As a society, we can’t seem to get enough of scammers and fraudsters – the whole world watched in anticipation as Fyre Fest crumbled right before our very eyes, and the internet has now piled on faux influencer Caroline Calloway. But as we laugh at these rackets from a safe distance, there’s another kind of scheme that hits much closer to home: network marketing companies, also known as MLMs.
In fact, you probably have a high school friend or relative peddling goods from one of these brands. Before you sink any money into their products, however, you need to know the truth about MLMs. In this guide, you’ll learn what MLMs really are and which network marketing companies in Australia you should be wary of.
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What Is MLM? How Do MLM Businesses Work?
MLM stands for multi-level marketing, but you may also know it by a few other names such as network marketing, referral marketing, direct selling, or pyramid selling. Like most businesses, MLMs do sell products or services. However, unlike most businesses, distributors associated with the company can also earn income by recruiting new sellers – for each sale their ‘down line’ makes, the referring distributor earns a small commission.
Are MLM Companies Really Legit?
Do a quick Google search for multi-level marketing, and you’ll see a ton of criticism lobbied at MLMs. This is because the business model is eerily similar to that of a pyramid scheme or Ponzi scheme.
In classic pyramid schemes, you ‘buy into’ a company, paying a sign-up and/or monthly fee to be a part of it. To make your money back, you have to invite new ‘investors’ into the company – and so on and so forth. But as we’ve come to learn, this isn’t sustainable at all.
There are a finite number of people in the world, and not every single one of those people is willing or able to ‘invest’. Once you run out of new recruits, then your downline (and therefore your profits) comes to a halt. In reality, only the top 5-20% of a pyramid scheme earn any money, while the rest either break even or go into debt.
This unsustainability is the reason why pyramid schemes are illegal in most countries. So why are MLMs able to copy a similar business model? Contemporary MLMs circumvent those laws because they also do direct selling – there’s a tangible product, and you can earn a little bit of profit on the sales you make.
How do you differentiate between an MLM and a straight-up pyramid scheme then? Here are a few things to consider:
- If you can make a decent amount of money through sales alone (i.e. without having to recruit anyone), it’s a legitimate business.
- If the products are high-quality and actually work, it’s a legitimate business. Examples of these include Tupperware and Avon.
- If the goods are low-quality, overpriced, or just simply don’t work, then it’s likely a pyramid scheme. doTERRA, Younique, and Herbalife are some examples of these.
- If you have to buy the products before you sell them, then it’s most probably a scam.
- If the majority of your income is supposed to come from recruits, then it’s definitely a pyramid scheme.
Multi-Level Marketing In Australia: Indirect & Direct Selling Company List
Modere
Years in business: 27 years
Headquarters: United States
Earnings: $USD 4.9-million ($AUD 7.2-million)
Product offerings: Personal and home care, beauty products, and nutritional supplements
Check out Modere’s website here.
Younique
Years in business: 7 years
Headquarters: United States
Earnings: $USD 395-million $AUD 580-million)
Product offerings: Personal care, makeup, and beauty products
Check out Younique’s website here.
Scentsy
Years in business: 16 years
Headquarters: United States
Earnings: $USD 450-million ($AUD 660-million)
Product offerings: Scented wax and oils
Check out Scentsy’s website here.
Arbonne
Years in business: 44 years
Originating country: United States
Earnings: $USD 550-million ($AUD 807-million)
Product offerings: Health, beauty, and skincare products
Check out Arbonne’s website here.
Juice Plus+
Years in business: 26 years
Headquarters: United States
Earnings: $AUD 730-million ($AUD 1.07-billion)
Product offerings: Food, nutritional, and dietary supplements
Check out Juice Plus+’ website here.
ACN
Years in business: 26 years
Headquarters: United States
Earnings: $USD 750-million ($AUD 1.1-billion)
Product offerings: Utilities (telecommunications and energy)
Isagenix
Years in business: 17 years
Headquarters: United States
Earnings: $USD 950-million ($AUD 1.4-billion)
Product offerings: Personal products, food and dietary supplements
Check out Isagenix’s website here.
DoTERRA
Years in business: 11 years
Headquarters: United States
Earnings: $USD 1-billion ($AUD 1.47-billion)
Product offerings: Nutritional supplements, essential oils, and other homeopathic healthcare products
Check out doTERRA’s website here.
Young Living
Years in business: 26 years
Headquarters: United States
Earnings: $USD 1.5-billion ($AUD 2.2-billion)
Product offerings: Home care, makeup, personal products, and essential oils
Check out Young Living’s website here.
Rodan And Fields
Years in business: 12 years
Headquarters: United States
Earnings: $USD 1.5-billion ($AUD 2.2-billion)
Product offerings: Personal, beauty, and skincare products
Check out Rodan and Fields’ website here.
Tupperware
Years in business: 71 years
Headquarters: United States
Earnings: $USD 2.26-billion ($AUD 3.3-billion)
Product offerings: Kitchenware, storage, and other home products
Check out Tupperware’s website here.
Herbalife
Years in business: 39 years
0Headquarters: United States
Earnings: $USD 4.43-billion ($AUD 6.5-billion)
Product offerings: Weight loss, nutritional, and dietary products
Check out Herbalife’s website here.
Avon
Years in business: 133 years
Headquarters: England
Earnings: $USD 5.5-billion ($AUD 8-billion)
1Product offerings: Clothing, makeup, beauty, and other personal care products
Check out Avon’s website here.
Amway
Years in business: 60 years
Headquarters: United States
Earnings: $USD 8.8-billion ($AUD 12.9-billion)
Product offerings: Home, health, and beauty products
Check out Amway’s website here.
2Business Or Scam?
The best way to tell if an MLM is legitimate or not is by doing your research. Always look up a company before investing or buying, and trust your gut.
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