How do people decide if a new product will be sold by MLM (AKA pyramid scheme) and not in stores?

My first thought is that, in some cases, the product just isn’t high quality enough to be mass marketed in stores (online or storefront) so hey, let’s recruit some suckers to sell it and maybe we won’t lose all our money?

I’ve known a few people who have sold for assorted MLMs, usually so they could get the dealer discount, but to my knowledge, nobody who ended up losing their shirts over it which I understand often happens.

Isn‘t the point of departure not what product do we have? but what kind of business do we want to be?

Either you want to found a product business because your talent lies in thinking up products, develop products and then market them (MLM not being a serious option).

Or you want to found a MLM business because your talent lies in recruiting suckers, then the choice of product is secondary.

Is some of the MLM stuff similar to brand names and generics? Made at the same factory, just a different name and maybe a minor adjustment?

Most stored are full of products already. To add a new one, they have to discontinue some current product that they are selling in the store. That will lose some sales, and disappoint some existing customers. So they need to be convinced that your ‘new’ product will sell enough to make up for those losses.

This is a major decision for a big retail firm, and they have experts who do this full time. Most new products aren’t likely to even be on the list to be considered. I remember seeing a video of the CostCo Seasonal buyer, in mid-summer, considering 100+ Christmas items, trying to decide on the 2 or 3 that he would add to their stores’ inventory. A really tough competition, and mostly looking at new items from companies with a track record of successful similar products. It’d be really hard for you to get your new gadget even looked at by them.

While not MLM, I have relatives who have been involved in 3 different home/direct sale businesses. (Sort of like Tupperware’s model.) Including 1 who co-founded 2 very successful ones. (Got pushed out of one, formed another one which is doing remarkably well.)

The limited availability is a major driving force in their success. New items get added, people contact their rep, get put on a waiting list, items ship, get sold out, wait for the next bunch to come out.

I’ve seen the catalogue and a rack of items the last one sells. Looks like crap to me. But there is a mania for them. So $ ensues.

Now, Amway and such doesn’t have such a mania with constantly rotating in new items, but still if the reps do their job right there’s a certain “Hey, I’m buying stuff that other mooks can’t get.” cachet to it. That can help … a little bit.

But in general MLM is all about the levels, bringing in new reps (almost all of whom lose money), etc.

I always figured it was this. First you decide you want to get into such a scheme, and then you start looking for your product, your gimmick.

John Oliver did a good program about MLMs a couple years ago.

Overall, it’s not as simple as just deciding you want to be an MLM to sucker people because your products suck. There’s a spectrum from mild MLM to pyramid scheme. Avon, Amway, and Tupperware are some of the original MLMs, and they’re still around because they’re more product focused and rather benign.

For products like makeup and skin care, going with an MLM strategy allowed them to distribute their products to a wider market than was otherwise available, which in the middle of the 20th century was mostly just downtown department stores. MLM allowed them to broaden their reach to new suburbs and more rural areas, while also giving women a chance to earn some money without needing to venture much beyond their own neighborhood.

Makeup is the type of product that benefits from more personal interaction with the salesperson, and having it be a neighbor in your own home is less daunting than a clerk at the department store. Avon may seem like a bit of an anachronism today, but if they don’t require their salespeople to buy products on a regular basis or insist on maintaining aggressive recruitment or sales metrics, taking more of a “go at your own pace” approach, then that’s pretty harmless. I think a lot of Avon ladies nowadays mostly sign up so they can get the discounted prices for their own use, and any other sales or recruits are just gravy.

At some point, the focus flips more from products and sales to recruitment, and that’s where things get a bit more predatory and murky legally. Herbalife was an example that John Oliver brought up. They’re still not necessarily pyramid schemes, but they’re moving closer to that end of the spectrum. There’s still products and sales to the public, but recruitment and funneling sales metrics up the chain starts to set off the alarm bells. I think the cutoff from legit MLM to illegal pyramid scheme is the point when making money depends not on selling products to the public, but to your recruits.

I’m not an expert but I do keep up with a lot of MLMs. One because I’m generally their target demographic (middle-aged white suburban woman) and they find me. And two because a good friend is a top seller for one of them and I get sucked in to reading about her MLM and end up reading about others.

Anyway when it comes to products, as far as I can tell everyone has their own formulation or unique product. It’s not like Maybeline is making a run of mascara and branding it Younique, or Johnson & Johnson is making special shampoo called Monat.

The MLM people, the ones at the tops of the pyramids that come up with the schemes to begin with, they like to have control of everything from the top down (which is why none of the people selling their products are actually “small business owners”). It’s a cult of personality. It’s one big egoed individual saying “Mascara? I can make a better mascara! And sell it better! And get millions of people to sell it for me! I’m going to do this!” and doing it.

A pretty good podcast about this subject:

I agree, so I would give Avon and Amway a pass for that reason because they started years ago, but today we have online selling to market your product.

This being GQ, if I really wanted to sell a product, why wouldn’t I go through Amazon, Ebay, or some sort of online advertising instead of setting up an MLM/pyramid scheme?

In addition to not having to pay advertiser/website fees, there’s the power rush of having an army of drones running around doing your marketing for you.