PDF Evook The Myth of "Income Opportunity" in Multi-Level Marketing
The claim by multi-level marketing (MLM) companies of offering consumers a viable "part time income" or an "extraordinary income" greater than most other businesses or occupations is their hallmark attraction. It is also their greatest defense against persistent charges of pyramid scheme fraud, mind control and deceptive promotions. The question is whether MLM is a social and financial blight or a benefit to consumers. Legitimacy of this business ultimately hinges on the truthfulness or falsehood of its income claims.
This report reveals that 99% of all sales representatives each year in the sample of companies analyzed earned less than $14 a week in rebate income. This figure is before all business expenses, inventory purchases and taxes are deducted and therefore represents a significant financial loss for virtually all who join. Additionally, the report shows that on average no net income is earned by MLM distributors from door to door "retail" sales.
If all the losers over a five-year period are included in the calculations, the failure rate rises even further. Less than one in one-thousand will be shown to have profited. The so-called successes in MLM are in the same small group positioned, year after year, at the top of the recruitment organization. MLM companies obscure their astonishing failure rates by counting only "active" participants and limiting the figures to a one-year or even shorter time frame, thus concealing the factor of the ongoing and mounting losses of new investors. Most MLMs do not reveal any data at all on actual average incomes.
Of the two categories of the MLM income opportunity, rebate income and retail sales income, the most publicized are the rebates, commissions and bonuses paid out on the purchases by "downline" recruits. This is the source that the companies claim has "unlimited potential" based on the opportunity to derive payments from an "endless" chain of recruits. MLM allows all distributors to recruit others and qualified distributors to receive rebates on the purchases made by multiple levels of recruits that recruit more recruits.
This report analyzes data from five representative MLM companies. Three of the five that are analyzed are major and very well-known MLM companies. One is newer and growing. Charts are provided showing the actual commission payouts on a per-10,000-sales-representatives basis for each of these four. The data show not only that virtually no recruits earn rebate profits but also that the MLM payout schemes transfer the lost investments of the great majority of participants to a tiny number of organizers at the top of the recruitment chains.
A special supplement is provided on the rebate data from the oldest and largest of all multi-level marketing companies, Amway/Quixtar. The analysis for Amway/Quixtar is presented on a per-300,000-distributor basis. It reveals the same pattern of 99+% annual loss rate and a concentration of payments to a tiny number of promoters at the top.
Introduction and Overview
- The Disguise of Direct Selling
Part 1: How the MLM Income Myth Is Maintained
- Confuse the Consumer
Claim "Legality"
Hide the Pyramid Math
Obscure the Nature of the Business
Put on the Camouflage of "Product Sales"
Part 2: Exposing the Myth of MLM Rebate Income
- MLM Data Sources
MLM Data Analysis
- Data Disclosed by Companies
Method of Calculations
Revenue, not Profits
Retail Sales Costs and Income Excluded
MLM Data
- Estimated Nuskin Payouts
Estimated Nikken Payouts
Estimated Melaleuca Payouts
Estimated Cyberwize.com Payouts
Additional Data on Rebate Income Averages
Summary of Rebate Income Findings
Three Key Facts for Understanding MLM Rebate Payouts
Part 3: Exposing the Myth of MLM Retail Income
- The Legal Significance of Retailing
The 70% Retail Benchmark
Retailing Realities
The Retail Income Myth Revealed
- Data from 21 MLMs
Summary of Retail Income Findings
Bottom Line: No Rebate Profit, No Retail Profit
The Myth of Door-to-Door Selling
The Lure and the Hook
Blaming the Victims
Special Supplement: Amway/Quixtar Data and Analysis
- The Secret Business
Lawsuits, Exposés, Consumer Protests, Tax Evasion, Defiance
of Government Orders, Intense Political Influence-Peddling
Estimated Quixtar (Amway) Payouts - on a per 300,000 distributors basis
How the Quixtar Data Is Analyzed
Amway Data Disclosed on the Quixtar Website
Appendix
I. How to Recognize – and Avoid – a MLM Recruiting Scheme
- Five Red Flags
Three More Tricks of Pyramid Perpetrators
II. How to Prevent MLMs from Operating as Pyramid Schemes
- Audited Retail Sales
Full Disclosure
Download
PDF Evook The Myth of "Income Opportunity" in Multi-Level Marketing
Posted in :
