Mar. 1st, 2012

lisamoe: (Default)
I was reading up on multi-level marketing today, after running into an MLM type thing on the periphery of things that happened last week. You know what that is, right? Direct selling, like Amway or Avon or other companies that sell directly through salespeople but also make the salespeople recruit more salespeople in order to actually make any money, through taking a piece of all the commissions of the people they recruit.

I sold Usborne Books for a while when I was younger, and I was pretty happy with that experience, but I hadn't gone into it with the idea of making a lot of money. I had small kids and I basically wanted to be able to order books for them at a dealer discount, which I did. That didn't sit well with my upline (supervisor/recruiter who gets part of your commission) because they really wanted me to recruit as much as to sell, so I didn't do it for long and I didn't even try to recruit, but I did it just long enough to amass a great collection of kids' books. If I had gone in expecting an actual liveable income, I would have been pretty disappointed. I was glad to pretty much break even after about 6 months, but I was never near to making any actual money.

Recently my niece got involved with an MLM company selling really overpriced knives. The company she worked for (well, you don't really work FOR them, you're an independent contractor) recruits inexperienced college kids who don't know any better, and they try to get them to buy overpriced sample kits and sell knives to their family and friends (for $1000s of dollars!) before they wise up and quit. Fortunately she got out before she got too involved and before it cost her too much money, just a few days of wasting gas and a sample kit that wasn't TOO bad. Her parents and I told her it was pretty much a scam and she didn't believe us, but when they started asking her to buy things and made her come to unpaid meetings and make unpaid "training" calls (remember, not an employee, a contractor) she wised up on her own.

I have seen others of my friends who are in really tight economic straits try to sell overpriced candles, makeup, pampered chef, etc, and invariably, it ends up costing them money up front that they don't have and none of them have made any significant profit with it, not even enough to be a second income, let alone a first. Sure, people do succeed, but it's not selling they usually succeed at, they get ahead because they're great at talking people into trying to sell it themselves, and you make way more money off having people under you and taking a cut of all their commissions than you do by selling it yourself. That's how pyramid schemes work. You can have a good time doing it, you might make a few dollars here and there, especially initially before you wear out the good will of your friends and family, and you can usually get a lot of product, but unless you're pushy and unscrupulous, you probably won't ever make much.

The bad part is that they tend to prey on people who are desperate for money, they tell them this is a job with their company, when it's really not, it's you opening your own business. Typically at a regular job you actually work for that employer, they pay unemployment insurance, there may be benefits, they pay you at least minimum wage for all the time you're working, and there is normally mileage reimbursement when you have to use your own car. This arrangement works great for MLM companies because they can "hire" every single person who applies and see who sticks around and there is absolutely no risk or outlay of money by them up front, unlike with a real employer. Even the people who don't stick around (and this is most of them, that's why they're *always* "hiring") might make them a little money on upfront fees, buying samples or selling to family and friends before they quit. If people could just try it and get out it wouldn't be so bad, but there is almost always upfront expense of the sort you don't have if you take a traditional job with a traditional company, which strains already strapped people even further.

Anyhow, in my stumbling about the internet, I came across this article that pretty well explains the whole history of multi-level and direct marketing, how it works, the economics thereof, why you have all the hassles of being an independent contractor PLUS all the hassles of being an employee, and why the vast majority of the people doing it don't make much, if any, money. You're probably not as wonky as I am, but if you are, it's interesting reading. If you're thinking about direct selling, I would read it all the way through so you know what you're getting into. There is a list of the worst companies toward the end, with specific complaints and info about each.


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