Tuesday, May 5, 2009

What's up with MLMs?

MLMs (Multi level Marketing; AKA Network marketing).
Examples: Amway(Quixtar), MaryKay, Avon, and many many more.

After my wife did a short run (about a year) with Mary Kay Cosmetics, we ended up short about $2grand and decided to call it quits. This apparently is a similar scenario with thousands of others.
"The largest MLM company, Amway/Quixtar, and hundreds of others, such as Nuskin, Herbalife, Melaleuca and Nikken, operate it in such a way that 99.9% of all people who invest will never earn a net profit."-FalseProfits
Unfortunately Sarah's recruiter started her off on the wrong foot. There is a good way and a bad way to get into any business venture, and going in with a poor understanding of how it operates is definitely a bad way. Had she gone in with the idea that she would just use these products herself, and if her friends wanted to use them as well, great. If we were able to stick to that it may have been a different result. Many factors including her recruiter, her personality type, stocked product, and the business model shortened the life span of her fledgling business.
I've been looking at home businesses myself, because, like most, I would enjoy having a little extra income. I'm not afraid to work for it, not afraid to sell. I am concerned with 'using' my friends and family as my test subjects. Which is the case for most, if not all, MLMs. I also see it as a poor business model. There are similar products for sale over the counter at traditional store fronts, and in most cases it's cheaper. It's cheaper because you don't have to pay your recruiters recruiters recruiter. MLMs are known as pyramid(or matrix) schemes because for the most part you make money not because of the product you sell, but by enlisting other sellers to work under you.
These companies have great products (sometimes superior to store bought) to sell (Avon, Amway, MaryKay) but at what cost? Sure the financial cost is obvious. But what about relationships. Can you afford to be sitting down across the table from your good friend and basically begging them to buy your product so you can pay rent?
Realize that most people who get into the business do it to get discounts on the product, and not to resell it. Which ends the pyramid and makes it harder for the person who wants to make it a full time job. The 'bonuses' you can receive from recruiting will offset your own purchases and therefor encourages you to recruit rather than sell the product. At some point there is a market saturation of recruiters (sellers) and product so that everyone is struggling to sell or recruit. Face it, no product is so good and at the right price that EVERYONE will get on board. There is a breaking point, and since these MLMs don't know and perhaps don't care what that breaking point is they just keep pushing more and more to sell/recruit. At some point they are telling everyone you can be a winner, but they are only hiring people who will lose.

I'd like to make more money and these 'get rich quick' schemes are just that schemes. If they sound to good to be true they probably are. Some people make money, but most people lose money on (or just purchase product) with these companies. I am realizing that to increase my income I need to focus on my current job and get a promotion, because seeking additional income from other sources requires more time. That would take away from what family time I currently enjoy.

Something in my gut says stay away from these as a form of income. Call it discernment, logic, or whatever. I pray for guidance to do the right thing for me and my family. I hope for the same for you and yours.


Summary of What's Wrong With Multi-Level Marketing

  1. MLMs are "doomed by design" to recruit too many salespeople, who in turn will then attempt to recruit even more salespeople, ad infinitum.

  2. For many, the real attraction of involvement in multi-level marketing is the thinly veiled pyramid con-scheme made quasi-legal by the presence of a product or service.

  3. The ethical concessions necessary to be "successful" in many MLM companies are stark and difficult to deal with for most people.

  4. Friends and family should be treated as such, and not as "marks" for exploitation.


  1. This is a great post, hon. I really agree with the last point on the summary... when I was in MK I hated the idea of "pushing" products onto my family and friends. It was just so uncomfortable for me. I think for these kind of businesses to work, you almost have to be a pushy-salesman type... and I'm just not.

  2. I never understood why companies like Mary Kay pushed recruitment so much. Sure, it continues the pyramid, but if everyone's selling then who's buying? Nice post.

    (And Sarah, thank goodness you AREN'T a pushy salesman-type!! lol)