What is the difference between a piramid scheme and Tupperware’s business?
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The reason why most MLMs are said to be pyramid schemes is that their business model relies more on attracting new salespeople who will then purchase thousands of dollars of items to sell, rather than selling products to end-market consumers. But often the products are crappy or a lot of the products are crappy, or the market is oversaturated, meaning that ultimately, it’s not possible to sell a lot of items. So the salespeople are convinced to purchase products so that they can have their own business, yet it’s extremely obvious that this whole process is a lie because like 98% of these folks lose money, and like 90-something percent of all the company profits come not from end-consumer purchases but from these other salespeople lower down in the pyramid being convinced by those higher in the pyramid to purchase items. But no new money is being generated, it’s just salespeople buying products they can’t sell.
Tupperware was created with a different model. Initially it started in the 1950s because people were unfamiliar with this type of plastic and how to use it. At Tupperware parties, the Tupperware ladies (almost invariably women; stay-at-home mothers would couldn’t otherwise work) would show other women how to use the Tupperware. How long the food would last. What to put in it. Those kinds of things. And then there would be a payment sheet where customers would pick items for purchase and pay for them. So the Tupperware salesperson wasn’t buying $2000 worth of inventory, usually without being allowed to chose what items they wanted, and then hoping that the market would be there for the products, or else they’d be out $2000 but their “upline” person would be making a profit from their purchase. Instead, the salesperson would only be ordering items that had already been ordered by customers. They wouldn’t end up with massive amounts of unsold inventory. Tupperware was a popular product that people wanted. So in these ways, you could make a profit.
In contrast, you have some of these MLMs like LuLaRoe where you had to pay them X amount of money for a starter kit of leggings that you can’t choose. You’d get whatever sizes, patterns, and amounts they sent you. Maybe hideous patterns no one would want, or sizes few could wear. That’s ideally not how retail clothing places operate. You have buyers whose job it is to pick items to order because they know their customers and will purchase items they think their customers will like. And also since LuLaRoe or whichever MLM is encouraging as many sales people as possible, you inevitably end up with an over-saturated market with too many salespeople and not enough customers. Because the salespeople ARE your customers–you make a lot more money by recruiting “down-line” people to buy $2000 starter kits in bulk than you do trying to find someone to buy your $20 pair of hideous leggings that you only have in sizes that are too small, and that 5 other people are trying to sell as well.
Those problems are avoided by having people only order the items they want, that there are guaranteed customers for, with Tupperware.
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