MLM Companies

[rayjp11]

Does anyone think MLM companies are not always scams?

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[wserra]

Does anyone think MLM companies are not always scams?

It depends on your definition of "scam". However, it is certainly arguable that the answer is "yes, an MLM is always a scam", for the following reasons.

(1) The business model is fatally flawed, for many reasons. In what other business do you pay someone for the privileges of selling their products and recruiting your own competition? The best single-page explanation I know of is here.

(2) The odds are overwhelming that a new distributor will earn more at McDonalds. Digging into the financials of even the best-established MLMs (generally available only from the SEC filings from those that are publicly-traded, a small minority) shows this.

(3) They all present potential suckers with hugely overblown expectations of earnings. That's why: (a) the FTC has proposed new rules that require disclosure, and the MLM "industry" is fighting tooth and nail. Why do you think they're doing that? (b) All of them, including the poster children for the "industry", have distributor turnover rates approaching 40 percent (and some 50 percent) per year. Why do you think people drop like flies - because they're getting rich?

There are other reasons, but those are summaries of the main ones.

[Evil Squirrel Overlord]

I've not seen one to date that isn't. If it is *cough* legit and the originators are *cough* honest, it still will eventually collapse as the *great product* reaches saturation level, people at the bottom lose their money (because you aren't really selling a product, but catering to personal greed, selling a dream of luxurious wealth--and greedy people hate losing money). Thus the rats begin to flee the sinking ship.

[buck09]

Does anyone think MLM companies are not always scams?

That depends, does the company constitute a "level" in MLM? If so, I'm ok with any MLM that has no more than two levels. (I.e. the company and the distributor - no downlines.)

[wserra]

That depends, does the company constitute a "level" in MLM? If so, I'm ok with any MLM that has no more than two levels. (I.e. the company and the distributor - no downlines.)

I'm fine with that kind of arrangement too. Lots of big online merchants (e.g., overstock.com) use exactly that, and the LinkShare network is set up for it. The LinkShare agreement even prohibits using its facilities to recruit others.

But I wouldn't call such an arrangement an "MLM". It's just independent salesmen who work on commission, a deal that's been around forever.