The company’s that everyone knows are MLM trash (HerbaLife, JuicePlus, ect). When I was looking for a job I naively joined a seminar discussing CutCo Knives. Come to find out these dud muffin companies have been around since my mom was growing up, and are somehow still operational? Wouldn’t the BBB or whatever business bureau operates in the US (FTC?) have these scams shut down by now? I understand that new ones are popping up all the time but im referring to the ones that have been around forever now.
In: Economics
The biggest issue is that they aren’t *actually* a scam in the sense of “you give money and we take it and run”.
They’re scams because the only way to actually earn any money is by working your ass off, or getting other people who will work their ass off.
If you look at the details and read the fine print, the insanity is disclosed in advance. The person talking will probably exaggerate it, and make it seem simple, but the details are there.
If you are willing and able to hit the pavement and sell sell sell, you can make money with these programs. But you have to realize you’re going to pitch to 100+ people for every 1 that you make a sale to.
I know someone that participates in one of the MLMs because their family of 6 actually uses the products, so they basically get to buy them at wholesale costs by being a “member”. They have a few friends that will occasionally buy stuff too, and so they’ll just order it at cost and sell to them.
They’re not in it to get rich quick, they’re in it because they use enough product to stay members and essentially get a discount.
The better business bureau is a for profit business, they basically charge other businesses for good reviews. They don’t have the authority to make another business change anything. Under capitalism the people with the most money have the most power and in a pyramid scheme the people at the very top are the ones who have all the money. Pyramid scheme companies donate lots of money to politicians, one of the biggest donors behind Ronald Reagan was Amway
Hey OP. Simply because people are naive, greedy or both. It’s human nature to look for short cuts and cheat codes – MLMs seem like that to people with the right (wrong…?) sort of mindset.
As the saying goes, “There’s a sucker born every minute.”
I’ve been to at least two of these seminars, one for Cutco and the other for a company that advertised vacation packages with plane travel. The key point is that they are advertising a product. That alone skirts them around the laws. What they don’t tell you off the bat is that you have to buy into the product yourself and become a salesperson, then you have to recruit/convince others under you to continue selling said product. If you are successful enough at it, you won’t have to buy any more of that crap to sell because the people you have working under you are doing the very same thing you were when you were suckered into attending and buying into the pyramid scheme. Some of them throw in little incentives if you recruit like 20+ people or so, but I’ve never found it to be true.
A shady MLM tried to recruit me once, and they didn’t do anything illegal, they just deployed an array of psychological tricks. Story for those interested:
I was straight out of college, looking for a first job, and I got an interview for some vague ‘marketing’ position. I show up, and I’m guided to a few rows of chairs where I sat with a mix of other timid, young-looking folk and some well-dressed, professional looking guys. The lights dim and a ridiculous presentation video starts. “Bill Gates, Albert Einstein,” goes this booming voice, “what did they have in common? When opportunity presented itself, they seized it!” I start giggling, and I turn to the guy next to me (one of the well-dressed fellas) to make a joke, but he’s nodding his head along to the video, deadly serious. So I sit back, watch another 15 minutes of buzzword-saturated bullshit, and finally the lights turn back on. Guy next to me immediately grabs my shoulder and goes “wow, this looks like an amazing opportunity! We need to get in on this!” Each interviewee was seated next to a ‘plant’ who would sell them on the company. They tried to get me to sign something, and I refused. Other people were signing, and when they did, their plant would shout “(Name) here just took her first step towards financial independence!” and all the plants would cheer. They really set it up to make you think you were an absolute moron if you declined. About the third time I declined, my plant said “I guess it looks like you don’t want to be rich and successful” and turned his back on me. Didn’t escort me out, just ignored me, like I was supposed to come crawling back. I stood there dumbfounded for a beat, then walked out of there (alone) as these other people signed on for the next seminar or whatever, as the plants all cheered them on. I’m sure all of those people got milked for as much product as they would buy, and then the company moved on to recruiting the next generation of suckers. Truly one of the most bizarre things I’ve been a part of.
BBB is really a scam itself. Allows individuals to file complaints against a company. BBB then offers to remove the complaint if the company pays a fee.
Bc theoretically, the business works. If you have the distribution, capital necessary to store inventory, and correct incentive to sell, the business makes sense. But then you layer in all the middle men, less than sophisticated associates who cant do above, and the incentive for “good” associates to recruit rather than sell product and you get bad outcomes on average.
Thought of another way you are statistically likely to lose in a casino. Ppl still gamble. Some will drive the Mary Kay pink Caddy, and most will go home broke.
The product is not the scam but the model. But it’s also not illegal if you have a team of lawyers who can help you.
MLMs are super predatory, the payment structure (pyramid) is a disaster for a lot of people, and tons of people get scammed and end up losing their savings/in debt.
But at the end of the day, most MLMs are selling $2 worth of soap, fragrances, vitamins, etc for $30 to the end customer, and with margins like that, there’s a lot of room for profit.
Even when there’s millions spent on fines, lawyers, etc.
Cheap manufacturing, paired with lots of subscribers. They call them “employees”, but in reality, they’re the customers just trying to flip the companies products.
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