MLM brings The Modern Pyramid Scheme

April 30, 2019


A lot of people find the idea of starting your own business as a dream, many want to be their own boss, call the shots and say what goes and what doesn’t. 


This is a desire as American as base ball and apple pie. To start from nothing and then rise to the top is as big a part of the American dream as white picket fences and 2.5 beautiful babies you can call your own. “What if I told you this dream could be yours?”


“What if I told you that if with a payment of $100 to $500 you could start your own business?”“What if I told you that you could improve your life and make your own money by selling a product?”


If you have been on Facebook or Instagram in the recent year you make have seen posts like these. They offer a variety of product from weight-loss shakes, to essential oils, even make-up and vitamins.


While it may just look like a friend or family member investing in a new opportunity in reality is much more sinister. Companies like Dotera, Amway, Herbalife and Mary Kay are all known as Multi-Level Marketing Companies or MLM’s. 


MLM’s work different than a regular company, where they offer a product and sell them through distributors, rather MLM’s use recruits to make direct sales, often to their friends and family. These salesmen are then encouraged to recruit new people, taking a percentage of their sales. 


The marketing strategy of an MLM can be comparable to that of a pyramid scheme, where top recruiters most of the revenue leaving little to nothing for those salesmen at the bottom.Many times, these companies will put on extravagant presentations, flaunting the wealth of the people at the top to vulnerable people that think that with a little bit of time and money, they too could have the car, house or vacation of their dreams.


Sadly, these presentations are far from the reality for most salesmen of MLM’s. Take Herbalife for instance, they sell weight loss teas, shakes and vitamins, their top 0.05% sellers make any where from 90k to 300k a year, yet the bottom 93% of sellers make a median of $0 a year.


Herbalife is not alone, the majority of salespeople on MLM’s will actually lose money through cosplay start-up fees that leave many new members with a product they either just use themselves or are unable to sell.


A company some EPCC students may have experience with is Vector Marketing, they are an MLM that targets young people, general those who are about to graduate high school or about to enter college. I myself received a letter from them offering the potential to make $12 to $20 an hour.


It is not as simple as getting just an ordinary job, once perspective employees have arrived they are surprised to discover that they must first purchase their product, which is a set of knives that starts at around $200. 


Once joined the hourly wage turns out to rely more on sales and commission rather than time that put in. Even with thousands of people are losing money MLM’s are still legal, they are not considered pyramid schemes because they all offer a legitimate product, even tough they have adopted the same sales model.


So next time you see your aunt getting excited over a new business opportunity or an old high school friend offering you a lifechanging product. Take a moment to really think about where that money is going to.


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