Multilevel Marketing and Pyramid Schemes in the United States: An Historical Analysis

[EthanVanderbuilt]

William W. Keep, Dean and Professor of Marketing, The College of New Jersey has put together a useful paper in fighting the nonsense that MLM is a great business model.

Here are some highlights.

From 1974 to 2012, the U.S. direct selling industry grew at an annual rate of 1.45% while US GDP grew twice as fast, at an annual rate of 2.84%. The GDP grew approximately three-fold while the direct selling industry increased by approximately 1.7 times. As the number of people engaged in direct selling tripled from 1991 to 2011, direct sales as a percent of total retail sales at first increased and then declined.

A comparison over time of average annual distributor earnings showed that the average Amway distributors in Wisconsin in 1980 earned $744 in 2012 dollars ($267 in 1980), while the average annual earning for all Herbalife and Nu Skin distributors in 2012 were $749 and $641, respectively (State of Wisconsin v. Amway 1982; Herbalife, 2013a; Nu Skin, 2013); thus little or no change.

http://business.pages.tcnj.edu/files/2014/02/Keep-and-Vander-Nat_MLM-and-Pyramid-Schemes_Final.pdf

[ribshaw]

I can't imagine unless someone really has a "unique value proposition" that they can compete with the likes of Amazon, EBAY and any number of big box retail stores. The MLM model of high prices/questionable quality, and self consumption falls flat pretty fast as evidenced by the near 100% attrition rates. If people aren't even interested in buying from themselves then what hope is there for a true retail market?

On the product side there is almost NOTHING one can't find on Amazon, EBAY or the Web, including MLM products at massive discounts. In the 80s one had to ask where is the value, but now its almost laughable.

If someone really likes selling and dealing with teams people there seems an infinite number of sales jobs that offer a much higher, more consistent income than MLM.
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This is what continues to fascinate me...



The size of the direct selling sales force increased 5.7% to 16.8 million in 2013, a record high.

The percentage of households estimated to have a direct sales person as a member is the same as in 2012 at 13.8% of U.S. households.

Industry Statistics (http://www.dsa.org/research/industry-statistics)

While I have little doubt those numbers are goosed, that is still an awful lot of people who at some level are chasing the dream.