Saturation Reality and the Myth of MLM “Growth”

 

Jul 20, 2015 

 

Over seven years ago, the report, “The Myth of MLM Income Opportunity” was published  by Robert L. FitzPatrick and aimed at consumers being solicited to join MLMs that promised “unlimited income opportunity.”  Using data from 11 MLMs that published “income disclosures”, the report showed that less than 1% of all MLM participants ever earn a profit, according to the MLMs themselves.

 

Researcher and activist Dr. Jon M. Taylor had done similar research, arriving at the very same conclusions. He also showed the losses  to be even higher than 99%, if estimates of associated costs are factored or if the MLM product purchases are properly classified as costs themselves.

Now, a new report published by Robert FitzPatrick – this one aimed primarily at Wall Street, the business media and goverment regulators  –  shows that the major MLM schemes, such as Amway, Avon, Herbalife, Primerica and Nuskin , among others, have reached global saturation and now face a no-growth future. Saturation has finally caught up with the schemes themselves, while it has been the condition for recruits for decades.

 

Disinguishing between Saturation for Recruits and for the MLM Schemes

“Saturation” for the large MLMs is a recent condition that  means that the possibility for enrolling more people than the millions that quit the schemes each year  will no longer be possible. These large MLMs will now face decline in size, even as they still falsely claim to offer an “unlimited income opportunity”.

 

Saturation for recruits is different and is not new. It means there is no possibility of any significant number of the recruits to lure in enough new people into their “downlines” in order to become “profitable” (get some of the money their recruits lose). That condition has faced all new recruits from when the MLMs were first launched more than 40 years ago. Only the very top few people, those few opening new geographic areas or, in some rare cases, a few promoters who are exceptionally adept at deception and hype have ever benefited financially. Statistically speaking, it is accurate to say that it is impossible for new MLM participants (last ones in) to recruit enough new people to be sustainably profitable. The loss rates for the last ones in, year after year, is virtually 100% and has been that way from the start.

 

New Saturation Report

 

In the new report on “Saturation”, for the MLM companies, writer, analyst and expert-witness on MLMs, Robert L. FitzPatrick, examined  12-publicly traded MLMs. The firms have aggregate market capitalization of $19 billion and revenue within the USA of $4 billion, measured by the direct purchases of 1.8 million “independent contractors” in the USA.

 

The study divides the group into nine “mature” MLMs and three others that more recently adopted MLM or added MLM divisions. The companies include Avon (AVP), Herbalife (HLF), Tupperware (TUP), Nuskin (NUS), Primerica (PRI), Blyth (BTH), Medifast: Take Shape for Life (MED), Usana (USNA),  Reliv (RLV), Mannatech (MTEX), Nature’s Sunshine (NATR), LifeVantage (LFVN).

 

The report is 50-pages in length, and includes links and references offering analysis of MLM fundamentals. It serves as the first comprehensive study of the MLM sector specifically for the financial community, written from the investor/financial speculator’s perspective.

MLM’s absurd claim to “perpetual growth” has always been a lie. Markets for recruits are finite and most people must always be in the bottom ranks of MLM pyramids where profit is impossible. But, the new report shows that the very term  “growth”, when used in MLM, is also a lie. Growth, in MLM terms, means not enlargement of a customer base but rather the “replacement” of a customer base. Every several years, each MLM’s entire so-called sales force and whatever “customers” they may have quit and never return, after losing money. They must be entirely replaced. Growth, therefore means recruiting more people than the number who quit year after year. Those that quit, don’t come back. This is carried out using the extraordinary lie about “unlimited income” and “business opportunity.”

Piracy Fuels the Illusion of MLM Start-Up “Growth”

 

The report also shows that the occasion explosion of “growth” by start-up MLMs is the result of “downline piracy”, the practice of paying large bonuses to lure away “top gun” recruiters who bring large downlines from one MLM to another, creating the illusion of “growth”. This illusion is then  spread online as the “next big thing” causing many others to leave their MLMs and flock to what they hope and believe is a better one. This process is repeated continuously as the new schemes are just like the old ones. The decline of the larger and older MLMs spawns more and more MLM startups and increases the level of “piracy”, hastening and increasing the impact of saturation on the larger MLMs. Newer MLMs rise and fall even more quickly.

 

Information Saturation

 

Finally, the new report also addresses one more factor causing MLM saturation. It is “information saturation”. As more and more people learn that MLM offers no true income opportunity but is in fact a money trap and a scam, they won’t be as vulnerable to recruiting tricks. Because more information is getting on to the internet with true facts and experiences, MLMs are increasingly turning to small and poor countries like Cambodia for recruiting and among people who little access to the internet.

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