Multi-level marketing: Pampered Chef, Scentsy, Mary Kay, Initials Inc., even freaking Tupperware, to name a few! Are these “small businesses?” To me, they are not much different than a franchise. The person running the parties gets some money, but most of the profits go to a huge corporation that doesn’t have to pay benefits or for the party-giver’s time or expenses. I’ve been seeing a lot of posts from this type of seller on social media, touting that buying from them is supporting small business. What do you think?
John Oliver devoted his main segment to these in his HBO show on 11/6.
He reams them out. Quite justifiably. For the overwhelming majority (I mean overwhelmingly) of people who try this, then end up losing money. Big money. And friends. This is where the people in the company make their money. Not from selling to end users but by grifting off of the suckers who step into this mess.
Remember: Any business that clearly states it isn’t a pyramid scheme is a pyramid scheme. IBM doesn’t have to tell anyone it’s not a pyramid scheme.
Having known a few, it is not a small business. Each person makes the most money when they recruit more people, as the sales of the lowest get portioned among those higher up. You want your group selling soap, not you.
Dennis
Most scams are “small businesses” as well and we don’t urge you to go into them.
MLMs are scams for everyone but 1% of the people. Q.E.D.
I thought some of these, like Tupperware and Avon, are direct sales companies but not MLMs.
http://www.adoughables.com/tupperware/
I believe they are MLM, here are some links that agree.
even if they were direct sales, does that qualify as a small business?
Amway is huge in Thailand. The couple who run the franchise are treated like royalty. Really, you’d think the king and queen were coming whenever they attend one of the many Amway seminars held there.
I remember in the wake of the 1997 crash, when multitudes were thrown out of work. Starting their own Amway “businesses” was heavily promoted as one way for people to survive. Of course, the Thais thought this was hugely popular with all Americans, and one new Amway entrepreneur in particular became downright angry with me for not wanting to buy any products.
My friend is a seller for this brand/company called LuLaRoe. They sell womens’ clothing- mostly leggings but also dresses and shirts. It’s impossible for me to explain in an “elevator pitch” but do know that people become quickly obsessed with this clothing and much of it can be considered by many of us to be butt-ugly. But women are spending millions on it each year.
Anyway, the parent company is raking in the dough because the sellers do a shitton of work (I know this because I help my friend do her work). It’s all buy-wholsale-sell-retail but there are restrictions as to where you can sell (not on your own website or on eBay - just Facebook, Pinterest and Instagram; or out of your home and/or home parties at other homes) (seriously), how much you can charge, how you can advertise and what you can charge for shipping. You have to use their draconian invoicing system and ordering system. There is no SKU system, no customized reseller websites and no apps for the sellers.
Sellers can recruit other sellers but that won’t make you too much money. You can absolutely be a star seller and make lots of profit without having a single downline person.
I struggle to consider it multi-level because while you can make extra profit from having levels below you, that is not the gist of it at all.
My friend is a top seller because she is insanely ambitious and works, along with her husband and parents, on selling 24/7. It’s ridiculous at this point.
You have to buy in at a huge amount - $5k to $8k. You can only sell inventory you have - you can’t take an order from a customer then order from the warehouse. You literally cannot request an item in a size + pattern because there is no such thing. They make 2000 of each style (Dress A, leggings B, shirt C, etc) in whatever pattern of fabric and send them out randomly to sellers and that’s it. No more of that style in that pattern, ever.
And yes sellers are on the hook for sales tax and income tax.
Is it a small business? Well it is a business run by women out of their homes. My friend’s operation is well larger than mine and I run a small business out of my home (web development, employing 2 people). And people love the product. You can’t really be scammed into buying the clothes - no false promises like vitamins or some makeups.
Some people want to “be my own boss” and have this vision of money pouring in with very little work. And all they really are able to do is badger their friends and family into buying some of their worthless junk. And then they go broke until some other “opportunity” comes along. Other people, like my friend, are ambitious and like to work 24 hours a day and can totally be successful at it except their kids and husband are going insane because it takes up all their time. But she is successful dangit.
And some opportunities just aren’t going to make you rich or solvent no matter how hard you try, and those are the super scammy ones. You’re set up to fail.
omg I am so tired and I am rambling. I forget what the question was. But now you know about my crazy friend’s leggings business.
I’ve got a couple of friends selling LuLaRoe too. I’ve heard some people handing over their entire life savings for inventory, one of my friends being one of them. I’ve let myself be invited to one party. That was last month, and we’re still “in the queue” because I guess the LuLaRoe PTBs only let a certain number of parties happen at the same time.
Mostly everyone I know selling something online is either 1) long-term unemployedl; 2) a freelancer; and/or 3) a SAHM. I know people who sell both LuLaRoe and Jamberry or Jamberry plus Posh or Posh plus whatever because it’s difficult making money with just one unless you do it 24/7. One of my traditionally employed friends has done well with Jamberry, but that’s because that’s all she does in her off hours.
Intrigued I looked up the website. It appears to be not all that hideous fashions for heavier, but not morbidly obese, women. Both my daughter and ex are heavier women and it’s tough to dress well with clothes that are forgiving of 20-40 extra lbs. I can see why they are so draconian with their agent sellers. If they have that demographic in hand they can mint money.
Sure, but only because “small business” is pretty useless term. Anything short of Walmart can be and will be defined as a “small business” to suit some agenda.
My ex got involved in NuSkin when it started in Japan. We actually were invited before Japan officially opened and her immediate up line was one of the first Blue Diamonds or whatever they called the top layer.
I was dragged alone to a few things and saw everything my ex went through.
I would not characterize it as a small business even for the woman two up from my ex who made six figures a year.
The LuLaRoe model may be different, but I don’t know enough to say. However, most or all of them would not be considered small businesses by those of us who have built our own companies.
What does “small business” mean to you?
It *is *a small business. So is running a hotdog pushcart on a downtown street corner. So is your local Honest Bob’s Car Repair with 10 employees. So is the woman who cleans my house, although she has no licenses or official existence as anything other than somebody doing work for cash under the table.
“Small business” is not some sainted category where we’re better off spending our money there vice spending it at Giganto-Corp.
MLMs and franchises are a hybrid category with elements of *both *small business and elements of Giganto-Corp. There are franchises where the balance of costs and benefits between the two sides makes for a reasonable business on both sides. There are also franchises that are mostly ways for Giganto-Corp to cream off almost all the value-add of the franchisee’s work and capital, leaving them locked into having bought a crappy job at a stiff price. Finally at the far extreme there are the MLMs: designed at the outset to simply be vehicles for legal theft from the “franchisees” and flow the money uphill to the “franchisors.”
Certainly your “friends” on social media are better off if you spend money with them than with Giganto-Corp. Their blatant attempts to guilt you into doing so using a BS term should tell you all you need to know about their “friend”-ship.
The proper term for their opinion of you is “mark”, not “friend”.
Note that there are legit direct sales outfits that make money for their reps.
I have a relative that co-founded two such companies. Each grew rapidly, managers were brought in, focuses changed, etc. Resulting in my relative selling out. (Never has to work again, does charity stuff.)
Got into the business via a parent who worked for one of these types of companies. Then started their own specializing in similar line of products. Of course the parent was in on the ground floor of these as a regional rep managing the reps as well as doing their own “shows”. But that’s it as far as levels go.
One thing that was very different about these is that they limited the number of reps. Kept a lid on production of items. Only available for a short time in limited supply. All this creates a cachet about the product which drives demand.
Compare that to the major MLM companies. If they’ve been in business so long and if it’s so great being a rep for them, why are they trying so incredibly hard to bring in more reps? Shouldn’t they have enough already? Why do they need tons of more reps after all this time?
Wouldn’t you worry if Ford was trying to get thousands and thousands of people to start up new dealerships?
No their sizes go from XXS to XL in all styles then some styles have 2X and 3X. So if you are only seeing fat women in the images it might be that the clothes make you look a little more frumpy than flattered.
Thank you for your opinions, everyone. Rest assured I have no intentions of joining an MLM.
MLM is essentially ‘Turn Your Friends Into Money!’. Except, like any other exchange that fails disastrously, you don’t get your contribution (friends) back at the end.
Dunno. I think it could be argued that there’s at least a little moral virtue in supporting small businesses which provide a direct, friendly, traditional service. Of course, these businesses exist to make a profit for the people running them, but being rooted inside the community can breed commitment to value and service, as well as service offerings with a more tailored fir to the local needs.
MLM is set apart from this in that it actually is Giganto-Corp thinly veneered to present it as ‘small business’ - it exists solely to suck up cash and move it to the top.
My uncle spends a massive amount of time and effort on Primerica (the retirement investment arm; I hear they also sell insurance too). I have no idea how much he makes from it or how,but he’s still at it, so it has to be something.
But then, he’s the kind of person who enjoys striking up conversations constantly, even with total strangers, if there’s even the smallest hook, so I suppose he’s uniquely qualified for the industry.