Why does everyone say that MLMs are always scams?

Question

All I seem to hear now is people saying that MLMs are nothing but scams and yet I am fairly sure that the scheme that gives me £7500 a month is an MLM scheme.

If I am right, an MLM is a scheme where you get paid a certain amount to get other people to join who get others to join etc.

The team I am on works like this and I think that it works like a dream. I mean, I know that the company makes a lot from it (or rather, Children in Need does from this particular company) but if I am making a lot as well, it surely can't be a scam. If it were a scam, wouldn't I be losing money and not gaining anything?

So either I have the definition of MLM wrong, people are wrong about MLMs, or I got lucky and picked the right MLM first time. Which do you think it is?

I'm not asking your advice on whether or not to join as I already have and am doing well with it (as are all the others that I know who are with the same company), I'm just curious as to where all the bad press came from.

I've never had emails asking me to join up for one of these though and I guess that, if I had, I might have been a little more suspicious. A good friend asked me to join and I trust her so I did.

By the way, Skyline-D, why do you hate me? I haven't done anything to you. And why would I be sending you anything anyway?

Answer 1

I think you found the right one for you, as I have found the right one for me. I think it's the fact that some representatives of this type of business don't do it in a moral fashion, so it causes negative reactions. I am honest about my company and don't try to sign up every Tom, Dick, and Harry. That's not going to help my business.

Answer 2

A MLM scheme is a perfectly acceptable business model. It just takes the added value between the manufacturer and the consumer (which equates to the profits made by the distributor, wholesaler and retailer) and redistributes them in a different way.

The best schemes arrange this profit-sharing in such a way that incentives to maximise sales of the product are firmly in place. There is no scam about this, although many distributors are guilty of putting an optimistic glow on potential earnings and the ease with which they might be attained.

Their bad press is because many people have memories of pyramid schemes, which are illegal in the UK (and elsewhere). The hallmark of a pyramid acheme is that the bulk of the reward is for introducing new members into the scheme. In many there is no actual product although there have been some very creative devices to obscure this fact.

From the way you have worded your question it would seem you are in one of the scam schemes. I hope I am wrong.

Answer 3

My opinion... people go into MLM without, as you say, doing their own due diligence. They are not familiar or aware of how to run a business and they fail because they don't understand the model or put the necessary effort into the business. I know MLMs can be very profitable for some.. I know a guy that makes over $30,000 US every month... I have seen his checks! But it isn't easy, and it won't come in a week or a month. It is not a get rich quickly with little effort thingy.

Answer 4

Unfortunately, the vast majority of MLMs are indeed fly-by-night operations.

However, the continued legality of MLMs in general, in the United States, hinges on one specific court case back in the 1970s, which established the Amway Rule (which is in regards to the percentages of sales to non-members as opposed to distributors).

Here are some sites that explain the common perception of MLM=Scam a lot better than I can.


http://www.mlm-thetruth.com/tax_study.htm is, as the name suggests, a study of the tax returns of MLM participants. The data isn't encouraging. For every high-money-earner, over 99 others MLMers lost money overall. The conclusion was that betting everything on one spin of the roulette wheel was a better gamble than joining a multi-level marketing program to get rich.
The same site has, on another page, some of the warning signs to look out for to tell a scam from a reputable MLM.

http://www.falseprofits.com/FSLegalityPg.html covers the history of the Amway Rule, and the differences between MLMs and pyramid schemes.

http://www.vandruff.com/mlm.html discusses MLM psychology, and some of the nasty hidden pitfalls of "MLM blindness." It also covers the economic hazard of market saturation quite nicely.

http://www.profitclinic.com/MLM/boobytraps/Index.html covers, as you might expect, many of the boobytraps inherent in MLM as it is practiced today. The part about what "ground floor opportunity" really means is sad and scary.

http://www.stopspam.org/faqs/mlm_vs_pyr.html is usually another good one for explaining the differences between a real MLM and the more common Ponzi/pyramid schemes posing as MLMs, but unfortunately the site seems to be down tonight.



Oh, and to the fellow with the e-vwd.com link... that program is only legal within the United Kingdom, but they make false claims of worldwide legality. Gambling Act 2005, the rules of the lotteries they use, and the laws of Australia and the United States put the lie to their claims.

Answer 5

In my state, MLMs are illegal UNLESS... goods are actually sold. Amway is MLM marketing company. Not all of them are scams, but I think that most people that try them do not understand that not everybody is a born salesman, which is what is required to succeed in that kind of business. I'd avoid them like the plague if I were you - there are other ways to make a lot of money. Try getting a specialized skill instead, like biomedical electronics technician, or something else like that.

Answer 6

Most people are too unintelligent to differentiate between MLM and pyramid schemes. When they're approached by someone offering them a career change, they go straight on the defensive and bleat, "Scam, rip-off, envelope filling...my mate's friend's friend got ripped off in 1974." etc.

Those people you don't want in your network.

Most companies, anyway, operate in a similar way to MLM companies. Big earner at the top, then upper management, middle management, down to the ones at the bottom. The difference is that those at the bottom WILL get promoted on their efforts. Most people fail in MLM because they expect to be earning 1000's with very little effort and, when they fail, they blame the company, not their lack of effort.

Enjoy yourself in your business, as I'm enjoying myself.

Answer 7

Some people make money in MLMs, that's why the exist.

Most people don't though--mathematically, they can't, since most of the money comes from signing up others, and the pyramid can't grow forever.

These are called scams because a large percentage of people participating in them don't realize the benefits that are described as being possible.

Answer 8

It's not that they're scams it is that people are led to believe it is going to be MUCH EASIER than what it really is. If you put a lot of time & effort into whatever MLM you are doing, you will see some profit. However, it may not be reasonable to make the amounts they lead you to believe are possible. But if you have found a product or service you believe in, I say go for it! A lot of people try to hold others down that dream big. Listen to your inner voice, not the voices around you.

Answer 9

I feel real sorry for people who think MLM are scams. They are just to stupid to get it. MLM is the wave of the future and you all know it.

I am making $50,000/day which is more than most of you will make in an entire year and its entirely with Network Marketing. I have never had to sell a thing. Yes, i bought minimums to keep my quotas, but then I just focused on signing up everyone I ever met in my life. I always think in terms of getting people into the business.

Last week I was at the doctors office and asked every doctor and nurse I could find to join my business. Most of them get upset because they think I am annoying them, but I am making more money than they can dream of. Who are they kidding. Its people like doctors who give MLM a bad name.

MLM accounts for almost 80% of all retail sales at this point. Can you even name a retailer that does more than $1 million in annual sales, yet now there are MLM companies doing almost 3 times that!

You people who think bad things about MLM need to get a clue!

Answer 10

Very few people make money these pyrimid selling scams have been around a long time. People have gone to jail and it is very close to fraud.
Look in my answers and you will see a little history on this subject.taken from Motley Fool website
In most MLM there is no product just hype to sign people up.
You have been lucky, the fact that a charity is involved possibly helps you sell this as been legitimate.
In general I would sooner talk to a Nigerian fraudster tahn a MLM person.