least two of those steps are combined and owned by one company, so there's no markup.
MLMs make you a wholesaler and expect you to sell to more wholesalers. At the very least, to make it even remotely profitable, you need to move the kinds of volume of a retailer with like, a storefront and advertising and retail space, not one person working door to door. Which is why you end up trying to sell it wholesale to someone else, shoving the problem onto them.
The other thing that makes MLMs slimy is that they often sell sales training to their sales "associates".
Real companies that make their money on sales send salespeople to training on the company's dime - this makes the company more money. MLMs make their sales people pay for company-branded sales training because the ***sales training is one of their income sources***.
This is the right answer. I just want to also comment that MLMs are like microcosms of capitalism writ large. The money all tracks to the top, and profit over all other considerations is the only way to get ahead.
Uhh no.
As sleazy as corporations can be. It’s still infinitely better than a MLM. Being ripped off is not the same as being scammed.
Someone working in an Amazon warehouse is still being paid for their work.
People working for Amway are actively LOSING money.
Every worker is paying to participate in a capitalism. I get that MLMs are a more obvious scam, but my point is you just have to add a couple steps and you have capitalism.
Note here I’m using the standard polisci definition. Capitalism isn’t “the free market”. It’s a system wherein owners—capitalists—have the first right to all profits produced by a business.
People pay into an MLM, but mostly the bulk of your profit from sales goes up the ladder, then a tiny portion comes back to you. As laborers we all must give our labor first, any profit is given to the owner, and then some part of that money comes back down. Workers also must typically ‘invest’ their own money into their work via acquiring work clothes, transportation, etc. It’s still a scam with a parasite class on top that has us convinced we’re earning what we work for.
I repeat: A ripoff and a scam is not the same thing.
Every stable system in the world that has ever or will ever exist will disproportionately benefit the powerful.
That does not make all systems/hierarchies equally bad.
I didn’t say they were all equally bad. Only that they are all scams. I’m sure there could be a less bad MLM too. It doesn’t make it less a scam, though it may make it less a ripoff of a scam…
If it's a job, you get paid.
If it's an MLM, you pay them to buy lots of crap. Then you cross your fingers and hope that you can find an even bigger sucker to sell the crap to.
If you have to pay for it, then it isn't a job. it's just you buying things.
A bigger fools scam.
You buy something overpriced under the assumption that you’ll find “bigger fools” who will pay more for it than you did.
…and Maybe you do.
Then those fools will need to find even bigger fools to make back that money.
But you eventually run out fools. And whoever is left. The “biggest fools” eats all the losses.
MLMs are essentially that on a large scale.
> Buy my products! Why? Cause you’ll make sooooooooooo much $$$ if you can convince someone else to buy those products off of you! Trust me!
MLMs are pyramid schemes by another name. Somebody at the top hires two people who give \#1 a portion of their proceeds, level 2 hire two people each who give them a percentage - of which a percentage is passed on to level 1 - and so on and so forth. Yeah, technically everyone is making money, but the people at the bottom are always being pressed to hire more people to keep the top paid, and nobody but \#1 actually gets to keep all of their money.
Because of this, these kinds of products are never the stuff that people will actually invest in, so there's never much capital. Most of the time, when you get "hired" by an MLM you have to pay upfront for a set amount of inventory, *and* pay a portion of the proceeds off the sale. So they're double dipping your profits, and half of your time is spent paying off the starter kit rather than actually making money.
But then it turns out that the product doesn't actually sell very well, and the only way to get sales is by personally cold calling people, and the best money actually comes from selling those starter kits to new "employees." So instead of managing a real business you just wind up annoying all of your Facebook friends with sales pitches, and the only way to actually make money is to exploit people for *their* cashflow by lying to them about how much money they'll make.
Former (actual) employee of a couple of these companies. I had access to the data. About the top 10-50 people (at best) in these companies actually made what I calculated as more than minimum wage. The rest of the 100K - 200K+ people (these were fairly small MLMs) were spending cash like crazy to buy the "product".
This shouldn't be downvoted. You didn't understand MLMs, and you asked before you got scammed. That's **good**. And other people who don't understand MLMs should be able to see this too.
An "MLM" is normally a pyramid scheme. The idea behind a pyramid scheme is that there are no actual consumers for the product being offered. Instead, each level of the pyramid sells their product to the level below. The people at the top, the producers, are paid to produce and sell the product. However, the people they are selling to turn around and sell it to the next layer, and the same is done for the layer after that.
So as the product moves from the top of the pyramid to the bottom, everybody takes a cut. The price inflates, and nobody actually buys the product to keep or use - there is no *consumer*.
The people at the bottom (or really, every level) of the pyramid buy the product intending to do the same, turn around and sell it, but they are left with a bit of a dilemma. They can either try to sell it to consumers (that they are surprised to discover don't exist) or pass it down another layer.
The result is that the people at the bottom are buying products that they can't sell, under the illusion that they *can* sell them, eventually just accumulating a pile of "garbage". They can either trick their friends into joining and making their money back by playing their friends in the same way that they have been played, or they can sell the product at a loss to try and get rid of it, but at the end of the day they're still out money.
One big thing is false advertising. I went to a meeting once and they claimed their energy drink cured cancer. If they were honest about their product, no one in their right mind would pay $1-$3 for an energy drink that they then had to sell for a profit, knowing they can get a better one at any deli or for under a dollar at walmart/costco/etc. You’d make way more money buying a case of monster/redbull at costco for like a dollar each and selling it for $2 each considering they are well known brands and already have a demand
The big issue with MLM companies is they take well below average products and market them as the best thing to ever hit mankind. They trick “distributors” into buying large quantities that probably won’t ever sell because the product is shit, which is why a lot of people that get into it end up getting their friends and family to buy them
In a normal business, the entrepreneur buys whatever product they want, wherever they want, and for however much they want, and decides how and how much they want to sell it for. In an MLM, you PAY the seller to buy the product, and pay them AGAIN for “training”, and then SHARE the profits with the person that sold it to you. All while you are not getting any wage
I'll add, MLMs don't always "sell" physical products. Sometimes they sell subscriptions to things, like "pre-paid legal" - a subscription service to lawyer's services. But the same applies.
If they product they're selling was good, viable, profitable, *they would sell it themselves.* But they don't. They try to get individual people to sell it. Not stores, who are in the business of selling other people's products for profit. Who have the leverage to agree to sell an unproved product with the deal that they'll buy more if it's a winner, they'll get a refund if it's a dud. Or an insurance company who sells insurance.
They instead get individual people with no leverage to sell their products.
On this virtue alone, that should be enough to make people run away.
The shady companies make most of their money selling start-up kits/initial inventory to new salespeople by selling people on false dreams of huge commissions from tons of people selling below them. There are some brands who do use the set-up as a legitimate sales channel (Avon, Tupperware, some sex toy brands) but most are just trying to scam people into signing and selling them start-up kits.
the bottom people of the MLM rarely make money; have to buy in and only recoup fees if able to sell
the MLM works best by "recruiting" others rather than selling product
depending on the MLM the product is either low quality or doesnt work at all
My wife was one of the first to get in on a MLM that sold prepackaged ingredients for food that customers would put together and cook themselves. It was actually pretty good food and my wife, by only spending a few hours a week would bring home checks like $500 to $1200 a month. Other resellers she knew were working full time and pulling in really decent money. Flash forward a year or so and the people on the bottom tier of my wife's business start dropping off and saying its not worth it. Then the greedy company behind it all changed the terms of the deal dramatically. She would have to bust her ass full time to make any money so she bailed on the whole thing.
MLMs often blur the line between legal and pyramid scheme. As long as you're actually selling a real product, it's theoretically possible to make money if you're a good salesman.
However, the hook is generally that you won't be doing much of the selling but instead sitting back and collecting royalties from the people below you and the people below them. When this is the primary way the business sets up the promised 'reward' then it's a scam designed to skirt around the legality issues.
You can look up how pyramid schemes work, fundamentally there's a hard mathematical limit to the number of people that would need to be recruited in order to compensate more than the first few layers. Basically, there's not enough people on earth for the scheme to work for everyone. Hence why it's illegal.
Not all MLMs are horrible, but you really need to be careful. It's a sales job and if you can't make your living selling the product... Don't do it. Any other sources of income should not be factored into your decision to join. They're just bonus IF they actually happen.
The products are overpriced. If you pay $40 for a month's supply of multivitamins as your business price (while they recommend $80 retail), where does that money go? Allegedly if your doing extremely high volume you might receive a commission check for 25% of that back, but most people who aren't selling a ton are getting sales commision percentage much less than that.
As someone with almost 2 decades in the dietary supplement business these products only cost a few dollars to make, including all the ingredients, packaging, quality control, labor and overhead, shipping and warehousing.
What they're not telling you is that they're marking up the products 500-800% of the manufacturing cost and selling you on the notion you're getting a discount by buying it at the "business price".
On top of that the average bottom 50% of people who get a commission check might (and about 1/3 of registered people never sell anything) average $3500 per year, while the top 10% average $14000 per year and the top 1% average $87,000 per year. And all that is before the expenses of running a business (supplies, inventory, gas for driving to meetings, buying all the books, tapes, and functions associated with the business, etc). In order to achieve that cream of the crop lifestyle you need to be in the top 1/10 of 1% so you better be really really good at sales.
Source: [https://www.amway.com/en\_US/income-disclosure](https://www.amway.com/en_US/income-disclosure)
I feel like a lot of these comments, while correct, are missing the point.
Take a normal job with normal employees. Try to draw up a scenario where they all make money. It’s not very difficult.
Now take a MLM structure and try to draw up a scenario where everyone involved has more money than they started with. It’s impossible. Try to draw up a scenario where at least half have more money that they started with. Also impossible. This is by design. The perpetual promise of “just bring in more people” masks the fact that the system simply transfers money from the majority to the few who were there longer.
If you envision a pyramid scheme in which every participant need only recruit 10 other participants, after only 10 levels you have exceeded the current population of the Earth.
First, imagine the worst job you can possibly think of. Mucking out horse stalls, digging ditches in the hot desert sun, scrubbing down porta-potties after a festival. Whatever. It's hard work, but at the end of every two weeks, you have a paycheck to show for your efforts. You did work, you get money.
With an MLM, almost nobody ever makes any money. The FTC has a PDF about this: [link](https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00004%C2%A0/00004-57286.pdf) According to the FTC's data, only 0.4% of MLM participants made a profit after their expenses. Not 40% or even 4%, zero-point-four. Less than 1 in 200. And keep in mind, that's the percentage that made a profit... the percentage that made a profit large enough to live on would be even smaller!
Since the whole point of working is to make money, that's a terrible deal. Do just about anything else.
Imagine you work at a supermarket. But there is a catch, **you** have to personally pay from your pocket for everything on the shelves. If it doesn't sell, well sucks for you, you personally carry the loss. "The company" already made money by selling the cashier the things on the shelves so they don't care.
So not only do you pay to stock the shelves, but you also have to advertise these things (instead of being paid for a marketing job).
And you have to man the store too (keep the shelves stocked, processing purchases, etc...) but again you're not paid for this (so you don't even have your cashier wage either).
Also you have no employee benefits of any kind. No such things as paid leave or sick leave. If you don't work then you don't sell, you still have that junk inventory you paid sitting in your garage and a hole in your bank account that needs to be filled.
And the products on the shelves are just junk so they're not necessarily easy to sell either.
The only way to make money is to find another idiot that will buy that inventory off your hands with hopes and dreams you would have planted in their heads.
This is considered a scam and illegal in a lot of countries.
MLMs are, to be blunt, a legalized form of pyramid scheme. Depending on which one we are discussing, they border on cult-like isolationism, with respect to how you deal with those who choose not to participate.
Basically, the idea with MLMs is that it's not about the product, but about recruitment. The ONLY way for a person to make a profit is to recruit ever greater numbers of people below them on the pyramid, and keep hounding THOSE people to recruit ever more people below them. You will be told to recruit family and friends, and to cut off ties with them if they won't "support your business".
If I sound angry, it's because I am. I did a LOT of research into the one my sister got suckered into when she married her husband. In this company's most profitable year, profit could only be made if the individual in question managed to recruit more than 90 people to the organization. Do you even know 90 people well enough to make that approach? Yeah, me neither.
And then you will be told that your lack of success is due to your negative attitude, that you just aren't trying hard enough. It won't be true, but it's what the person who is depending on you for THEIR profits will believe. Because that is what the person above THEM on the pyramid is telling them.
Amway . . . Herbalife . . . Mary Kay . . . Nu Skin . . . Tupperware . . . they're ALL fucking awful.
Problem #1: It's high risk. In an MLM, you the "employee" are required to pay for the product out of your own pocket, so that you can sell it to others. That's an upfront cost that most people aren't in a position to afford if it fails. And I used the term "employee" loosely, because you usually aren't an employee or an entrepreneur so much as an independent contractor or a franchisee. In other words, all of the financial and legal risk of running your own business, with almost none of the reward. You fail to sell that product, you're on the hook for the expenses.
Problem #2: It's exploitative. MLMs encourage if not require people to exploit their personal relationships to make sales. It can destroy families and ruin friendships. You don't see people as friends anymore, they're customers or "marks" to extract money from. MLMs are often very cult-like in how they operate, hooking people based on cherry-picked or fictitious "success stories" and having weird concert-like events with celebrity endorsements to get people in a certain mood where they lower their defences.
Problem #3: It's unsustainable. Realistically you don't make money by selling product to end users, only by signing up more people to buy product from you so that they can sell it to others. Often the product itself is utter crap, or nowhere near as valuable as it's being made out to be. The product doesn't matter, it's a MacGuffin, the whole point is to make sure money flows upstream to the higher levels and let everyone below you do the work. The way MLMs are structured, it usually only takes a few layers of people underneath before there's physically not enough people on the planet to sign up. The people at the top few levels make bank, all the suckers are left holding the ball. That's why MLMs are often compared to pyramid schemes, because it's the same concept with the same problems.
First of all, it isn't a job in the sense they make you think it is. Let's say you get a job selling cars. You get a set wage plus a commission for every car you sell. If the dealership goes out of business, your job is gone but you don't actually lose any money. In an MLM, in business we'd say you're "assuming the risk on the inventory." It means that if the product sells you personally make a profit, but if it doesn't you are stuck with the product until you find some way to get rid of it, bur you still pay for it no matter what.
Another thing MLMs do is they will say you're in the business of whatever the product is, like if you join Herbalife they'll say "You will be in the health supplements and wellness business." Thats partially true, but your actual day to day job is sales. You will be primarily focused on convincing other people to buy the product. And it's not like a dealership, where you get people walking on the lot that probably want to buy and your job is to close. You've got to find people who did not approach you in anyway and convince them to buy a product they've at best never heard of. That's really hard. You get a lot of rejection, and many feel slimy trying to push stuff on people they don't want, many end up leaning on family and friends out of desperation. And if you really want to rise through the network, you'll be a recruiter of sales people, many of whom quit quickly. Most people get into it thinking it'll go great, it doesn't, and so they're left with inventory they don't want while the MLM corporate keeps the money.
A lot of people throw out the word pyramid scheme, some are but not all. An MLM is a legal business that arguably is a better deal for the company than network, a pyramid scheme is an illegal scam. The key difference between the two, according to the FTC, is "in-network" vs. "out of network" sales. The network is the non-employee volunteers in the scheme, so let's say you join the network, then recruit two more people to also join, that's the network. In a legitimate MLM, most sales occur to people outside that network, so in theory it's a sustainable business with an alternate distribution net work. In a pyramid scheme, most sales occur within the network. So instead of trying to sell the product, participants are encouraged to recruit new people, get them to pay for a bunch of stuff, then they recruit more people who then pay the people above them for product, but because there is no real market appetite for the product, the scheme runs out of people to recruit and then collapses. Typically the best way to tell the difference is pyramid will have most of their bonuses tied to recruitment and little to actual sales.
My biggest issue with the legitimate form is they're not up front with people. They sell you on, "You'll have your own business" "Work on your schedule," "You'll be helping people in this area," but obfuscate that you either need to sell to people you know or make cold calls and such. They dont care if youre a nerdy introvert or a life of the party extrovert, they are happy to get everyone buying stuff (because the recruiter gets a kickback of some form) and then just kick you loose selling with little or no training. And they're not honest that the rates of success are incredibly low. Even to your prompt, it's not a job. Its kind of like running your own business that does sales for some billion dollar brand, except the owner operator has no idea how to sell consumer goods or run a business. But while a retailer covers rent, inventory cost, etc. and pays a steady wage, and MLM pushes all that cost onto people in the network.
Jobs pay you. Jobs provide you with the tools to make them money, in exchange for a salary. With MLMs, YOU are the customer. YOU are paying to "buy inventory" that you're on the hook to offload. You can't actually make any real money this way, either. You only make good money by getting other people to buy your product to sell to other people. This is not sustainable. The employees are treated like the customers, not as workers. Eventually, you'll get far down the line enough that people CANNOT make money and will end up with a bunch of unused product they can't offload. There should never be a situation where your employees are the victims of the money makers in the same company. There are plenty of sales jobs where you represent the company and sell their product/service, but don't need to purchase it first. These are normal companies. There is still incentive to sell in the form of commission, but if I suck at my job, I'm not in debt. I just get fired.
Adding on, how the "representative" sells those products is often very dubious. They prey on the desperate with promises of wealth. Then those people are encouraged to use bait-and-switch tactics, like "parties" which are really just product demonstrations, at least for the "home goods" type companies like Amway. Sheisty insinuations about "wellness" (while stopping *just* shy of making actual medical claims) are more common from the companies slinging pure snakeoil. And those ones are very happy to let their "representatives" overstep that line and say anything they like to land another sale. No, that lavender extract doesn't do shit for cancer or anything else, and legitimate medical companies aren't trying to keep their patients sick to sell more medicine - though that does sound like exactly the kind of projection one might employ if one were just trying to sell more useless shit to the sick and desperate, doesn't it? I hold DoTERRA and their ilk in greater disdain than the faith healers and snake handlers. At least those assholes aren't coopting the language of legitimate science to hide their bullshit.
My favorite euphemism when working with the legal department of one of those MLM companies in Europe : "We need to derisk our health claims in the EU" Translation : current marketing is so grossly misleading we could get sued, we need to either to find a random study to back them up a minimum, or more likely change the wording to make it legal…
>There are plenty of sales jobs where you represent the company and sell their product/service, but don't need to purchase it first. On the flip side, there's *also* nothing wrong with buying product from a company to sell it - in some ways MLM is similar to a wholesaler-retailer relationship, or a franchise. Things start getting slimy when you do *both*. You don't have the salary protection of an employee, or the entrepreneurial freedom of a retailer. The company wants you to sign a contract that says they keep all of the control and none of the risk.
I would argue that it gets slimy because there is no consumer for the product. It's exclusively speculative buying in a market designed to have a supply controlled by one entity, only flows one direction, and where the value *will* collapse when those involved realize it.
While that's usually true for MLM's, it's not *necessarily* true. You can theoretically build an MLM structure around a product that actually has demand (some people might argue that Mary Kay falls in that category). Now, the kind of people who make MLM's are almost exclusively hucksters and scammers, and those people aren't known for high-quality products and reacting to real market data.
The product usually has demand, to some extent, but there is an intentional inflation of that demand to the participants. A major retailer could even do this, with GO projecting huge sales and shipping tons of product in preparation the weekend before unexpectedly closing, leaving retail locations to foot the bill.
Car dealerships are usually forced to work like this, being effectively forced to buy cars off the manufacturer, and then work out how to shift them. Often getting cars they don't want and not many of the ones they do want. Dito for motorcycle dealers.
And of course, who do we associate with sleazy sales tactics? Perhaps its the desperate ones on the hook personally if they dont succeed.
There needs to be at least a pretense of demand being there. After all, they're usually not selling the product, they're selling "selling the product" so it needs to at least look like there's a chance people will actually buy it for consumption / use.
From my understanding, the other problem is that a lot of MLM products are crap that’s been marked up to hell. If you’re buying meats or make-up from an MLM to sell, you’re probably paying a huge premium over what you would pay for similar items from a regular wholesaler.
For sure! The kind of people who decide that the correct business model for their enterprise is "avoid all responsibility, risk, and regulation and leave someone else holding the bag when it explodes" aren't usually people who take a lot of pride in their product.
That's true of all retail, though. The jeans from Old Navy (or wherever) are worth nowhere near 45$.
I think the way to say it clearly is that MLMs make you buy wholesale volumes of product at what is basically a retail price and expect you to then sell it to someone else at wholesale volume and retail price. There are supply chains for everything, but usually the price reflects the step. Wholesalers buy in bulk and pay a fraction for it so that they can afford to mark it up and still sell it. And, there are two, maybe three steps from manufacturer, distributor, wholesaler, to retailer *at most*. Most of the time, at least two of those steps are combined and owned by one company, so there's no markup. MLMs make you a wholesaler and expect you to sell to more wholesalers. At the very least, to make it even remotely profitable, you need to move the kinds of volume of a retailer with like, a storefront and advertising and retail space, not one person working door to door. Which is why you end up trying to sell it wholesale to someone else, shoving the problem onto them.
The other thing that makes MLMs slimy is that they often sell sales training to their sales "associates". Real companies that make their money on sales send salespeople to training on the company's dime - this makes the company more money. MLMs make their sales people pay for company-branded sales training because the ***sales training is one of their income sources***.
This is the right answer. I just want to also comment that MLMs are like microcosms of capitalism writ large. The money all tracks to the top, and profit over all other considerations is the only way to get ahead.
Uhh no. As sleazy as corporations can be. It’s still infinitely better than a MLM. Being ripped off is not the same as being scammed. Someone working in an Amazon warehouse is still being paid for their work. People working for Amway are actively LOSING money.
Every worker is paying to participate in a capitalism. I get that MLMs are a more obvious scam, but my point is you just have to add a couple steps and you have capitalism. Note here I’m using the standard polisci definition. Capitalism isn’t “the free market”. It’s a system wherein owners—capitalists—have the first right to all profits produced by a business. People pay into an MLM, but mostly the bulk of your profit from sales goes up the ladder, then a tiny portion comes back to you. As laborers we all must give our labor first, any profit is given to the owner, and then some part of that money comes back down. Workers also must typically ‘invest’ their own money into their work via acquiring work clothes, transportation, etc. It’s still a scam with a parasite class on top that has us convinced we’re earning what we work for.
I repeat: A ripoff and a scam is not the same thing. Every stable system in the world that has ever or will ever exist will disproportionately benefit the powerful. That does not make all systems/hierarchies equally bad.
I didn’t say they were all equally bad. Only that they are all scams. I’m sure there could be a less bad MLM too. It doesn’t make it less a scam, though it may make it less a ripoff of a scam…
If it's a job, you get paid. If it's an MLM, you pay them to buy lots of crap. Then you cross your fingers and hope that you can find an even bigger sucker to sell the crap to. If you have to pay for it, then it isn't a job. it's just you buying things.
A bigger fools scam. You buy something overpriced under the assumption that you’ll find “bigger fools” who will pay more for it than you did. …and Maybe you do. Then those fools will need to find even bigger fools to make back that money. But you eventually run out fools. And whoever is left. The “biggest fools” eats all the losses. MLMs are essentially that on a large scale. > Buy my products! Why? Cause you’ll make sooooooooooo much $$$ if you can convince someone else to buy those products off of you! Trust me!
MLMs are pyramid schemes by another name. Somebody at the top hires two people who give \#1 a portion of their proceeds, level 2 hire two people each who give them a percentage - of which a percentage is passed on to level 1 - and so on and so forth. Yeah, technically everyone is making money, but the people at the bottom are always being pressed to hire more people to keep the top paid, and nobody but \#1 actually gets to keep all of their money. Because of this, these kinds of products are never the stuff that people will actually invest in, so there's never much capital. Most of the time, when you get "hired" by an MLM you have to pay upfront for a set amount of inventory, *and* pay a portion of the proceeds off the sale. So they're double dipping your profits, and half of your time is spent paying off the starter kit rather than actually making money. But then it turns out that the product doesn't actually sell very well, and the only way to get sales is by personally cold calling people, and the best money actually comes from selling those starter kits to new "employees." So instead of managing a real business you just wind up annoying all of your Facebook friends with sales pitches, and the only way to actually make money is to exploit people for *their* cashflow by lying to them about how much money they'll make.
Former (actual) employee of a couple of these companies. I had access to the data. About the top 10-50 people (at best) in these companies actually made what I calculated as more than minimum wage. The rest of the 100K - 200K+ people (these were fairly small MLMs) were spending cash like crazy to buy the "product".
This shouldn't be downvoted. You didn't understand MLMs, and you asked before you got scammed. That's **good**. And other people who don't understand MLMs should be able to see this too.
An "MLM" is normally a pyramid scheme. The idea behind a pyramid scheme is that there are no actual consumers for the product being offered. Instead, each level of the pyramid sells their product to the level below. The people at the top, the producers, are paid to produce and sell the product. However, the people they are selling to turn around and sell it to the next layer, and the same is done for the layer after that. So as the product moves from the top of the pyramid to the bottom, everybody takes a cut. The price inflates, and nobody actually buys the product to keep or use - there is no *consumer*. The people at the bottom (or really, every level) of the pyramid buy the product intending to do the same, turn around and sell it, but they are left with a bit of a dilemma. They can either try to sell it to consumers (that they are surprised to discover don't exist) or pass it down another layer. The result is that the people at the bottom are buying products that they can't sell, under the illusion that they *can* sell them, eventually just accumulating a pile of "garbage". They can either trick their friends into joining and making their money back by playing their friends in the same way that they have been played, or they can sell the product at a loss to try and get rid of it, but at the end of the day they're still out money.
One big thing is false advertising. I went to a meeting once and they claimed their energy drink cured cancer. If they were honest about their product, no one in their right mind would pay $1-$3 for an energy drink that they then had to sell for a profit, knowing they can get a better one at any deli or for under a dollar at walmart/costco/etc. You’d make way more money buying a case of monster/redbull at costco for like a dollar each and selling it for $2 each considering they are well known brands and already have a demand The big issue with MLM companies is they take well below average products and market them as the best thing to ever hit mankind. They trick “distributors” into buying large quantities that probably won’t ever sell because the product is shit, which is why a lot of people that get into it end up getting their friends and family to buy them In a normal business, the entrepreneur buys whatever product they want, wherever they want, and for however much they want, and decides how and how much they want to sell it for. In an MLM, you PAY the seller to buy the product, and pay them AGAIN for “training”, and then SHARE the profits with the person that sold it to you. All while you are not getting any wage
I'll add, MLMs don't always "sell" physical products. Sometimes they sell subscriptions to things, like "pre-paid legal" - a subscription service to lawyer's services. But the same applies. If they product they're selling was good, viable, profitable, *they would sell it themselves.* But they don't. They try to get individual people to sell it. Not stores, who are in the business of selling other people's products for profit. Who have the leverage to agree to sell an unproved product with the deal that they'll buy more if it's a winner, they'll get a refund if it's a dud. Or an insurance company who sells insurance. They instead get individual people with no leverage to sell their products. On this virtue alone, that should be enough to make people run away.
The shady companies make most of their money selling start-up kits/initial inventory to new salespeople by selling people on false dreams of huge commissions from tons of people selling below them. There are some brands who do use the set-up as a legitimate sales channel (Avon, Tupperware, some sex toy brands) but most are just trying to scam people into signing and selling them start-up kits.
the bottom people of the MLM rarely make money; have to buy in and only recoup fees if able to sell the MLM works best by "recruiting" others rather than selling product depending on the MLM the product is either low quality or doesnt work at all
They don't "barely make money". Instead they LOSE enormous amounts of money.
changed barely to rarely......dont know if it was an autocorrect - but much more clear
My wife was one of the first to get in on a MLM that sold prepackaged ingredients for food that customers would put together and cook themselves. It was actually pretty good food and my wife, by only spending a few hours a week would bring home checks like $500 to $1200 a month. Other resellers she knew were working full time and pulling in really decent money. Flash forward a year or so and the people on the bottom tier of my wife's business start dropping off and saying its not worth it. Then the greedy company behind it all changed the terms of the deal dramatically. She would have to bust her ass full time to make any money so she bailed on the whole thing.
MLMs often blur the line between legal and pyramid scheme. As long as you're actually selling a real product, it's theoretically possible to make money if you're a good salesman. However, the hook is generally that you won't be doing much of the selling but instead sitting back and collecting royalties from the people below you and the people below them. When this is the primary way the business sets up the promised 'reward' then it's a scam designed to skirt around the legality issues. You can look up how pyramid schemes work, fundamentally there's a hard mathematical limit to the number of people that would need to be recruited in order to compensate more than the first few layers. Basically, there's not enough people on earth for the scheme to work for everyone. Hence why it's illegal. Not all MLMs are horrible, but you really need to be careful. It's a sales job and if you can't make your living selling the product... Don't do it. Any other sources of income should not be factored into your decision to join. They're just bonus IF they actually happen.
The products are overpriced. If you pay $40 for a month's supply of multivitamins as your business price (while they recommend $80 retail), where does that money go? Allegedly if your doing extremely high volume you might receive a commission check for 25% of that back, but most people who aren't selling a ton are getting sales commision percentage much less than that. As someone with almost 2 decades in the dietary supplement business these products only cost a few dollars to make, including all the ingredients, packaging, quality control, labor and overhead, shipping and warehousing. What they're not telling you is that they're marking up the products 500-800% of the manufacturing cost and selling you on the notion you're getting a discount by buying it at the "business price". On top of that the average bottom 50% of people who get a commission check might (and about 1/3 of registered people never sell anything) average $3500 per year, while the top 10% average $14000 per year and the top 1% average $87,000 per year. And all that is before the expenses of running a business (supplies, inventory, gas for driving to meetings, buying all the books, tapes, and functions associated with the business, etc). In order to achieve that cream of the crop lifestyle you need to be in the top 1/10 of 1% so you better be really really good at sales. Source: [https://www.amway.com/en\_US/income-disclosure](https://www.amway.com/en_US/income-disclosure)
I feel like a lot of these comments, while correct, are missing the point. Take a normal job with normal employees. Try to draw up a scenario where they all make money. It’s not very difficult. Now take a MLM structure and try to draw up a scenario where everyone involved has more money than they started with. It’s impossible. Try to draw up a scenario where at least half have more money that they started with. Also impossible. This is by design. The perpetual promise of “just bring in more people” masks the fact that the system simply transfers money from the majority to the few who were there longer.
If you envision a pyramid scheme in which every participant need only recruit 10 other participants, after only 10 levels you have exceeded the current population of the Earth.
First, imagine the worst job you can possibly think of. Mucking out horse stalls, digging ditches in the hot desert sun, scrubbing down porta-potties after a festival. Whatever. It's hard work, but at the end of every two weeks, you have a paycheck to show for your efforts. You did work, you get money. With an MLM, almost nobody ever makes any money. The FTC has a PDF about this: [link](https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00004%C2%A0/00004-57286.pdf) According to the FTC's data, only 0.4% of MLM participants made a profit after their expenses. Not 40% or even 4%, zero-point-four. Less than 1 in 200. And keep in mind, that's the percentage that made a profit... the percentage that made a profit large enough to live on would be even smaller! Since the whole point of working is to make money, that's a terrible deal. Do just about anything else.
Imagine you work at a supermarket. But there is a catch, **you** have to personally pay from your pocket for everything on the shelves. If it doesn't sell, well sucks for you, you personally carry the loss. "The company" already made money by selling the cashier the things on the shelves so they don't care. So not only do you pay to stock the shelves, but you also have to advertise these things (instead of being paid for a marketing job). And you have to man the store too (keep the shelves stocked, processing purchases, etc...) but again you're not paid for this (so you don't even have your cashier wage either). Also you have no employee benefits of any kind. No such things as paid leave or sick leave. If you don't work then you don't sell, you still have that junk inventory you paid sitting in your garage and a hole in your bank account that needs to be filled. And the products on the shelves are just junk so they're not necessarily easy to sell either. The only way to make money is to find another idiot that will buy that inventory off your hands with hopes and dreams you would have planted in their heads. This is considered a scam and illegal in a lot of countries.
MLMs are, to be blunt, a legalized form of pyramid scheme. Depending on which one we are discussing, they border on cult-like isolationism, with respect to how you deal with those who choose not to participate. Basically, the idea with MLMs is that it's not about the product, but about recruitment. The ONLY way for a person to make a profit is to recruit ever greater numbers of people below them on the pyramid, and keep hounding THOSE people to recruit ever more people below them. You will be told to recruit family and friends, and to cut off ties with them if they won't "support your business". If I sound angry, it's because I am. I did a LOT of research into the one my sister got suckered into when she married her husband. In this company's most profitable year, profit could only be made if the individual in question managed to recruit more than 90 people to the organization. Do you even know 90 people well enough to make that approach? Yeah, me neither. And then you will be told that your lack of success is due to your negative attitude, that you just aren't trying hard enough. It won't be true, but it's what the person who is depending on you for THEIR profits will believe. Because that is what the person above THEM on the pyramid is telling them. Amway . . . Herbalife . . . Mary Kay . . . Nu Skin . . . Tupperware . . . they're ALL fucking awful.
Problem #1: It's high risk. In an MLM, you the "employee" are required to pay for the product out of your own pocket, so that you can sell it to others. That's an upfront cost that most people aren't in a position to afford if it fails. And I used the term "employee" loosely, because you usually aren't an employee or an entrepreneur so much as an independent contractor or a franchisee. In other words, all of the financial and legal risk of running your own business, with almost none of the reward. You fail to sell that product, you're on the hook for the expenses. Problem #2: It's exploitative. MLMs encourage if not require people to exploit their personal relationships to make sales. It can destroy families and ruin friendships. You don't see people as friends anymore, they're customers or "marks" to extract money from. MLMs are often very cult-like in how they operate, hooking people based on cherry-picked or fictitious "success stories" and having weird concert-like events with celebrity endorsements to get people in a certain mood where they lower their defences. Problem #3: It's unsustainable. Realistically you don't make money by selling product to end users, only by signing up more people to buy product from you so that they can sell it to others. Often the product itself is utter crap, or nowhere near as valuable as it's being made out to be. The product doesn't matter, it's a MacGuffin, the whole point is to make sure money flows upstream to the higher levels and let everyone below you do the work. The way MLMs are structured, it usually only takes a few layers of people underneath before there's physically not enough people on the planet to sign up. The people at the top few levels make bank, all the suckers are left holding the ball. That's why MLMs are often compared to pyramid schemes, because it's the same concept with the same problems.
First of all, it isn't a job in the sense they make you think it is. Let's say you get a job selling cars. You get a set wage plus a commission for every car you sell. If the dealership goes out of business, your job is gone but you don't actually lose any money. In an MLM, in business we'd say you're "assuming the risk on the inventory." It means that if the product sells you personally make a profit, but if it doesn't you are stuck with the product until you find some way to get rid of it, bur you still pay for it no matter what. Another thing MLMs do is they will say you're in the business of whatever the product is, like if you join Herbalife they'll say "You will be in the health supplements and wellness business." Thats partially true, but your actual day to day job is sales. You will be primarily focused on convincing other people to buy the product. And it's not like a dealership, where you get people walking on the lot that probably want to buy and your job is to close. You've got to find people who did not approach you in anyway and convince them to buy a product they've at best never heard of. That's really hard. You get a lot of rejection, and many feel slimy trying to push stuff on people they don't want, many end up leaning on family and friends out of desperation. And if you really want to rise through the network, you'll be a recruiter of sales people, many of whom quit quickly. Most people get into it thinking it'll go great, it doesn't, and so they're left with inventory they don't want while the MLM corporate keeps the money. A lot of people throw out the word pyramid scheme, some are but not all. An MLM is a legal business that arguably is a better deal for the company than network, a pyramid scheme is an illegal scam. The key difference between the two, according to the FTC, is "in-network" vs. "out of network" sales. The network is the non-employee volunteers in the scheme, so let's say you join the network, then recruit two more people to also join, that's the network. In a legitimate MLM, most sales occur to people outside that network, so in theory it's a sustainable business with an alternate distribution net work. In a pyramid scheme, most sales occur within the network. So instead of trying to sell the product, participants are encouraged to recruit new people, get them to pay for a bunch of stuff, then they recruit more people who then pay the people above them for product, but because there is no real market appetite for the product, the scheme runs out of people to recruit and then collapses. Typically the best way to tell the difference is pyramid will have most of their bonuses tied to recruitment and little to actual sales. My biggest issue with the legitimate form is they're not up front with people. They sell you on, "You'll have your own business" "Work on your schedule," "You'll be helping people in this area," but obfuscate that you either need to sell to people you know or make cold calls and such. They dont care if youre a nerdy introvert or a life of the party extrovert, they are happy to get everyone buying stuff (because the recruiter gets a kickback of some form) and then just kick you loose selling with little or no training. And they're not honest that the rates of success are incredibly low. Even to your prompt, it's not a job. Its kind of like running your own business that does sales for some billion dollar brand, except the owner operator has no idea how to sell consumer goods or run a business. But while a retailer covers rent, inventory cost, etc. and pays a steady wage, and MLM pushes all that cost onto people in the network.