Recently, a few of my friends were approached by their long-forgotten friends, school teachers and family members to buy some new FMCG products.
And slowly, they got invited to some conference meetings where they met with many people who made big money by selling the products.
Were you or your family members approached too? Whether it is Vestige, Herbalife, Amway or any other company, are you thinking of joining them? Let’s discuss whether you should join them.
Estimated read time: 3 minutes and 21 seconds
Buckle up, here we go!
Have you ever wondered how you can buy your favourite chips at the local Kirana store? How do the chips reach there from the factory?
In traditional distribution channels, the manufacturing company uses middlemen like distributors and retailers to make the product available for sale near you. All these middlemen collect some commissions on sales.
But companies like Amway, Herbalife, Vestige, etc use direct selling channels. Through this channel, they build a network of representatives like you and me.
We buy their products, market them in our circle and sell it to others. In return, we become their business partners. We receive commissions and bonuses.
But is this that simple? You sell their products and earn a good commission.
What if the company pushes you to add more people under you? To join as business partners. They give incentives to keep adding more people and increase your product sales number.
Because of the incentives, you agree to add more people. Initially, you might convince your friends and family to join and also persuade them to add more under them to sell more products. Soon your network might look like this.
What is this? Doesn’t it look like a pyramid?
These companies keep marketing themselves with different names and say they don’t follow the pyramid scheme. But as we move deep into their business, it clearly looks like a pyramid model.
For starters, pyramid schemes are old business models used to scam people. Governments all around the world have taken many measures to stop these scams, but people show up with new ideas to hide these models in plain sight.
And to be clear, these companies use different names like direct-selling, pyramid, multi-level marketing, or network marketing business. But mostly they all work in a similar model.
Do you know what happens in a pyramid scheme in such businesses? After some time, you reach a stage where you are unable to add more people below you or increase product sales. Or worse, the sales keep decreasing.
But the company has placed a system where if your network stops growing or your sales go down, even for one month, you lose all the bonus or commission percentage you have accumulated.
They call it different names like bronze-diamond level (Video explaining Vestige’s business partner model). Once you lose this level; you start from below again.
All your hard work will be in vain if your sales go down. So what do you do?
You might think these low sales are temporary, so you buy more products with your money, hoping to sell them soon. Your living room is filled with these products.
You call all your friends and family again begging them to buy the products or join below you in the pyramid. What happens? They end up getting frustrated and avoiding you. Even the ones who joined before are leaving the pyramid and cursing you.
Now you have your house filled with the company’s products which you are unable to sell. You have invested a huge amount of your money, and your pyramid size is decreasing every day.
Did you hear similar stories like this before? This is the perfect recipe for disaster.
From time to time, we have seen most of these direct-selling companies follow the pyramid model, and people lose their money.
Now, we have to be honest that not all direct-selling companies are scams. On the high-level, even Amway, Herbalife, Vestige, and others may not push their team to make others add new members.
But you know how low-level people can take a self-initiative to push people to add more members under them to receive the bonus. So it is good to stay away from these companies and find other ways to earn income.
We suggest avoiding this because research shows that 99.6% of people lose money in the multi-level marketing business.
Also, questions are being raised about the quality of the products offered. And it seems the products have very high prices. Check more here.
In India, companies with different names or schemes might approach you to scam you. Strategy India has made a list of these companies here. Check the list if you know any company and alert your friends and family members.
We have also covered a few other important current financial affairs. Check them out here.
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