At a time when even the employed are feeling the not-so-pleasant pinches of the hard economic times, the skyrocketing rise in unemployment levels is a disastrous puzzle that has defied all attempts muscled to solve it. The resultant situation is simply horrific. According to a study published in Social Indicator Research, even those who tend to be optimistic find it difficult to look on the bright side of things when unemployed.

 

Among the many stakeholders brainstorming on practical means of addressing unemployment are the Multi-Level Marketing (MLM) companies. As their suggested version of the solution to this quandary, MLM companies also synonymously referred to as Network Marketing, have through their independent distribution networks, risen to the occasion to suggest that the unemployed youth can and should take advantage of MLM to realize their dreams. All one needs to do, they say, is to sign up on their respective programs and a windfall of unlimited prospects will abound.

 

A Network marketing practitioner I will call Joyce, a facebook friend, proudly alludes that the benefits of direct marketing are immense. No need to rent shop premises, the business is easy to start and it requires little upfront capital investment. To cap it all, an employed person can keep his/her day time job and still utilize spare time to run a successful MLM business courtesy of the flexibility MLM entails. Joyce herself however, does not see herself writing any job application anytime soon, as she is comfortable with her current business.

 

“The mind-blowing juicier part of the deal is that an erstwhile distributor, no longer actively distributing, is still guaranteed to earn continual residual income so long as members he/she recruited in his/her pyramid are actively selling or recruiting more members.” says Joyce. She asserts that she is better able to plan for her retirement through the MLM business and that she enjoys the distinct advantage of job security. Being her own boss, she does not lose sleep over the-now-common corporate layoffs that come with downsizing or outsourcing. There is no income ceiling and she is immune to work-place politics typical of many offices. Doesn’t it sound so cool?

 

On the flip side, contrary to Joyce’s account, many analysts concur that it is extremely difficult, if not impossible for many distributors to earn a lot of money in this business. Logically, it is obvious that having lots of competitors can only saturate the market, thus limiting sales. But in MLM, your goal is to recruit many competitors under your pyramid. Failure rates are so high, though hard to establish reliable statistics. Most sources put the figure anywhere in excess of 90%. For instance in 1982, when the Wisconsin Attorney General filed charges against Amway (case #589806), tax returns from all distributors in the state revealed an average net loss of $918 for that state’s “direct” distributors. This should give some valuable clue about the kind of “unlimited income” we are talking about.

 

Juxtaposed with the open market prices, most MLM company goods are uncompetitively overpriced. This considerably blurs the marketing potentials for distributors, regardless of quality of products. For instance, Amway’s Nutrilite Double X multivitamins is $75 for a 31 day supply. Supplement retailer GNC’s most comparable product, Ultra Mega Green multivitamins, cost $40 for a 60 day supply. It takes nothing short of a miracle for price-sensitive customer to buy an expensive good when cheaper ones of the same quality exist in the market.

 

Apparently, in the present dispensation of internet, when manufactures can sell directly to consumers through e-commerce, there is simply no real need for traditional distribution “systems” as there once was. Sure, it still works perfect for some narrow range of products, but not nearly as perfect as it used to.

From a pessimistic but logical point of view, the insistence to recruit more members in the present market environment points to a likelihood that indeed the focus of all the program may not entirely be on the product they sell — which are usually non-essential goods or are available somewhere else to the public at the same or lesser prices.

 

Michael Dlouhy, an outstanding MLM mentor himself and Author of Success in 10 Steps shared this very suspicion in his e-book: “I was stunned by how many companies and “Heavy Hitters” make HUGE profits NOT on product sales, but instead by selling a ton of worthless marketing materials to the distributors who trust and believe in them!”

Another researcher notes that, for the case of Amway, one of America’s biggest MLM outfit, 8$ DVDs are a “profit centre” yet they cost only “25 cents” to produce. In other words, membership enrolment fees, sale of DVDs, tapes and other marketing materials are, in essence the company’s real profitable business. Of course no body puts a gun to your head to buy these materials, but as a general rule, all “serious distributors” are expected or psychologically coerced to buy them.

 

Research shows that overwhelming consumers of MLM company goods are the distributors themselves. Then why the hell would one have to pay to become a customer?

 

Far from leveling a blanket accusation on all MLMs as being villainously unscrupulous, my analysis is simply an eye opener for all potential investors in MLM business to take some time to do ample home work about the viability of the business. Most of the facts here are focused on Amway, but as you are aware, there are many other MLM out there. I do not in any way expressly claim that the facts are universal to all MLMs.

As a matter of precaution, it is advisable to have an eye for both risks and opportunities: on one hand, taking no risk at all amounts to the biggest risk ever, while on the other hand, the desire for quick cash is the epitome of culpability to scams. Remember, the greedier you are, the easier to con.  As food for thought, if an egoistic person, as most human beings can be, practically begs you to join an “Income Opportunity”, my guess is as good as yours.

 

One good thing we can all learn from MLM is the power of networking skills. Anyone who has noticed the high level persuasion skills of MLM gurus can testify that this capability, if replicated by activists, will remove the need for violent protests.