Are they legal, ethical, or just taking advantage of those trying to earn from home during our current environment?
Network Marketing/ Social Selling/ Multi-Level Marketing (MLM); whatever you want to call it, in our current uncertain environment, we can’t seem to get enough of scammers and fraudsters – a world full of faux influencers, collaborators, connectors, and consultants. But as we shake our heads daily at the rackets from a safe distance, there is another kind of scheme that hits much closer to home: Multi-Level-Marketing companies, also known as MLMs and Pyramid schemes.
Most of you probably have a high school friend or relative "connecting" you, consulting for, or just trying to sell you goods from one of these brand products or services. Before you enthusiastically withdraw your hard-earned savings to buy into their products or services, you need to know the truth about MLMs.
What Is MLM?
How Do They Work?
MLM stands for multi-level marketing, but you may also know it by a few other names such as network marketing, referral marketing, direct selling, or pyramid selling. Like most businesses, most MLMs sell products or services. However, unlike most businesses, distributors associated with the company can also earn income by recruiting new sellers – for each sale their ‘down line’ makes, the referring distributor earns a small commission.
MLM Companies, Are They Really Legit?
Do your research, a quick Google search for multi-level marketing, and you’ll see a ton of critical as well as positive stories, and even legal actions directed at MLMs, many supposedly reputable International companies. This is because the business model is eerily similar to that of a pyramid or Ponzi scheme.
A classic pyramid scheme will require you ‘buy into' the company by paying to sign-up or pay a monthly fee to be part of the company, many even require you to purchase the items you sell prior to acquiring customers and offer high returns. You would then be required to invite new ‘investors’ into the company – and so on and so forth, this isn’t sustainable at all.
There are only a certain number and type of people in the world willing or able to ‘invest’. Once your recruitment number is exhausted your downline, or profits, come to a screaming halt. The FACT is, only the top 5-20% of a pyramid scheme earn any money, while the rest barely break even and many go into exorbitant debt.
The lack of sustainability is the reason pyramid schemes are illegal in Australia and many other countries.
So How Can MLMs Operate In Australia?
Most MLMs are able to circumvent those laws because they also do direct selling – they do have a tangible product to sell, and some do earn a little bit of profit on the sales.
So how do you differentiate between an MLM and a pyramid scheme? Here are a few things to consider:
Q: Are you able to earn a profit through sales alone, without having to recruit underlings?
It’s a legitimate business, but still may not be profitable for you.
Q: Are the products high-quality and do they actually work?
It’s probably a legitimate business and may require more research.
e.g. Tupperware 71 years, Avon 133 years.
Q: Are the products low-quality, overpriced, unproven, scientifically questionable, or simply don’t work?
then it’s likely a pyramid scheme.
doTerra, Younique, and Herbalife are some examples that may require questioning.
Q: Do you have to buy the products before you sell them?
It’s most probably a scam, a good company will stand by their products.
Q: Does the majority of your income come from recruiting and your recruit's buy-in?
It’s definitely a pyramid scheme.
The best way to tell if an MLM is legitimate or not is by doing your research. Always look up a company before investing or buy-in, and trust your gut, trust the research and be thorough!
MLMs Targeting Vulnerable People!
Vulnerable people are being targeted with the allure of making easy money, being able to work from home or work around their own schedule. Many stay-at-home Mums are lured into the "supportive community,” with some companies exhibiting an alarming cult-like mentality, practicing ‘love bombing’, and cutting off anyone who isn’t supportive or has concerns about the business model. Many families and friends step away or try to intervene with sometimes sad and disastrous outcomes.
Can you really make money working in an MLM? The short answer is yes, but in reality, only a tiny percentage of representatives actually realize the earnings advertised in MLM promotional materials and at meetings.
The AARP Foundation found that only about 25% of those it surveyed made a profit with MLM, 27% broke even, and about half of them lost money.
Of the quarter that made a profit, less than 4% actually earned a living of any kind:
14% made less than $5,000
6% made between $5,000 and $9,999
3% made between $10,000 and $24,999
3% made $25,000 or more
.05% made $100,000
NOTE: The AARP Foundation found that only 40% of MLM participants received a copy of the company's income disclosure statement. Of the participants who received it, 16% felt that it was "very accurate", 50% felt that it was "fairly accurate," 24% felt it was "fairly inaccurate." 9% reported that it was "not at all accurate."
On average, one in 545 is likely to have any profit after subtracting expenses, and 997 out of 1,000 individuals involved with an MLM lose money, without including time invested.
Over the last year or so I have conducted so much research, listened to friends' experiences, good and bad, as well as some trying to recruit me to their pyramid. Below are just a small handful of reports and stories, do your own research before stepping into the minefield!
NETFLIX SERIES - UNWELL https://www.netflix.com/search?q=unwell&jbv=81044208
OCTOBER 2020 - https://mlmtruth.org/