Here is an interesting piece on multi-level marketing. Is it a pyramid scheme? According to the law, not if you are selling an actual product. Is the product being sold actually worth it? Is it legit?
Lately, all eyes have been on Herbalife, a $4 billion weight loss and nutritional supplement company that hedge fund manger Bill Ackman has attacked as an alleged “pyramid scheme.”
Herbalife (HLF) contests those charges, saying its multilevel marketing strategy is above board. But the headlines have brought this huge industry into the spotlight.
From lipsticks sold by iconic “Avon ladies” to the popular P90X workout system, multilevel marketing companies represent nearly $30 billion in annual U.S. sales and enlist tens of millions of Americans as independent salespeople. Here’s a look at how the industry works.
What is multilevel marketing?
Multilevel marketing companies employ a network of independent salespeople who sell products directly to people in their community. These salespeople earn income based on their personal sales, as well as the sales of people they recruit to work for the company.
While critics accuse multilevel marketing companies of being pyramid schemes, the Federal Trade Commission says that a company only qualifies as a pyramid scheme if its salespeople are paid primarily on the basis of recruitment, as opposed to the sale of a retail product or service.
Herbalife dietary supplement, Avon, Amway, P90X workout system. Are they worthwhile products? Or are they hyped, overpriced or worse than the same stuff you can buy cheaper directly? I’m skeptical they are worth it. When profit comes via other means (like convincing others to sell it instead of BUY IT), then the product quality is secondary.
Herbalife has detractors for decades clearly establishing that their premise of the products are not good nutrition, and do not do anything worthwhile for diet and health.
Avon has a few iconic products but quality is generally NOT better than those brands you find in the store. Amway products are certainly overpriced in order to give the seller a tidy profit. Some multi-level marketing companies are CERTAINLY pushing nonsense products.
This article notes that this type of business venture is becoming more popular due to economic times. There is every reason to believe that you will NOT get your money’s worth out of this, only a few do. And to be successful take a lot of work and, in reality, are not about selling a product you believe in but amassing a troop of subsidiary sellers who do work for you. It’s not a good deal.
I’m looking for examples. What are some good ones? Please provide links if you can.
Tip: Jim Lippard