Pharaonic creations - Multi-level marketing in America
TO SOME young adults, Vemma Nutrition looked like a path to wealth—the
chance to sell energy drinks, recruit other sellers and, according to a
company video, enter a world of private planes, fast cars and pretty
women. To America’s Federal Trade Commission (FTC), Vemma looked like a
pyramid scheme. In September a judge barred Vemma from conducting its
main business while the FTC makes its case in court. The FTC’s suit is,
however, relatively rare. Pyramid schemes remain devilishly hard to
identify.
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MLMs do business globally, but the world’s biggest, such as Amway, Avon
and Herbalife, are American. They sell all kinds of products;
supplements, energy drinks and lotions are among the most common. What
differentiates these firms is their unusual business models. They sell
products to independent distributors and reward them for hawking their
wares and finding further recruits.
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The lobby group reports that direct sales, mostly by MLMs, reached $34
billion last year, up 16% from 2004 (see chart). However, the number of
those at some point involved in the business grew at twice that pace,
reaching 18m people in 2014, or one in 13 American adults. Just 12% of
these earned more than $25,000 in 2014 and 62% earned less than $6,000.
That does not account for expenses, such as purchases of the companies’
products.
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