s/o of the "life coach" thread - what is a true MLM and what is a legit sales business?

[StaceyinLA]

I'm just curious because the MLM thing came up a lot in the other thread.

 

What is the difference between a MLM and a legitimate home business selling certain products?

 

I mean I've done a few of the home-based sales things over the years; Tupperware, DK books and Thirty-One products. I never really considered them true MLM because you could sell stuff and make a profit whether you had people "under" you or not. Obviously you make more money if there are people you recruit to sell, but at what point is something nothing more than a MLM?

 

My daughter just signed up to sell a chemical-free makeup/beauty care line. This is something that really fits with her lifestyle, and she feels very strongly about what she puts in/on her body. Obviously if she gets people signed up under her, that's a good thing for her, but she can also just sell the products and make money. Just wondering if that's considered a MLM.

[Word Nerd]

My daughter just signed up to sell a chemical-free makeup/beauty care line

 

Surely they don't actually claim it's chemical-free?

 

ETA: MLMs can be legit sales businesses, so I don't think there is a clear line. I don't know of any that don't encourage people to recruit others to sell.

Edited April 4, 2017 by GalaxyGal

[Pink and Green Mom]

I don't think the two are mutually exclusive, meaning an MLM can be a legitimate business.

 

I am sure there is a legal definition, but to me, something is an MLM when you either (1) make money by signing people up to sell or (2) make money off of those people's sales.

[Hyacinth]

MLMs can be legit. You can offer your brochures or have your parties and sell your products and that can be that.

 

I think the red flags are in the business model itself.

 

When the company seems to sell more products to its distributors (the "sign up with us this month and buy this intro deal for only $129!") than it does to the end-user customers, for example . . . I don't know. It seems fishy.

 

And those promises of lucrative incomes are feasible only with an active downline, which means the reps can't sell just the product; they have to sell the distributor role also. And then one wonders . . . just how much of a markup is on this doo-dad if everyone is getting a piece of the price?  

Edited April 4, 2017 by Hyacinth

[regentrude]

Wiki defines MLM like this: 

 

 

Multi-level marketing (MLM), also called pyramid selling, network marketing and referral marketing is a controversial, pyramid-shaped marketing strategy where profit is theoretically derived from two revenue streams: from direct sales to customers and from commission based on the sales of recruited team members, also known as down line distributors. MLM salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing. They are also incentivized to recruit others to join the company as distributors....

 

The pyramid shape in MLMs, however, does not refer to "pyramid organizational structure," but rather, it refers to the pyramid structure of MLM's incoming revenue sources, which itself stems from its unpaid participants (i.e. its unpaid participating non-employees). This is the reason MLMs are grouped with other ordinary pyramid schemes, even where they might not be classified as such by existing law.

 

 

 

[Guest]

I also agree that there is not a clear-cut line. I have also sold in direct sales before (Tupperware), but now I am pretty much against all forms of direct sales that are dependant on "warm" sales and recruiting a down-line. The business models are usually, possibly always, set up in such a way that you CANNOT make a "real" living at it without exploiting and pressuring your "warm" targets. AFAIK, direct sales companies do not allow you to independantly market your Arbonne sales (or whatever the company is) by way of, say, having an independant website or putting up an Arbonne kiosk at the mall. The business model is predicated on securing sales through friends and family and then branching out to friend-of-friends and extended family of family. You can only move into positions of authority (distributor, for example) if you have a downline.

 

When I sold Tupperware, securing new leads was a necessary part of retaining your employment status. Even if you pulled in a $900 sale, if you did not secure two new leads a week at minimum, you were suspended from sales until you got new bookings. Thus, it was not even possible to "just" sell the goods to willing friends and acquaintances; you HAD to indicate more bookings every single week to remain active status. This is because the "network" part of the business model is crucial to the sales. Oftentimes (perhaps always) this is because people are much less likely to buy those products if they are not in the party setting, subtly peer pressured into buying. Products sold by direct sales are typically (or always) priced higher than similar and widely-available goods. You can buy candles or baskets or makeup or purses anywhere and probably spend less than you will at a party of direct sales. Therefore, the sales model is direct sales where people will buy candles they don't need or leggings they don't really like because they are there, doing their friend a favor, and feeling at least a small pressure to purchase.

 

Personally, I think a legitimate business model is one that is not dependant on friends and family to launch or remain in business. My husband is a master plumber and general contractor. Sometimes he does put in a bathroom or renovate a basement for a friend, but he doesn't cycle through his friends asking if they want to rehab a bathroom or put on a new deck. He makes a living from people who need these services and they are rarely prior friends or family. I have friends who have all kinds of worhtwhile skills, but they don't post on my FB asking if I need my taxes done or would like to put in some new carpet.

[Carol in Cal.]

There are businesses that are like that that aren't MLMs though.

 

For instance, last week I met with someone who expressed interest in something I was doing, and it turned out that he wanted to sell me advertising in a tight demographic neighborhood news magazine, for 100-1000 per month.  It was not a great value proposition at that price, particularly for the small circulation.  I was pretty ticked at the bait and switch for our meeting.  If he had said, I'd like to review a business proposal with you, I wouldn't have minded so much.

 

And that is part of the issue with MLMs, too.  People tend to take a fake interest in you, and to invite you to fake parties.

[Anne in CA]

Right now a friend of my oldest dd's is chatting with me on facebook, and I know from other people this is about her trying to sell her healthy lifestyle products, which I will not buy. But I'm still chatting because her mother is a lovely woman and I can't be rude to her dd. I will just have to say no when it comes up.

[wathe]

A business model that relies on abusing social relationships is a key part of the definition. 

 

These businesses are predatory toward women.  They devalue the work of women. 

 

 

 

[Lady Florida.]

My daughter just signed up to sell a chemical-free makeup/beauty care line.

 

 

Surely they don't actually claim it's chemical-free?

Even though that's not what the thread is about, it caught my eye too. There's no such thing as chemical free so that would be a red flag for me.

 

As far as MLM, I agree with the posts that say a business can be MLM and legit. Avon is an example. The question is whether an MLM company is a pyramid scheme, which was also answered.

 

But back to the chemical free makeup (because I can't let it go), that sounds like a scam business to me.

[eternalsummer]

I also agree that there is not a clear-cut line. I have also sold in direct sales before (Tupperware), but now I am pretty much against all forms of direct sales that are dependant on "warm" sales and recruiting a down-line. The business models are usually, possibly always, set up in such a way that you CANNOT make a "real" living at it without exploiting and pressuring your "warm" targets. AFAIK, direct sales companies do not allow you to independantly market your Arbonne sales (or whatever the company is) by way of, say, having an independant website or putting up an Arbonne kiosk at the mall. The business model is predicated on securing sales through friends and family and then branching out to friend-of-friends and extended family of family. You can only move into positions of authority (distributor, for example) if you have a downline.

 

When I sold Tupperware, securing new leads was a necessary part of retaining your employment status. Even if you pulled in a $900 sale, if you did not secure two new leads a week at minimum, you were suspended from sales until you got new bookings. Thus, it was not even possible to "just" sell the goods to willing friends and acquaintances; you HAD to indicate more bookings every single week to remain active status. This is because the "network" part of the business model is crucial to the sales. Oftentimes (perhaps always) this is because people are much less likely to buy those products if they are not in the party setting, subtly peer pressured into buying. Products sold by direct sales are typically (or always) priced higher than similar and widely-available goods. You can buy candles or baskets or makeup or purses anywhere and probably spend less than you will at a party of direct sales. Therefore, the sales model is direct sales where people will buy candles they don't need or leggings they don't really like because they are there, doing their friend a favor, and feeling at least a small pressure to purchase.

 

Personally, I think a legitimate business model is one that is not dependant on friends and family to launch or remain in business. My husband is a master plumber and general contractor. Sometimes he does put in a bathroom or renovate a basement for a friend, but he doesn't cycle through his friends asking if they want to rehab a bathroom or put on a new deck. He makes a living from people who need these services and they are rarely prior friends or family. I have friends who have all kinds of worhtwhile skills, but they don't post on my FB asking if I need my taxes done or would like to put in some new carpet.

 

 

Ding ding ding.

[Ellie]

I'm just curious because the MLM thing came up a lot in the other thread.

 

What is the difference between a MLM and a legitimate home business selling certain products?

 

I mean I've done a few of the home-based sales things over the years; Tupperware, DK books and Thirty-One products. I never really considered them true MLM because you could sell stuff and make a profit whether you had people "under" you or not. Obviously you make more money if there are people you recruit to sell, but at what point is something nothing more than a MLM?

 

My daughter just signed up to sell a chemical-free makeup/beauty care line. This is something that really fits with her lifestyle, and she feels very strongly about what she puts in/on her body. Obviously if she gets people signed up under her, that's a good thing for her, but she can also just sell the products and make money. Just wondering if that's considered a MLM.

 

I don't know what you mean by asking what the difference is. :confused1:

 

"MLM" is just another name, with derogatory inferences, for direct sales. All of the ones you mention are "multi-level marketing." They are also direct sales. They are also "legitimate home business selling certain products." Direct sales companies have marketing plans which have bonuses of some kind for sponsoring/recruiting/whatevertheycallit others. Some have requirements for your total sales each month in order to continue to be a distributor/dealer; some don't. Some have requirements for sponsoring/recruiting; some don't. But they are all still "MLM."

 

"Pyramid schemes" are illegal, and have been since the early 70s? Something like that. Because of a company called Holiday Magic. So none of the direct sales companies in business today are pyramids. With a pyramid, it is not possible to make more money than the person who sponsored/recruited you.

 

Some people who are in direct sales are jerks. That does not mean that the companies they're associated with are bad; it just means that those particular people are jerks. Generally, if you care enough to look into their companies, you'll see that the companies don't tell their people to be jerks.

 

If I sell a product or service that I think is good, of course I'll talk to my friends and family members. Why wouldn't I? But if they tell me they're not interested, then I won't nag them. Not all people in direct sales have learned this. :glare:

 

FTR, I disagree with Wiki.

[eternalsummer]

I sell a product that is good (and I produce the product).  I do not tell my friends or family members that I sell a good product, or the benefits of it, or whatever (except my mom, because really I am very proud of what we make and I like to tell her about it).  I have never sold a single item to a family member or friend, and if they wanted an item, I'd just give it to them (and have).  I really really don't understand any other way of selling things.  It baffles me.

 

That said, I don't have a lot of friends compared to how many customers we have.  We've had maybe 30,000 customers over the years and I have a very small social circle, mostly limited to my immediate family.  Maybe if I knew a whole bunch of people semi-casually *and* I made something I thought all of them would want or need?  Still feels weird to me.

[Carrie12345]

I love the concept of making extra spending money by hosting little parties and giving out catalogs for fun products.

 

I HATE the concept of harassing friends and families to constantly buy and/or sell products for themselves and continue to harass additional friends and families to buy/sell products and take all the fun out of it.

 

I did Avon for a short time years ago.  I did it in order to have money and credit to spend on Avon myself.  It was fun until I began getting serious pressure to haunt my loved ones and my area became so flooded that people were sick of being asked to buy Avon.

 

Now I'm sick of being asked to buy anything, because everyone is peddling something.  I need a new Thirty-one bag, but I'm too afraid to call attention to myself, so I'm looking for similar items through regular retail establishments.

[Guest]

Some people who are in direct sales are jerks. That does not mean that the companies they're associated with are bad; it just means that those particular people are jerks. Generally, if you care enough to look into their companies, you'll see that the companies don't tell their people to be jerks.

 

If I sell a product or service that I think is good, of course I'll talk to my friends and family members. Why wouldn't I? But if they tell me they're not interested, then I won't nag them. Not all people in direct sales have learned this. :glare:

I'm sure there aren't many companies who urge their distributors to be jerks. Obviously. But the companies DO put policies in place that induce people to become nags and annoying to be around. If, for example, you must produce new leads in order to keep your seller status, you must bug/pressure/mention/post your friends and acquaintances to gain leads.

 

I know or have known dozens of people who are/were in direct sales. They vary in how successful they are and they vary in how irritating they are. Generally, the most successful are the most annoying. Every time you see them, they're shaking the money tree. You can't even pay them a complement or ask how their weekend was without getting a sales pitch. The thing is, most all people are keenly aware when they are getting a sales pitch vs. when a friend is simply telling them enthusiastically about something they like.

[madteaparty]

I'm just curious because the MLM thing came up a lot in the other thread.

 

What is the difference between a MLM and a legitimate home business selling certain products?

 

I mean I've done a few of the home-based sales things over the years; Tupperware, DK books and Thirty-One products. I never really considered them true MLM because you could sell stuff and make a profit whether you had people "under" you or not. Obviously you make more money if there are people you recruit to sell, but at what point is something nothing more than a MLM?.

If you have some time, read the Herbalife article in the New Yorker (titled something about shorting a rainbow).

[mmasc]

I sell a product that is good (and I produce the product). I do not tell my friends or family members that I sell a good product, or the benefits of it, or whatever (except my mom, because really I am very proud of what we make and I like to tell her about it). I have never sold a single item to a family member or friend, and if they wanted an item, I'd just give it to them (and have). I really really don't understand any other way of selling things. It baffles me.

 

That said, I don't have a lot of friends compared to how many customers we have. We've had maybe 30,000 customers over the years and I have a very small social circle, mostly limited to my immediate family. Maybe if I knew a whole bunch of people semi-casually *and* I made something I thought all of them would want or need? Still feels weird to me.

What do you sell and produce? I probably need it. Lol

[StaceyinLA]

 

 

 

Even though that's not what the thread is about, it caught my eye too. There's no such thing as chemical free so that would be a red flag for me.

 

As far as MLM, I agree with the posts that say a business can be MLM and legit. Avon is an example. The question is whether an MLM company is a pyramid scheme, which was also answered.

 

But back to the chemical free makeup (because I can't let it go), that sounds like a scam business to me.

That was my wording - sorry. I was just trying to do a quick description to get my question across. The company bans use of 1500 chemicals that are typically allowed in our cosmetics in the US. I realize it's not the same, but it wasn't as pertinent to my question. I apologize.

[StaceyinLA]

I love the concept of making extra spending money by hosting little parties and giving out catalogs for fun products.

 

I HATE the concept of harassing friends and families to constantly buy and/or sell products for themselves and continue to harass additional friends and families to buy/sell products and take all the fun out of it.

 

I did Avon for a short time years ago. I did it in order to have money and credit to spend on Avon myself. It was fun until I began getting serious pressure to haunt my loved ones and my area became so flooded that people were sick of being asked to buy Avon.

 

Now I'm sick of being asked to buy anything, because everyone is peddling something. I need a new Thirty-one bag, but I'm too afraid to call attention to myself, so I'm looking for similar items through regular retail establishments.

There are a lot of Thirty-One products on ebay.

[eternalsummer]

What do you sell and produce? I probably need it. LoI

 

I doubt it!  :)  We make name tags for clothing (mostly for people who have kids in private school) and labels for people who make clothing and need small runs of care and content labels, logo labels, stuff like that.

[Lady Florida.]

That was my wording - sorry. I was just trying to do a quick description to get my question across. The company bans use of 1500 chemicals that are typically allowed in our cosmetics in the US. I realize it's not the same, but it wasn't as pertinent to my question. I apologize.

 

That makes sense. Thanks for the clarification. I wouldn't want her to get ripped off.

[mmasc]

I doubt it! :) We make name tags for clothing (mostly for people who have kids in private school) and labels for people who make clothing and need small runs of care and content labels, logo labels, stuff like that.

Well, you're right...I don't need that product. :) But it's a really cool product to produce. Thanks for sharing!

[unsinkable]

I doubt it! :) We make name tags for clothing (mostly for people who have kids in private school) and labels for people who make clothing and need small runs of care and content labels, logo labels, stuff like that.

Your labels are really cute. I wish I needed to label stuff!

[Plink]

MLM is a management structure that encourages direct sales through leveraging friendships and aquaintances.

 

I don't buy from MLMs of any kind because I detest the friend-as-customer dynamic. (I hate feeling as if I'm purchasing out of guilt just to prove I'm a good friend or "help" a friend in need of money).

 

That said, we own a business and many friends have at one time or another been our clients. Employees are NEVER asked to advertise. In fact, we'd be appalled to hear that someone was manipulating their interactions with their friends to convince them to visit our store. The customer gets to decide if they want our products and services based on their needs, not who they know.