Can MLM Survive The Current Recession?

[Doc Bunkum]

I was just looking at some current unemployment figures posted in the New York Times this morning.

Seems the American economy lost another 240,000 jobs in October, bringing the total to somewhere around 1.2 million jobs lost since the beginning of the year. The number of unemployed Americans increased by 603,000 in October to 10.1 million.

We also read that more than a million people have lost their homes through foreclosure in the last two years.

Through all this economic doom and gloom though, it's not surprising to find that some MLM zealots find this to be all good news.

Take the genius that wrote this article: Can MLM Survive an Economic Recession? . His premise is that:

"The MLM business is tailored for ordinary average people that want to improve their financial condition without spending a small fortune in order to do so. At the same time they would also have their business education covered from the MLM companies without the need to rely on third parties for expensive training or consultation as other business owners might need."

The outcome of all this, as we dive into an economic recession, would be

... "an increased number of people that would seek to participate in your MLM business opportunity. That is a great chance to increase the members in your downline and the income you are making from your network marketing home business. You have nothing to fear as your MLM would not only survive but it would become stronger and it would help you to reach your goals faster than before."

.

Wow! What an optimist.

The obvious question, I suppose, is just who the heck is going to buy your overpriced products anyhow? We've got over a million people alone that can't afford their house payments, and this guy thinks they're going to go on a monthly autoship?

But this fellow apparently is not alone in his enthusiasm that the current recession is a gold mine. Rod Cook over at MLM Watchdog just published a similar article: Hot Times Ahead - WHEN RECESSION HITS THE ECONOMY, NETWORK MARKETING BOOMS .

Funny though, not everyone is in agreement with these views. Like the findings in this recent article: Recession Proof MLM Business Suffering From Recession: Quitters Numerous/New Recruits Harder To Find .

Dunno. Somehow I think that last article is closer to the truth.

Personally, I can't see how anyone in MLM with a sizable downline can remotely hope to maintain it, let alone increase the size of it during the current economic mess.

At least that's my opinion.

[webhick]

People always seem to find money for the things they want and will forgo the things they need to do it.

[Mr. Mephistopheles]

I had a former neighbor who moved to a different part of the state a couple of years ago. Before he left he got hooked up with one of the financial advisor MLM schemes. I saw him recently and asked him how it was going and he remarked that it was very successful and he had a couple of guys working under him handling the "business". It's so successful that he was able to go get a second job (one that can actually pay bills & provide medical insurance for his family). It doesn't sound too successful to me. Perhaps I'm just overly skeptical of such things. Incidentally, his father is a TP of the first order.

[wserra]

The obvious question, I suppose, is just who the heck is going to buy your overpriced products anyhow? We've got over a million people alone that can't afford their house payments, and this guy thinks they're going to go on a monthly autoship?

But no MLM aims to sell to ultimate users. Why, then they'd be selling a product. As you say, what they really sell is the virtually non-existant (unless you're at the top of the pyramid) "opportunity". And lots of folks figure that they have friends, neighbors, friends' friends, friends' neighbors, and so forth to whom they can sell the "opportunity". Those folks may stop being friends after the attempted sale, but hey.

But this fellow apparently is not alone in his enthusiasm that the current recession is a gold mine. Rod Cook over at MLM Watchdog just published a similar article:

He actually gives the game away. From that article:

During the early 2000's recession (officially starting in November 2001), MLM company growth rates jumped higher than they were before the recession. See the chart below (November 2001 was the benchmark) and look at the following growth. This was due to two reasons: (1) Fear leads people to new income sources and they WORK the opportunity, not watch TV. (2) The doubt of the recession lingers in the minds of people so there is an "aftereffect". (3) During the recession the company grew a "freverant" distributor base, recruiting more new people that lead to exponential growth.

I think he needs to recount his "reasons", and check out "freverant". Still, note that his "exponential growth" comes from "recruiting more new people", not selling more product.

That's what it's all about. If there is MLM growth during recessions, it's because people are cheaper than product.

[GoldandSilverEagles]

But no MLM aims to sell to ultimate users. Why, then they'd be selling a product.

Wrong. The following is quoted directly from Amway Global's Business Rules, Code of Ethics:

FYI: "IBO"...Independent Business Owner.

"..Pyramid and Direct Selling Regulations The IBO Plan is not a pyramid or chain distribution scheme. A pyramid is a scheme in which an individual pays for the right to recruit additional persons into the scheme who, in turn, receive the same right to receive profits from recruiting others.

Three common elements of a pyramid scheme have been identified as: (1) a large, required initial investment or purchase of inventory; (2) direct payment for recruiting additional persons into the scheme; and (3) heavy emphasis on recruiting additional persons, with little or no emphasis on selling products to consumers.

The Independent Business Ownership Plan contains none of the above described elements. Amway Global-affiliated IBOs earn money by selling products to their downline IBOs, registered Clients and Members, and other customers directly and through other IBOs in their sales organization, but not from the introduction of additional persons into the business. IBOs who improperly require large initial investments in business kits or inventory and do not properly emphasize retail sales of Amway Global’s products may invite scrutiny under various state pyramid laws and be subject to disciplinary action.

In summary, IBOs must present the IBO Plan in accordance with Amway Global literature and sales aids, properly emphasize retail selling, and only require purchase of the literature portion of the Amway Global Registration Pack to enter the business. It is important to realize that seemingly simple and innocent changes made by well-meaning IBOs could violate these laws. We insist on compliance with the IBO Plan, Rules of Conduct for IBOs, and all other requirements outlined in this guide."

[GoldandSilverEagles]

Well, that certainly settles all debate now doesn't it? They have a Code of Ethics.

Damn right Captain! Wserra made a statement and I proved it incorrect.

Of course I am sure Enron, WorldCom, Tyco, Executive Life, AIG, etc. also had fancy Codes of Ethics and that really helped those businesses in the long run didn't it?

A Code of Ethics means jack-sh*t if there is a pervasive culture of deception, fraud and thievery endemic to a company, especially if it is worst at the top.

It can only be expected that there's a degree of negativity in even the best of businesses.

Amway Global has strict disciplinary policies, which include termination of IBO's who refuse to follow Corporate policies.

Amway, MLMs, and their ilk seem to be endemic to a particular class of people and disappear almost enetirely once a certain economic status has been achieved.

Hmmm....As corny as it sounds, the desire to own a piece of the 'American dream' is what has fueled Amway since 1959, and interestingly enough, they are far from going away.

Amway is just like anything else in life in one regard, if you look for good you will find good, if you look for bad, you will find that too.

As good as Amway is, it has a flaw, it's made up of people, and like any other business, some people screw up.

[wserra]

Wserra made a statement and I proved it incorrect.

You proved that Amway isn't a pyramid by quoting . . . Amway.

Guess you showed me, GASP. Just like you did when you proved politicians use escrow accounts.

[GoldandSilverEagles]

Wserra made a statement and I proved it incorrect.

You proved that Amway isn't a pyramid by quoting . . . Amway.

Actually you are wrong. Amway IS a pyramid, (in a manner of speaking,) but they are a legal pyramid. Look at the structure of any Corporation in the USA. Every Corp. in this country has the structure of a pyramid, and so do the IBO organizations powered by Amway.

Guess you showed me, GASE. Just like you did when you proved politicians use escrow accounts.

Well for once you are partially correct.

Yes I did show where you were in error, and that's about it.

[Doktor Avalanche]

Actually you are wrong. Amway IS a pyramid, (in a manner of speaking,) but they are a legal pyramid.

Oh yeah, that makes it all right then doesn't it?

Dude...WTF?!? Seriously.

[GoldandSilverEagles]

Actually you are wrong. Amway IS a pyramid, (in a manner of speaking,) but they are a legal pyramid.

Oh yeah, that makes it all right then doesn't it?

Dude...WTF?!? Seriously.

It's obvious that you are an uneducated outsider in terms of the business world, and one who does not understand (nor comprehend) the industry, nor how businesses, or institutions as a whole are structured.

If it weren't for your being cocky and labeling me a 'dumbass' (can you say the 'pot calling the kettle black') in another thread I wouldn't be abrasive in my words and I would have taken the time to explain this to you.

[Nikki]

Actually you are wrong. Amway IS a pyramid, (in a manner of speaking,) but they are a legal pyramid. Look at the structure of any Corporation in the USA. Every Corp. in this country has the structure of a pyramid, and so do the IBO organizations powered by Amway.

There is a significant difference between a heirarchical organization and a pyramid sales organization.

To revert to your example, AMWAY, per se, is a heirarchical organization with Vice Presidents, Diretors, Managers, and employees. In that respect, it's just like any other major corporation.

However, AMWAY differs in that its sales force is organized as an MLM pyramid. Unlike non-MLM marketing structures, AMWAY's compensation plan includes a significant incentive to recruit other prople to sell products for you. According to their official web site, the average retail margin on their products (when sold at full suggested retail price) is about 29%. However, before they even mention taht, they highlight

Monthly performance bonuses ranging from 3% to 25% of business volume, depending on your monthly productivity.

Monthly and annual leadership bonuses and other cash awards and business incentives based on group performance.

Nothing, other than an MLM, structures its sales force so that a representative needs many subordinate levels to provide a source of income.

Even the largest corporations rarely have more than four or five levels of staff between the corporation and the retail purchasers. And none, absolutely NONE, of those corporations require that a salesperson pay them for the privilege of seling their products.

Other than that, you are absolutely correct in likening an MLM to a normal business structure.

[GoldandSilverEagles]

Nikki~ I'm still learning (battling...lol) with the quote feature, so it's easier to reply in this manner:

BTW: I'll do my best to "quote" you correctly, (ie...the parts that I use,) including your spelling errors. So if I screw up, don't spank me too harshly! lol
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Me: For the most part I agree with what you are saying. However there are a few things we differ on. Also you appear to compare IBO (Independent Contractors) with salespeople who are employees of companies.

Nikki: "However, AMWAY differs in that its sales force is organized as an MLM pyramid. Unlike non-MLM marketing structures, AMWAY's compensation plan includes a significant incentive to recruit other prople to sell products for you."

Me: That's one of the myths/misconceptions of the business, that one has to go out and get people to "sell for them". When a IBO makes a sale, I assure you they ARE NOT doing it for their upline, they are doing it for their business/IBOship. It's the attitude behind the sales. On paper it may look like they are doing it for their upline, but I assure you IBO's aren't.

Nikki: "Nothing, other than an MLM, structures its sales force so that a representative needs many subordinate levels to provide a source of income."

Me: Not necessarily. Look at the job of a regional sales manager within a corporation. Frequently they are responsible for managing a region of the country as they're "territory". If sales should drop within they're "territory", frequently their income/bonuses reflect it.

Nikki: "Even the largest corporations rarely have more than four or five levels of staff between the corporation and the retail purchasers. And none, absolutely NONE, of those corporations require that a salesperson pay them for the privilege of seling their products."

Me: Paying for the privilege to "sell a company's products" has been around for a long time. Lots of people pay franchise fees for the privilege/opportunity to sell a companies products (McDonalds, as one example.)

Now this may be a bit of a "twisted/roundabout" example, but what about companies that require you to buy a membership to buy their products? Sam's Club, Costco, etc... and the bad part is... a majority of the merchandise is not their THEIR products... they just sell them to you.

Sales reps of large corporations are employees. As I mentioned above, Amway IBO's are Independent Contractors. What you may not realize is that the Amway sends out a variety of catalogs, updates, magazines, etc throughout the year. IBO's have a yearly renewal fee to pay for these services.

[Nikki]

yawn. stale, unthought out mlm propaganda. bye

[GoldandSilverEagles]

yawn. stale, unthought out mlm propaganda. bye

bye

[GoldandSilverEagles]

yawn. stale, unthought out mlm propaganda. bye

Propaganda? Oh you want a dose of propaganda? Here's a dose I was taught in high school:

To be financially successful, go to school, get a good education so you can get a "good job" (Just Over Broke) and the company will take care of you and you'll be able to retire in dignity.

~~~~~~~~~~~~~~~~~~~~~End of government subsidized propaganda~~~~~~~~~~~~~~~~~~~~
What the 'American Fool System' failed to teach me was that when you "retire" from the career world, all those dollars you were making turn to quarters! ~ Now isn't that exciting!

So now you gotta figure out a way to "get by" on 1/4 of what you couldn't "get by on" when you were employed.

If you think Social (In)Security is going to take care of you that significantly... I got some swamp land real cheep, off the coast of North Dakota. ....LOLOLOLOLOL

Now please notice, there is a HUGE difference in "getting by", as opposed to enjoying a prosperous lifestyle.

The one factor that amazes me the most is this:

In my experience, the broker someone is the MORE they criticize Amway while clinging to Amway "horror stories".

However, financially independent people on the other hand usually have tremendous respect for Amway.

And I'll end this post on this, Bye!

[Doktor Avalanche]

It's obvious that you are an uneducated outsider in terms of the business world, and one who does not understand (nor comprehend) the industry, nor how businesses, or institutions as a whole are structured.

Translation: I can't justify illegal activity in terms you'd accept, but watch me try as I explain the paradoxical quantum duality of Amway being both a "pyramid" and "not a pyramid" and hope you're stupid enough not to see what a crock I am.

Yup...sailed right over my head.

If it weren't for your being cocky and labeling me a 'dumbass' (can you say the 'pot calling the kettle black') in another thread I wouldn't be abrasive in my words and I would have taken the time to explain this to you.

I still think you're a dumbass and you couldn't explain your way out of a wet paper sack if you tried.

But go right ahead. Unlike everyone else here, I'll even let you make up any citation you wish - and I'll still show you for the crock you are, fake evidence and all.

[GoldandSilverEagles]

By the way, not everyone is cut out, has the wherewithal, or the ability to own and operate their own business with any degree of success.

Very true!

And to add to that, a**lot of people are not cut out to have their own business(es). Unfortunately many people in this country grow up developing an ISI (Inadequate Self Image). These folks have been inundated all their lives with what they can't do, what they will never do, what they won't ever become,or achieve, etc...

Unfortunately I find a majority of the population fits in there to some degree or another. Growing up, most of us experienced people (idiots) telling us what we couldn't do, more so that people uplifting us by telling us what we can do.

A lot of small businesses fail each year and a lot of businesses just get by, to the point where the owner has to work at that business until they die, all while making a modest living. It is a very small percentage of people who start their own businesses who actually achieve financial wealth and security, the rest are probably better off working for someone.

True again. Actually around 85% of all small businesses fail within their first 2-5 years.

And below a certain age (say 50), anyone planning for their retirement should make plans as if there will be no Social Security for them.

You are quite correct.

[fortinbras]

I think it's a very real possibility that, in tough times, some desperate people would be attracted to pyramid schemes who might otherwise ignore them. Some of the most notorious swindles have occurred in recessions, probably because people are grasping at straws.

[GoldandSilverEagles]

I think it's a very real possibility that, in tough times, some desperate people would be attracted to pyramid schemes who might otherwise ignore them. Some of the most notorious swindles have occurred in recessions, probably because people are grasping at straws.

You make an interesting point. In contrast, historically, Amway, a legal business I will add, explodes in growth when the economy is doing poorly.

Because, and you are right.... because people are looking for extra income.

They are hungry for opportunity.