Could MLM work if you opened a brick and mortar store and actually sold to customers walking down the street? Why must Amway operate out of the trunk of your car?
(I’m NOT looking to invest in MLM).
The advantage of an Amway business is that you do not have the fixed costs associated with brick-and-mortar rent and upkeep, the tradeoff being that you seek out your customers instead of them finding you. If you open up a store, you’ll be at a comparative disadvantage, because then you will incur all of the facilities costs of a conventional business, while also supporting all of the levels of Amway sellers above you (which a conventional business doesn’t have to do).
Because seeing scores of failed B&M Amway stores lining the streets would dissuade new prospects from joining in at the lowest level.
Has anyone ever tried opening an Amway front with low overhead? Perhaps a booth at a flea market or something similar?
thanks
Short answer: Because MLMs are not concerned with selling the product. The product is a ruse to keep it technically legal. The real money is in recruiting other people to sell the product (who then recruit other people to sell the product) and selling promotional materials.
With that in mind, its a (further) losing proposition to devote expenses related to the product. Wal-Mart can sell all of that cheap shit at retail better than I can.
I’ve seen those for all manner of MLM-type products, including Amway. Some people just like Amway’s products. Never tried them, myself.
Yes. Therefore a bricks-and mortar MLM enterprise would be in the business of urgently encouraging its customers to open their very own bricks-and-mortar stores in some sort of subsidiary/franchise supply chain network arrangement.
Which of course would be horribly impractical and would rapidly end in disaster for everyone except a few originators/early adopters - so it’s probably a useful thought experiment on exposing the fundamental issues with MLM.
Two data points -
Cookie Lee Jewelry allows you to sell at a retail location - you just have to make sure you use their branding. You buy their pieces at half price, and can do whatever you want with it. You couldn’t fill a store, but you could have a few display racks in a location.
And, in the last year or so, these organic, health drink places have been popping up - you do a shot of some kind of wheatgrass type cleanse, and then drink super health tea. They’re becoming popular, and they sell all kinds of protein shake mixes and stuff like that.
It’s Herbalife.
I think I saw a Mary Kay (or was it Avon?) table at a flea market. Of course, there was a sign inviting people to speak to the person at the table or call a specified number if they were interested in joining - but most of the table was taken up by actual products.
It seems to me that an MLM might be a cheap way for an independent business to expand its product line - e.g. maybe an independent bookstore could set up a shelf of Amway soap or Mary Kay cosmetics at a lower up-front cost than going through a major distributor, paying huge amounts up front, etc.
You’ll see a significant amount of MLM products on Ebay frequently at lower prices than the company recommends. This happens when an affiliate needs to order more product than they intend to use because they wish to qualify for some bonus or another (or worse, their “upline” talks them into making the purchase so that they qualify for the bonus). They’re selling the product at a loss just to recoup some of their investment.
This could work with a one or two level affiliate sales structure but it’s unlikely to do so with mainstream MLM. In order to attract the sort of personality types who can run hour long Google hangouts 3+ days a week and recruit and recruit and recruit you need complicated interlocking bonuses that land fat in their pockets, otherwise they’ll take their perpetual hype machines elsewhere.
I was looking at one MLM recently and figured that “breakage” (bonuses unlikely to be qualified for) included at least 50% of the retail price of their products was overhead to the comp plan. And it isn’t like their products were all that unique, you could get more or less the same thing for far less money if all you wanted is to buy the products. You pay so much extra when you are buying the dream tacked on to the product.
Big article on the MLM lifestyle in the Washington Post. A box of 84 squares of chocolate for $125? I can’t imagine.