Multi-level marketing (MLM) schemes are booming in lockdown. More people are looking for ways to make money or get an easy income boost.
Those involved in the schemes claim you can be your own boss, work less or work flexible hours, and earn extra money at home. And, as of 2018, over 18 million people in the US alone were involved in these schemes, generating a staggering $192 billion.
But are MLM schemes too good to be true? Here’s everything you need to know:
What is multi-level marketing?
If you use social media, you have probably seen multi-level marketing schemes and maybe been invited to some. There’s no clear way to define an MLM business, but they’re often referred to as network marketing or direct selling.
Usually, they are made up of hundreds or thousands of individuals selling merchandise or services for a large organization. This could be anything from beauty products, cleaning products, candles, books, health products, supplements, or something else.
Some of the signs it’s an MLM scheme are:
- You will need to buy a starter kit to join the scheme and become a seller. This kit could include products, marketing materials, samples, or other selling tools.
- When selling a product, you will earn a small commission on the sale.
- You will also make money by recruiting other sellers to the scheme. As well as earning a bonus when they buy a starter kit, you will also make some commission on their sales.
Most MLM sellers use social media platforms like Facebook to sell products and find new recruits. Additionally, they might host parties and events to show the products in real life.
Are they a good way to earn extra cash?
Because sellers don’t receive a salary, this means they are dependant on commission from selling products and from signing new people up to the scheme.
There are some success stories. However, overall, most people don’t make a lot of money. In fact, a study by the FTC found that 99% of people that sign up to multi-level marketing companies lose money.
This includes all MLM businesses, not just the worst ones. Plus, less than .01% of their salespeople make any money over $32,000.
Furthermore, there are many other disadvantages to these schemes. For example, you have no control over the product or the best ways to sell it.
With MLM companies, there are lots of claims from sellers about making huge amounts of money and living a lavish lifestyle with financial independence.
However, this is rarely true. The reality is, most of the money comes from “recruitment.” Overall, there are much better ways to make extra cash at home, and these schemes rarely make any money for the distributors.