Deep Dive
What makes a business a multi-level marketing company (MLM)?
MLMs are recruitment-based businesses where participants find others to join, forming a pyramid structure. Money flows up to the top, often from new recruits rather than product sales. Sign-up fees and starter kits are common, costing between $99 and $499.
Why are MLMs mathematically impossible to sustain?
MLMs rely on recruiting new members, but after 13 levels, the pyramid surpasses the Earth's population. This structure ensures most participants lose money, with only 3% making any profit.
What role did Brownie Wise play in the history of MLMs?
Brownie Wise revolutionized Tupperware sales by introducing parties, making it fun and social. She built a recruitment structure with uplines and downlines, turning it into a popular pastime for women in the 1940s.
How did Amway influence the legality of MLMs?
Amway defended itself in a 1970s FTC case by creating the 'Amway rules,' claiming they self-regulated. Despite no enforcement, the FTC lost the case, setting a precedent that allowed MLMs to continue legally.
Why do MLMs appeal to American women, especially in economically depressed areas?
MLMs offer a sense of financial freedom and social interaction, often in areas with limited job opportunities. They provide an escape from domestic duties and a chance to earn money, despite low success rates.
What is the connection between MLMs and Christianity?
Many MLMs, like Amway and Mary Kay, are infused with Christian values, particularly the prosperity gospel. They align with the idea that success and wealth are signs of divine favor, appealing to conservative and religious communities.
Are affiliate links and TikTok shops replacing MLMs?
Affiliate links and TikTok shops are emerging as alternatives to MLMs, offering similar sales structures without recruitment. Some MLMs, like Rodan and Fields, are transitioning to affiliate models, reducing their profitability.
What is the FTC's role in regulating MLMs?
The FTC has issued warnings and studied MLMs' income disclosure statements, revealing widespread fraud. However, enforcement remains weak, especially under administrations friendly to MLMs, like Trump's.
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