May 30, 2014

Why I Hate MLMs... Even when I love their products.

Since moving to Kentucky three years ago, I feel like I have been noticing the growing number of MLMs (Multi-level Marketing).  In case you are unfamiliar with the term, some examples include Mary Kay, Pampered Chef, Thirty-One, Avon, etc.  It seems that now there is an MLM for almost everything.  Before moving I knew a handful of people that participated in the big ones like Mary Kay or Pampered Chef, but since moving, it seems like every other post on Facebook or person I know seems to be a rep/consultant/distributor/whatever for some company.  I believe MLMs appeal mostly to families with one parent that stays home.  I have also found them popular among families with a parent in school, since they can provide additional income.  However, I am not interested in buying into the MLM model, even when I love their products.  My most recent experience with this paradigm has been with Essential Oils.  I was introduced to Essential Oils a few months ago by a dear friend and really have enjoyed using them and learning more about them.  We, as a family, try to stay as natural as possible and Essential Oils seemed to be a good fit for us.  However, the company that I was introduced to is an MLM.  Young Living (as well as it's counterpart, DoTerra) serve as the big players in the essential oils market and are both MLMs.  So, I am going to use Young Living as my example as I go through the reasons I hate MLMs.  Most if not all of these reasons apply to all MLMs, regardless of the product or business structure.

1:  MLMs pass on a significant amount of unnecessary cost to the consumer.

 You know all those great rewards and discounts that top sellers get in MLMs?  Guess who pays for them!  All of us!  That's right, every person who purchases a product from a company that is an MLM is paying higher prices than necessary to cover the cost of rewards and discounts for the top people.  Think about it this way:  Through Young Living, if you reach the rank of silver in six months, you get an Aroma Complete kit for free.  Now, I don't really know what it takes to reach that rank as far as how many people under you, but I do know that Aroma Complete kits retail for well over $1,000.  I also know of at least five people that hit that rank last month in my tiny network alone, not to mention the whole company.  That means that the company is giving away thousands upon thousands of dollars in product every month.  Someone is paying for it, and here's the kicker, it's you.

2:  MLMs seem to brainwash their distributors and create biased reviews.

Okay, that may sound harsh, but here is what I mean.  Have you ever met anyone who sells some sort of MLM product that is not totally in love with the product and feels that it can be the only product of any quality on the market.  They all seem to also think that their company offers the highest integrity, has the best leaders, and the best business model.  Now, I understand brand loyalty.  I buy the same brand underwear because I like the way they fit, but that doesn't mean that I believe everyone should buy my brand of underwear or that my brand of underwear are the only brand that will really get the job done or that the company that makes my brand of underwear is the only company that makes quality underwear.  See how silly that would be?  However, that is what MLM distributors seem to be like.  I am going to continue using Essential Oils as the example.  Every Young Living Distributor I know will tell you that Young Living is the only company making 100% pure therapeutic grade essential oils.  Unfortunately, that is not true.  The bottom line is that both Young Living and DoTerra use the same methods for growing and extracting their essential oils.  After all, DoTerra was started by people who left Young Living.  But aside from the big MLMs, there are a handful of regular companies making 100% pure therapeutic grade essential oils using the same methods and plants.  It seems that since these companies cannot remain competitive through cost (see above), they gain customers by claiming that they are the biggest and the best and the only product worth having.  But, when your livelihood relies on getting others to like a product enough to sell it, you may have to bend the truth a bit. 

3:  MLMs can create tax burdens that distributors are not prepared for.

Disclaimer:  I am no accountant.  But, my husband had his own business for the first couple years of our marriage.  I saw through him the tax burden that having a personal business can create.  Everything from commission to bonuses to prizes to merchandise kept in stock can have an effect on your taxes at the end of the year.  That is the main reason I would never want to make money from an MLM.  Our taxes are complicated enough thank you very much.  My fear is that distributors are not educated on proper record keeping and tax issues and are left open to potentially high tax bills or audits.  No one that has ever talked with me about selling any product for an MLM has ever talked about taxes.  Not one.  That is frightening.

4:  MLMs are all win for the company.

It seems that everyone participating in MLMs feels that they are getting a great deal.  They talk about all the rewards and discounts and great products, but the bottom line is, the real winners are the owners and other top ranking officials of these companies.  Essentially, these companies are able to spread a product without a single store, marketing campaign, or distribution deals with stores.  They create armies of die hard sellers and distributors that do all the ground work.  Are the heart, they are pyramid schemes and the top of the pyramid wins big.

There you have it, the big four.  The four reasons I hate MLMs.  The downside is, sometimes I do love their products.  I do really enjoy Young Living oils.  I also have a pretty great Thirty-One lunch box and bag that I like quite a bit.  But, I would much rather purchase these products at closer to actual retail cost and not feel like I have to decide who is my better friend for who I order through.  I also do not appreciate companies that automatically sign you up as a distributor just for buying their product.  But that may only apply to a handful of these companies. 

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