It’s Time To Dismantle MLMs
If you’re a new mom, a military spouse, in college, recently posted on social media that you need/want a new job, or any other person looking for a place to belong, you’ve likely been bombarded with the iconic “Hey Girl!” messages.
If you’ve taken the bait, you’ve been lovebombed and bought into — literally and figuratively — a multi-level marketing business. You’ve been told how incredible you are, how incredible this “opportunity” is, and how incredible it is to own your own business. Your upline has told you everything you wanted to hear in the beginning of starting “your business,” but slowly faded away after your starter kit was sent or your back office was set up. You realized your group of friends and family were warning you against doing this, and maybe some of them bought in out of the kindness of their hearts. Then you realized that your group of friends slowly transformed into only the people you “worked” with. Suddenly, this business that was supposed to bring you everything you wanted: time freedom, financial freedom, free trips, etc, was keeping you working on your phone 20 hours a day and putting you into debt. Then you finally worked up the courage to leave “your business,” but were confronted with the truth that you are worse off financially now than before the business, your entire team no longer talks to you, some of your pre-business friends no longer speak to you, and you’re wondering what the hell you’ve just been through.
MLMs, or multi-level marketing, started out as a door-to-door, in-home social party business, selling products to your friends/family/neighbors. But now because of social media, has turned door-to-door selling into sliding into your DMs with an exorbitant amount of enthusiasm and emojis.
Now, you may be wondering why I’m not calling them pyramid schemes. And that’s because, technically speaking, not all MLMs are pyramid schemes, but all pyramid schemes are MLMs. Let me break this down for you so that we understand the different definitions and can continue on this dismantling journey together with the current FTC labels.
What is an MLM?
According to the Federal Trade Commission:
MLM companies sell their products or services through person-to-person sales. That means you’re selling directly to other people, maybe from your home, a customer’s home, or online.
If you join an MLM program, the company may refer to you as an independent “distributor,” “participant,” or “contractor.” Most MLMs say you can make money two ways:
by selling the MLM’s products yourself to “retail” customers who are not involved in the MLM
by recruiting new distributors and earning commissions based on what they buy and their sales to retail customers
Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.
Most people who join legitimate MLMs make little or no money. Some of them lose money. In some cases, people believe they’ve joined a legitimate MLM, but it turns out to be an illegal pyramid scheme that steals everything they invest and leaves them deeply in debt.
What is a Pyramid Scheme?
Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities and often sell actual products, maybe even ones you’ve heard of. But if you become a distributor for a pyramid scheme, it can cost you and your recruits — often your family and friends — a lot of time and money that you won’t get back.
The promoters of a pyramid scheme may try to recruit you with pitches about what you’ll earn. They may say you can change your life — quit your job and even get rich — by selling the company’s products. That’s a lie. Your income would be based mostly on how many people you recruit, not how much product you sell. Pyramid schemes are set up to encourage everyone to keep recruiting people to keep a constant stream of new distributors — and their money — flowing into the business.
Often in a pyramid scheme, you’ll be encouraged or even required to buy a certain amount of product at regular intervals, even if you already have more inventory than you can use or sell.
You may even have to buy products before you’re eligible to be paid or get certain bonuses. You also may have to pay repeated fees for other items, like training sessions or expensive marketing materials. In addition, the company may say you can earn lavish rewards, like prizes, bonuses, exotic vacations, and luxury cars. However, it often turns out that you have to meet certain product purchase, recruitment, training, or other goals to qualify for the rewards, and only a handful of distributors ever qualify.
Eventually, most distributors find that no matter how hard they work, they can’t sell enough inventory or recruit enough people to make money. They also can’t keep up with required fees or the inventory purchases they need to make to qualify for rewards, and they can’t earn enough money to cover their expenses. In the end, most people run out of money, have to quit, and lose everything they invested.
Let’s also establish which companies, as of January 2022, are considered MLMs (a non-exhaustive, small sample list):
So why do we need to dismantle MLMs?
It is my strong belief and opinion that based on income disclosure statements, rules from the FTC, lawsuits, previous MLM distributors, and many other reasons (that will be fully discussed and explored in future articles), it is an unsustainable business model and one that takes advantage of the majority of its distributors. It’s time for a change.