Multi-level marketing is often also called direct sales, which is based on person-to-person pitches. According to Statista, the US is the global leader when it comes to this. Back in 2021, direct sales generated nearly 43 billion dollars, which is more than double the amount in Korea—the follow-up country on the list. Germany, China, and Japan line up behind the two respectively.
IBIS data indicated that now, in 2023, the US market size of direct selling companies is over 65 billion dollars. It also revealed that it has been steadily growing for the last five years.
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Multi-level marketing is not a recent innovation. It’s believed to date back to the junction of the 19th and 20th centuries. Determining the exact year is difficult; so is finding out who were the first ones to introduce it, but such companies as AVON and Nutrilite are considered to be among the flag bearers.
According to Zippia, AVON recently had roughly 23,000 distributors and an annual revenue of 3.4 billion US dollars. The largest MLM company in the US (Amway), is believed to have around 15,000 distributors and nearly 9 billion in revenue.
Back in the day, distributors would have to go door to door selling their products. Nowadays, there are numerous ways to reach a person without having to show up at their house. People are connected through phones and social media, which means a salesperson can reach them in a matter of minutes.
A lot of them choose the latter option to spread information or try to recruit others—online platforms are mostly free, readily available, and easy to use. However, looks can be deceiving, and some MLM companies that seem to be flourishing on social media might not be in real life.
The way multi-level marketing is introduced usually sounds very appealing. Recruiters tend to emphasize that you can work from anywhere, at any time, and make loads of money. Seems too good to be true? Well, because it most likely is.
The overwhelming majority (91%) join such schemes with hopes of earning money, yet as many as 47% admit to losing it in the end. The numbers show that these options are far from the easy peasy lemon squeezy kind of options they are often presented as. Fundera pointed out that 52% of MLM distributors say that the way the company presented making money is “not too accurate” or “not at all accurate.”
According to Fundera, roughly one in 13 adults have taken part in MLM at some point in their lives. In addition to that, Direct Selling Association revealed that over 16 million Americans in 2021 alone signed independent contractors’ agreements with direct sales companies.
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In some ways, multi-level marketing companies resemble a cult. According to the author and mental health professional Steven Alan Hassan, they both use similar strategies, such as appealing to people’s emotions and creating false portrayals of certain situations.
“Most MLMs use tactics of recruitment, financial manipulation, and the promise of large profits. But, like all cults, they employ thought control, magical thinking, thought-stopping, and self-blame. Failures are blamed directly on the consultants, for lack of hard work or competence. The group has no accountability, and the leaders do not allow questions or criticism,” he wrote in Psychology Today.
Someone from your close circle might have tried to convince you to join such endeavors. Whether it’s an uncle taking his shot at it during another family gathering or a classmate with eyes full of enthusiasm, they most likely mean well, but it’s important to take their assertions with a grain of salt. What sounds like legitimate MLM can end up being a pyramid scheme.
A pyramid scheme is a fraudulent system based on promises of high returns and emphasis on recruitment. In such cases, the founder attracts X amount of people, who then have to do the same, creating a snowball effect leading to rapid expansion. Newcomers usually have to pay a certain amount in order to be able to join.
In these schemes, people receive money for recruiting others, not for selling the goods. One of the main differences between that and legitimate MLM is that no product is actually sold in a pyramid scheme.