The increasing popularity of Multi-Level Marketing (MLM) cannot be denied. Many will even think that it’s the so-called wave of the business future, especially for opportunistic entrepreneurs who want to get in on the act. This impression is reinforced by the growing acceptance of MLM companies as well as their products and services, such as USANA and Amway.
But the question that should be on the mind of everybody interested in the scheme:
Is Multi-Level Marketing a Scam?
Yes, It Is Absolutely A scam! I said it!!!
But it will not seem to be a scam when MLM professionals start their sales and marketing spiels, especially when the target recruits are new to direct selling, networking, and multi-level marketing.
Read on and find out about the fallacies spread by MLM professionals as well as the facts behind them. You will be glad to know about these things first before pouring your time, energy and money into the scam – a pyramiding scam, to be exact. These lies are also the proof, so to speak, that MLM is for all intents and purposes a scam!
Fallacy #1 MLM provides better business opportunities and higher incomes than other business models
The first lie made by an MLM recruiter is that MLM companies are legitimate businesses providing better entrepreneurial opportunities in comparison with other business models, such as direct selling and affiliate marketing. This is understandable as nobody will want to make financial investments in non-profitable ventures.
The fact: For virtually every person who makes an investment in an MLM venture, the results will likely be a disappointing loss. You may not believe it at first because of the high-profit figures presented by the MLM recruiter but there are notable examples from largest MLM companies.
Let’s consider the case of Amway’s distributors, of which the only ½ of one percent actually make it to the direct distributor level. The average income of non-direct distributors is approximate $40 a month, before operating expenses and taxes, which means a whopping loss. The average income for direct distributors is negative $918 – or a net loss of $918 – as is the case for Wisconsin distributors (i.e., the Wisconsin Attorney General gathered the facts upon its filing of charges against the company).
Why is this so? The reasons include:
- More and more downlines must be recruited to sustain the uplines’ income, an unrealistic business model, to say the least
- Majority of MLM recruits drop out within a year so the expected income dries up
- Most of the customers stop buying the expensive products since the promised results are average, at most
Fallacy #2 Consumers prefer buying products and services on a one-on-one basis, as provided by the MLM model
This isn’t so because personally and directly retailing products and services to family, friends, and acquaintances, even strangers, is a thing of the past, marketing-wise. This is because personal retailing requires target customers to radically change their purchasing habits, particularly in the age of online shopping.
With the MLM retailing style, people are forced to restrict their choices, pay for expensive products, and buy in an inconvenient manner, especially from close relatives and friends. In a time of open marketplaces in brick-and-mortar stores and online shops, buying from a single distributor restricts the consumers’ choices.
The result: Every MLM distributor, especially the downlines, has to keep reselling and reselling in order to sign up more distributors. Indeed, large-scale door-to-door retailing has gone out of style because of the unfeasible manner in which sales can be drummed up.
Fallacy #3 Financial success in MLM is fast and easy, as well as sustainable
Making Money OFF your closed one is nothing to proud of.
This fallacy comes from the promise that recruits already have a ready market for the MLM company’s products and services – their family and friends, co-workers and neighbors, even their casual acquaintances. But this isn’t such a great thing aside for the reasons stated above.
Think about the repercussions of the commercialization of your personal and professional relationships with others in the pursuit of the so-called MLM gold. Your “warm leads” can place undue and unnecessary stress on your social foundation, especially when you have already established love, trust, and loyalty. You will also find that your family and friends strongly dislike being solicited to buy your products.
The result: You can run out of people in your personal and professional circle that you can sell your products. Your hoped-for financial success becomes a figment of your imagination. This becomes a reality when you finally realize that only your uplines are getting rich, thanks to their commissions and rebates, while you’re shouldering the expenses and pouring in the effort.
Fallacy #4 Since products are sold in an MLM plan, it isn’t a pyramid scheme.
This isn’t true either because an MLM company can sell products via its distributors but still be considered as a possible pyramiding scheme. In recent years, the courts have been using the 70 percent rule in determining the legitimacy of MLM companies.
The rule states that at least 70 percent of all the products sold by an MLM company must actually be purchased by non-distributors – or ordinary customers. Sadly, federal authorities are discovering that most large MLM companies fall outside of the 70 percent rule, such as NuSkin, Amway, and USANA. The largest of them even acknowledge that only 18 percent of its gross sales have been made to non-distributors.
You should also beware of many other fallacies when you’re being approached by MLM professionals including:
- The MLM business can be done in your spare time, such as a few hours a week. You will find that there are no off-limit people, places and times when you should sell products lest the opportunity passes by. You have to be actively involved in selling unless you’re in the upper echelons of the hierarchy.
- The MLM environment provides a supportive and positive business environment where financial freedom can be achieved. You will likely not find the right training program since you’re basically left on your own to learn the ropes, usually at your own expense (i.e., paid training in DVDs, classes, and books).
- The MLM business model results in real economic independence. You’re buying into an illusion since your contract as a downtime can be terminated at any time, such as your failure to adhere to its duplication model.
What’s the Alternative?
What then is the better alternative to the scam that MLM is? You should look into Affiliate Marketing with reputable and reliable companies, such as those found in Wealthy Affiliate. If you have no idea what is Affiliate marketing about perhaps you may want to read the benefits here instead. Your venture in affiliate marketing will require reasonable time, energy and effort yet minimum money and result in respectable income – no scam here!
What your thought about this title I wrote about MLM here? Please share with us below.
Thank you for your time reading this MLM truth.