Nearly all products are sold in a
multi level type fashion. The producer or manufacturer first sells it to a
wholesaler who then sells it to a distributor who then sells it to a store who
then sells it to the ultimate consumer. These various different levels are
referred to as Multi Levels and this is the normal way of doing business. The
more levels there are between the producer or manufacture and the consumer, the
more the product will ultimately cost since everyone wants to make a little
profit. When it reaches the point that there are enough people or stores
selling the same product, we will then have reached what is called the “saturation
point.” After all, we can only have a limited amount of fruit stores,
groceries and hardware stores in one particular neighborhood. Open up too many
stores of one kind and soon some of them will be forced to close up for lack of
enough customers.
Any Multi Level business that is built in a way that just
keeps adding an endless amount of distributors will soon reach the saturation
point and will not be able to continue on any longer. So far everything is
fine and dandy and we have no problem with this type of arrangement. The
problem arises when one must pay a fee in order to become a distributor. Let’s say that one pays $1,000 to become a
distributor for a Carvel Ice Cream shop and then is left with no one to whom to
sell the product because there are already two Carvel shops on the block.
Obviously there can only be a certain amount of distributors of the same
product in one neighborhood. When you reach the saturation point then some of
the shops will have to close down for the lack of business.
Yet some businesses are set up in a way were everyone and
anyone becomes a salesman for the same idem. If one has to pay a fee in order
to sell this idem then eventually people will be paying a fee but will not have
anyone to whom to sell the product. This type of MLM is called a pyramid
and will eventually fail with all the last investors losing all their money.
Take the person who pays $1000 to
become a distributor of jewels. Instead of actually selling any jewelry he
decides to sell his distribution rights to ten others for $1,000 each making
$9,000 in the process. Each one of these 10 people does the very same thing
each making $9000 in the process. It sounds like a great business with lots of
people making lots of money. Yet, a little math will show you that it can’t
last too long. In less than 10 levels everyone in the world will have become a
distributor and there is no one left to sell it to. It’s quite obvious that all
those millions of people at the bottom of the pyramid that paid $1,000 to
become distributors will of course have lost their money. This is why this type
of MLM (Multi Level Marketing) scheme is sometimes referred to as a pyramid
scheme and is illegal.
Depending on how they are
structured, they may even be legal but not always moral or ethical. Making
false claims about a product is strictly forbidden. This of course applies to
any business.
Most MLM’s do actually sell a
product and encourage you to get others beneath you to also sell the product as
well. Those beneath you are called your “downline.” They convince you
that the more people you get beneath you to sell the product, the more money
you will make. This may work for a little time but can’t go on for long. You
may also find out that you don’t make the big money they claim for the time one
must put in. That’s because there are already too many distributors for that
particular product or there may be many cheaper options available to the
consumer.
Most MLM’s deny that their
business is a pyramid scheme even when they are. Time has proven that
they all come to a quick end and that most of the investors except for the
first few at the beginning ultimately lose their initial investment. Most people soon quit when they realize they
are not earning enough money to make it worth their while. Lots of these companies
make their money by selling you their sales promotion tapes and kits and
inviting you to their many sales meetings where they hype you up by telling you
how much money others are making by selling the product. Most of what they tell
you is just a balloon filled with lots of hot air! I recommend you read “Behindthe Smoke and Mirrors” by Ruth Carter who reveals the multi-level delusion and
guile in the Amway business. One must also read “False Profits” by Robert L.
FritzPatrick
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