Sell directly to the consumer, word of mouth, marketing
Among the first were Avon & Nutrilite – both California-based companies
DSA: Direct Selling Association- lobbying group for MLMs
MLMs/Direct Selling Boom
1990: 25% of DSA members used MLM models; 1999: 77% of DSA used MLM models. By 2009, 94.2% of DSA members were using MLM models
Single Level Marketing – Avon, Tupperware, Electrolux; then moved to MLM.
MLM is banned in China, Bangladesh, and Saudi Arabia, citing taxation.
Other names: Affiliate Marketing, MLMs, Pyramid Schemes (even if legal). Recruiting New Distributors is what determines if it is a pyramid scheme.
What year did the first direct sales company start?
1878 – David McConnell – selling books door to door. Discovered women really wanted to purchase perfume. So in 1886, he started the California Perfume Company which would become Avon. Women began selling perfume and sales went through the roof (the 1920s).
Avon and Nutrilite were one of the firsts.
Amway sells health, beauty & home care products. The company was owned by Richard DeVos. That last name might sound familiar b/c Richard DeVos’ daughter-in-law was the Dept of Education Secretary in the Trump Administration. Devos’s family net worth is $5.4 billion.
In the 1970s-2000s it was Tupperware, Cutco, and Pampered Chef. In-home parties.
The 2000s on – Diet Supplements, with social media.
8 most Controversial MLMs
Most who join are gone within 24 months.
Members pay $135/month to purchase supplements, and fees and no fitness experience is required.
Primerica employs, according to their prospectus, over 100,000 representatives who go out and sell financial products like term life insurance, mutual funds, life insurance, and annuities. Almost all the products offered by Primerica are from Citigroup, its corporate parent.
Health, Beauty & Homecare products; so many lawsuits based on deceptive practices and misleading members about how much they could make and how much they’d have to spend. The reason the Anti-MLM was formed. Startup costs are $100/annually. Legacy of Clean is their line of cleaning products. IBOs report spending around $300/month on products to keep up with their PV required to stay active.
Stream of lawsuits, sales distributors who signed up would spend thousands in inventory and never get it back. According to testimony from former LulaRoe retailers in LulaRich, a typical startup cost in 2016 and 2017 was roughly $5,000 to $10,000.As of Sept. 14, 2021, the LulaRoe onboarding package costs $499, which gives you 65 pieces of inventory.
Wellness/Skincare Company – recruit, recruit, recruit. That’s illegal. “Start creating your own business & the life you love.” For $49.95 you become a brand partner, access to training, and for $695 you get the starter kit. 11 products that retail at $950.
So many lawsuits and complaints, false promises about income potential. Shakes, starter kits; $34.95 to become a member, and then kits are $95. You get a discount on products.
Advocare – Illegal pyramid scheme, false promises of income potential, purchasing inventory (running costs). $59 – “Grow your own business, become part of a fun, supportive community.”
Illegal pyramid scheme, had to purchase more inventory to remain an active presenter and 8 tiers – which made it impossible to climb up to the next level. “Set your own hours, be your own boss, for a $99 starter kit.”