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Buying products from a network marketing company isn't cheaper, faster, or more pleasant than buying them on the open market, and it's often considerably worse in all three of these categories. That's because unlike normal retail business, where the supply chain is direct and logical (from manufacturer, to wholesaler, to retailer, to customer), in MLMs the supply chain follows the customer's upline, accumulating markups and compounding inefficiencies at each level of the pyramid. The result is higher prices, frequent unexplained delays, and products that are constantly "on back-order." MLMs will often try to artificially suppress competition by claiming their product is unique or superior to all others - even claiming that their competitors' products are poisonous or even Satanic - but equivalent products are always available from normal retail outlets, often at a fraction of the cost.
Amway’s outsize political influence goes back to 1979, when the FTC lost its pyramid case against Amway. After four years of litigation, an administrative law judge found that Amway did not run an “illegal” pyramid scheme because it had safeguards to protect against the reliance on recruitment. These included requiring its distributors to sell 70 percent of their inventory each month and to sell to at least 10 different customers per month.
Fed the fantasy of achieving the all-elusive American dream, many of them are being wooed by multilevel-marketing companies. Known as MLMs (or “direct-sales”), the current US administration is stocked with their cheerleaders: Betsy DeVos, the secretary of education, is married to a cofounder of Amway; Ben Carson is a spokesperson for a vitamin MLM called Mannatech; and president Donald Trump used to have an MLM, Trump Network, and was a spokesperson for another.
The minimum order is 30 pieces at a time, and LuLaRoe requires sellers to buy a minimum of 33 pieces a month ($346 in wholesale leggings, for example) to maintain active status. This means that if a retailer sold 30 pairs of leggings a week, it would take them just under three months to make back their initial $5,000. As they also need to use their revenue to restock an additional 33 pieces a month ($1,038 worth of leggings over 11.5 weeks), it would therefore take another month or so of selling 30 pairs of leggings a week to start turning a small profit. (There is a more detailed mathematical breakdown of different business models here.) “Just like anyone starting a new business, there is risk involved and not everyone is guaranteed success,” LuLaRoe CMO Lyon says.
By the 1980s, the landscape of U.S. economics was transformed. A financial boom coincided with women entering commercial life. These women were a huge target for network marketing companies, as they sought jobs that allowed them to earn money without neglecting their children and families. Women were able to acquire high positions within these companies, creating opportunities for women to achieve financial independence without giving up their families.
In Europa ontstond in 1991 de FEDSA (Federation of European Direct Selling Associations). Zij behartigde de belangen van netwerkmarketingorganisaties. In 2011 veranderde de organisatie haar naam naar SELDIA (The European Direct Selling Association). In 2015 worden 28 landelijke DSA's (Direct Seller Associations) en 16 zakelijke ondernemingen zoals Amway vertegenwoordigd.
After that package, consultants can start choosing styles and sizes for their next orders, but they never get to choose the patterns they’re delivered. This means they can wind up with a box of clothes that is less “chic young mom” and more Pee Wee’s Playhouse. There are 400 new prints apparently designed every day, and LuLaRoe says most patterns are limited to around 5,000 pieces each. When a consultant opens a box, they hope to find a few “unicorns”—the styles everyone wants—among armfuls of duds, like the infamous Dorito pattern.
Pyramid schemes come in all forms. A really simple example are those chain letter things where you’d get a letter with seven names and addresses. You were supposed to send $1 to the names on the list. After you did that you were supposed to add your own name to the bottom of the list and send the letter off to at least 7 people. Supposedly you could make tens of thousands of dollars in just a few weeks doing this.
Interestingly, the issue of supply and demand is what brought the USSR to its knees. By design, the Soviet government tried to macro-manage supply, where bureaucrats would decide how many potatoes were needed, how much toilet paper, etc. Assuming these bureaucrats did the best they could, unfortunately their efforts to deliberately manipulate the control "knob" of supply and demand was not good enough. Notwithstanding their good intentions, they were usually wrong, which created huge shortages and surpluses, and led to a massive economic collapse.