An issue in determining the legitimacy of a multi-level marketing company is whether it sells its products primarily to consumers or to its members who must recruit new members to buy their products. If it is the former, the company is a legitimate multi-level marketer. If it is the latter, it could be an illegal pyramid scheme. The Federal Trade Commission has been investigating multi-level marketing companies for several decades and has found many that blur the lines between the two. According to industry data, there are 90 million members worldwide, but relatively few earn meaningful income from their efforts. To some observers, that reflects the characteristics of a pyramid scheme.
CBD shows promise in the treatment of anxiety disorders, according to a report published in the journal Neurotherapeutics in 2015. Looking at results from experimental research, clinical trials, and epidemiological studies, the report’s authors found evidence that CBD may help treat generalized anxiety disorder, panic disorder, social anxiety disorder, obsessive-compulsive disorder, and post-traumatic stress disorder. However, the authors caution that human-based research on CBD and anxiety is fairly limited at this point.
Of course, like any other entrepreneurial venture, reaching significant success requires much more than a bit of selling here, a bit there. Only a tiny proportion of people entering this form of direct sales stay in it and make a good living. They do so because they work the job like any other successful sales agent operating between a customer and a producer.
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Rhonda Adams also swears by network marketing. In 2001, after leaving her job as a technical sales analyst for a telecommunications software company, the 32-year-old Chicago resident was introduced to Warm Spirit, an Exeter, New Hampshire-based beauty and wellness company that sells nature-based skincare products and other beauty aids for women and men. Adams paid $500 for the initial starter kit, products, and office supplies and began working the business.
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Stern decided to get out after she realized she had $20,000 in unsold wholesale inventory sitting in her living room. “It clicked for me that if you order 30 items, they send you 10 quick movers and the rest sit. It’s a false sense of actually being successful,” she says. “I noticed all these people started going out of business. I started getting scared that my inventory would be worth nothing, and I would be stuck with $8,000 on my credit card.”
Network marketing can be lucrative, but only a small percentage of people make serious money. Often referred to as multilevel marketing (MLM) or direct marketing, the idea of making money without any special skills or major investment with immediacy is appealing. And the promise of residual income fuels the desire to never wind up in your current financial position again if you've found yourself in a somewhat tough spot.
According to internal consultant calls, LuLaRoe is still onboarding more than 150 retailers a day. (LuLaRoe declined to confirm how many people are joining daily.) In this spandex rush, so many women were signing up to sell LuLaRoe that the onboarding queue stretched for weeks. Former customers were often convinced to become sellers so they could get their own wares wholesale, plus hopefully make some profit on the side. “Every time I got a really good customer, they would sign up under someone else,” Sophie says.
Network marketing plans differ from illegal pyramid schemes only by one subtle point: Commissions can only legally be paid on sales of a physical product. If commissions are offered upon recruitment of new distributors, then it's defined as an illegal pyramid scheme. Pyramids are illegal because they necessarily collapse when nobody else can be recruited. However the illegal plans are pretty rare; most companies are smart enough to stay on the right side of the law. But the problem of community saturation, and inevitable collapse, remains.
MLM salespeople are, therefore, expected to sell products directly to end-user retail consumers by means of relationship referrals and word of mouth marketing, but most importantly they are incentivized to recruit others to join the company's distribution chain as fellow salespeople so that these can become down line distributors. According to a report that studied the business models of 350 MLMs, published on the Federal Trade Commission's website, at least 99% of people who join MLM companies lose money. Nonetheless, MLMs function because downline participants are encouraged to hold onto the belief that they can achieve large returns, while the statistical improbability of this is de-emphasised. MLMs have been made illegal or otherwise strictly regulated in some jurisdictions as a mere variation of the traditional pyramid scheme, including in mainland China.
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