Correlation between Direct Sales Companies and Schemes
Have you noticed the correlation between direct sales companies and schemes?
I’m sure you also have thought about becoming part of one of the many, many direct sales companies that are plastered on social media by our friends. In fact, according to BFH, there is more than 10,000+ direct selling businesses throughout the world. Direct selling business are companies with a sales model that have a sales representative go directly to the consumer without a retail location or middle man. There are companies that have these types of selling teams, but in this post I am speaking of companies that use this as their only selling model, like LuLaRoe, Scentsy, Plexus, etc. I too sometimes find myself thinking, “Man, it seems to be making them money…maybe I should try.” As I actually think of these company models, I can’t help but notice the correlations between direct sales and schemes.
I work in marketing at a company that takes scams, schemes, and ID theft very seriously. In my marketing role, I teach many public seminars about how to avoid such things and where to report them if you see them. I would like to highlight some interesting similarities.
There are two schemes I would like to relate to, work-at-home scams and pyramid schemes. Work-at-home scams are jobs that promise work at an upfront fee, but sadly in the end there is no work and no profit, leaving the victim with a large fee for nothing. Basically, one would pay up-front for a kit or job training that he will never be able to get a profit out of. The main business model of a pyramid scheme is based on the top getting a return when they get new recruits. Pyramid schemes are built on lying to investors about a promised return. These investors will have to go and get more investors to sign up for this company to also get a return. Here is a great video that explains pyramid schemes. There are very real distinctions from these schemes and direct selling companies--the main one is real direct selling companies have a product to sell (there are direct selling scams too, so beware!). I am only sharing some food for thought of the similarities, and why I don’t like this high-pressure business model.
3 Key Similarities
1. More Recruits = More Money: This is Pyramid Scheme 101. In direct-selling models you make money off sales. Not only do you make money off sales, but you also make money off other people joining.
2. Pays Out X Levels Down: One business model says, “Pays you up to 7 levels down!” This means more recruits, more money for you, and more money for them.
3. Join Our Team Now by Purchasing this Starter Kit: Although you can actually make legal money off of these companies, the work-at-home scam is a similar model to this.
I do not get involved with direct-sales companies, partly because I know their products are worth a very low percent of the value asked for to sustain the business, but also because I just do not like their business model. I hate the pressure to wrap your friends and relatives to giving you money for a mediocre purchase. I do have to admit there have been plenty of times I have purchased from these companies, but the more I research, the more I'm driven not to be a part of it. I encourage you to look at all business models before purchasing product or joining a company.
Cheers to a long rant!
P.S. Here is an additional link for further information about these companies.