This post is the result of a meeting with a friend and customer who told me that MLMs only benefitted the top membership echelon but not the lower rungs of members. I beg to differ.
There has been a lot of hooha amidst the fallacy that MLM is a pyramid scheme, a scam, etc. Actually, instead of blaming the company or the MLM industry itself, have you ever wondered why you didn't make money like they said you would, when you were invited to join a certain company that works an MLM program in distributing its products?
From the way I see it, there are two main reasons why someone joins an MLM company.
One is, they like its products and they are buying mainly for their own consumption and would like to get those products at a wholesale membership price. If you are in this category, know this: In order to get the privilege of buying cheaper, you need to buy in quantity as there is a cost involved in manufacturing, production and shipping the product, the upkeep and maintenance of storage facilities and so on. You can't get a product at a price without consideration of these costs. So, if you join as a member, you pay a membership fee for the privilege of buying the products you want to consume yourself at wholesale which you would have to pay a much higher price if you bought it at retail.
That is scenario number 1.
If you are in scenario number 1 above, it stands to reason that just by becoming a member to get products for self-consumption only and no more, does not make you money. You only save money on the products you consume. And when you buy in quantity on an autoship based on this premise, you will not make money, because you did not intend to promote or re-sell the products you have on hand. In that case, please do not buy more than you can use. Or get the products without a membership by getting it on retail from a member who has every right to make a profit by supplying the product to you. After all, the person who does this has a cost to cover doing so.
In scenario number two, on the other hand, if you decide that your intention is to make money with the products, you need to sell the products of the MLM company you joined. Your membership entitles you to get your products on wholesale so that you can make a profit selling them at retail. You can't and won't be selling them at YOUR cost. That's not selling.
Selling means you make a profit on your efforts to introduce the products to your circle of friends, relatives, etc and encouraging them to buy the products from you at retail, out of which you make a profit. It is only a business when you make a profit from the products.
It therefore stands to reason that the company will give you a higher discount when you order more. It is like a difference between a wholesaler and a jobber. And the concept is still business. You will make more money if you get products at a bigger discount and selling on retail to a retail customer and a profit selling to the member who only orders for his/her own consumption and therefore is entitled to a lower discount schedule. Say, a product retails for $50. As a member buying for your own consumption only, you get a 20% discount or $10 off the top. If you are just buying for your own consumption, a $10 discount is not considered much and may not even be viable in some cases, if you include the membership fees you had to pay for the privilege of doing so. That also goes for someone who wants to make money out of selling the products. If you want to make, say, $1000 a month, you are going to sell 100 units of the product a month to make that money. But, if you are going to make the MLM company's products your business, you WILL make a lot more if you get in on bigger product packages that the company offers. Say, you order a big enough amount of products that will give you a 40% discount. That means, based on the $50 retail price of the example above, you now make $20 on each product sold. So, in order for you to earn $1000 a month, you just need to sell 50 units of the product per month. See the difference? And if you sell to an ordinary member who wants only to buy for own consumption at $40, you still make a $10 profit off his member price. The business concept is still the same as the old supply chain - manufacturer to jobber to wholesaler to retailer EXCEPT for one difference. MLM companies allow you to recruit other people into the business, and pay you a small overiding commission on your downline.(remember I said business, so they must also want to re-sell the products for a profit. Whether they consume the products themselves or not is irrelevant, just a convenient add-on advantage to their business).
The final conclusion of the matter thus will be: IF you like a certain product from an MLM company and would like to buy for your own consumption, consider whether the end justifies the means. Will joining as a member help you save enough to justify a membership fee? Or will it be better to just get the product you like direct at retail from a member of that particular MLM company selling the product? Even if you want to make money, will you be able to offload all your monthly product quota each month to justify the re-order requirements? Will the extra discount be worth it even if you cannot sell off the previous months' stock on hand? Is it better to just remain as an ordinary member and just take the minimum discount level and make money as you go on a piecemeal basis rather than burdening yourself and your resources on products you cannot sell? What about the shelf-life of the products. If, let's say, a product has a 1 year shelf life. Can you sell it within the first 3 months? Or will you be saddled with expired products just because you cannot sell them fast enough? You could end up bankrupting yourself if you happen to be in this situation. Best is, before you join an MLM company, check out the products first. Can and will you consume it? Will your immediate circle of friends, acquaintances, relatives, etc. like it? Will you be able to sell and promote it? If you answer is no, better not join. Even if you like the products, and don't want to be in the business, check and see if getting a discount is worth the membership cost. If not, you are better off buying the product at retail. So, when you hear that people complain about MLM companies not working for them, ask yourself, is it because they weren't doing things right in the first place?
No comments:
Post a Comment