All fingers point at MLM as recruits express dissatisfaction and raise claims of unfair terms. The resistance has been growing against industry players as former distributors, and policymakers join forces to weed out bad players.
Stocks have been dropping, and revenues are stagnating or plummeting for business known for this model. Among affected companies include Nuskin, Avon, Tupperware (TUPP) and Herbalife.
How Multi-level Marketing Works
A company recruits a distributor who sources their stock form the firm, sells it, and earns a portion from the profits.
But recruits do not only make money from the sale of products if you recommend someone you earn a commission from their earnings and this goes on down the recruitment ladder.
These deals seem perfectly legal and fair, but critics feel that most MLMs focus more on recruitment and having new distributors purchase the product than real sales to customers which makes them more like pyramid schemes.
The Guardian recently featured a report that shows how those on top of MLM pyramids are recruiting more people by promising them “a chance that will change their lives.”
But the result for most victims is lost money and pals. Only a handful of scheme leaders benefit.
At the center of The Guardian’s focus was Youniqe, a beauty & cosmetics retailer. However, there are many others like Arbonne who use the same model.
According to the Guardian, most of these businesses set up shop online and use social sites to sign in new distributors.
Groups Ganging Up to Fight against MLM
Meanwhile, earlier recruits have turned into activists after their horrible experiences with multilevel marketing.
One anti-MLM union has pitched its tent on a Reddit, a popular web-based forum. And numbers don’t lie because this forum has grown to almost 500, 000 members.
Another group on Facebook known as Sounds like MLM but Ok with over a hundred thousand members also focuses on the dark side of multilevel marketing.
Final Words
But despite these efforts to warn would-be victims, MLMs are still around and will keep targeting ambitious, innocent Americans.
MLM offers glitter like gold until you dive in and realize you are just a small fish in a large pool.
MLMs have won cases in courts, and still, there’s no provision in the law books that can ensure these businesses don’t rip off distributors.
Author Bio: Electronic payments expert Blair Thomas is the co-founder of high-risk payment processing company eMerchantBroker. He’s just as passionate about helping businesses get an MLM merchant account he is with traveling and spending time with his dog Cooper.