MLM – Don’t fall for the hype

Avon, Amway, Younique, Arbonne, Beach Body, Scentsy, Monat, Lula Roe, Juice Plus – what do all these companies have in common. Well apart from being MLM (multilevel marketing companies) you are almost sure to know someone who has signed up to one of these schemes.

MLM or multilevel marketing seems to be everywhere right now. And on the surface it can seem very attractive, after all who doesn’t want to become their own boss for a small investment? With almost cult like fervour, happy clappy “boss babes” or “huns” are falling over themselves to sign you up, inviting you to private groups or spamming your and their own facebook walls with inspirational quotes and sales pitches.

How MLM works – or doesn’t

MLM has been around a long time, well over 100 years. However, it wasn’t until the 1970’s when companies such as Amway really came to prominence that MLM really took off. And compared to traditional direct selling where agents sell directly to customers, MLM offered a lot more earning potential. By recruiting others into the scheme and earning a commission on the sales they made as well as their own, agents could start to build a passive income.

On the surface, the concept of multilevel marketing is sound. So long as there is a genuine product which is being sold to real customers, the model should work. However, what happened in many companies was very different, and led to the MLM being tarnished with the “pyramid scheme” label.

The Oxford Dictionary defines a pyramid scheme as “a form of investment (illegal in the UK and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.”

In some MLM companies, distributors find the products extremely hard to sell. Not only is the market saturated with the same product, but because of the commissions paid out to the various levels of distributors, products are often grossly overpriced as well. What tends to happen is that distributors buy enough products each month to keep them active in the scheme, and encourage their downline to do the same.

Obviously we can see the problem here. This isn’t a real business, there are no customers. Distributors often spend large amounts of money on stock for themselves, which then never gets resold. This isn’t sustainable. Sooner or later recruits will start to drop out and the whole “business” starts to crumble.

The Cult of MLM

MLM has often been described as a cult, and for good reason. Distributors are encouraged to have slavish devotion to their new “business”, and in the process they often end up isolating themselves from friends and family who don’t share their passion for the enterprise. Distributors are encouraged to bombard people on social media with endless invitations and sales pitches and will often find themselves quickly unfriended. And this spills over into real life too as friends become resentful that every time you see them you try to sell them something.

There is huge pressure to perform in an MLM. Because essentially you are a cash cow for your upline distributor they want you to make money for them. And in turn you will pressure your downline to make money for you. This can become very toxic.

Anyone who raises obections with either the company or the tactics of its distributors will e labelled as negative, jealous or even a downright failure. Distributors are encouraged to avoid these people. Whilst distributors will pretend to be supportive of each other, even describing each other as “family” in some cases, anyone who strays from the official party line will be excommunicated. This puts massive strain on relationships.

Can You Make Money?

When you first get involved with MLM you will be drawn in by the success stories. Stories of “ordinary people” earning cars, holidays and six figure incomes are inspiring. But those who achieve the heady heights of MLM fame make up less than 1% of distributors. The dirty little secret which many MLM’s seek to hide is that more than 90% of people who sign up for an MLM company will not make any money and indeed most will lose money.

So why is this? Firstly, there is no USP with a MLM business. You are selling exactly the same product as everyone else (Lula Roe being the exception with their different patterns and styles of clothing). Unless you get in very early with an opportunity, the market is likely to be saturated.

Products are also likely to be overpriced as several levels of distributors are taking a cut of the profit which pushes up the retail price. Ask yourself if you would genuine pay the asking price of the product if you were a consumer. Are people likely to make a repeat purchase? Some items such as cleaning products, diets and cosmetics lend themselves well to repeat purchases – hot tubs and vacuum cleaners do not.

In addition to the immense pressure to build a business, some companies demand you make a certain amount of sales within a period in order to “stay active”. This can range from just a few pounds a month to significant sums. If you are not active you will not earn commissions on your downline sales, so to avoid losing out you might feel pressured to meet your quote by purchasing products for yourself.

In lawsuits filed in other countries, stockpiling was cited as a major issue in certain MLM’s. Some distributors had even taken out loans and credit cards to purchase stock and had ended up seriously in debt. There is nothing “boss babe” about ending up in a debtors court.

You are not a failure if you don’t succeed in MLM

Whatever the “huns” will try to tell you, most people will not succeed in MLM. The odds of becoming a multi-level millionaire are firmly stacked against you. But this does not mean you are a failure. Don’t let a failed MLM business, shatter your dreams. It’s not you, it’s them.

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