A Warning on Network Marketing in South Africa

A Warning on Network Marketing and Multi-Level Marketing (MLM) in South Africa

This website provides essays, links, and resources for learning more about Network Marketing (NM), also known as Multi-level Marketing (MLM) or Direct Marketing (DM). This will help you make an informed choice about continuing on this journey.

Essay: I have an opportunity for you

I have an opportunity for you

Have you heard this sales pitch: "In these tough economic times, don't you want to do things differently this year? I have joined forces with a bunch of like-minded people. We have a meeting planned for this week. Can I reserve a seat for you?"You might have received a message like this from a family member, colleague, or acquaintance trying to get you interested in their new business opportunity. Often, it will turn out to be network marketing, multi-level marketing, or, in the worst-case scenario, a pyramid scheme business.These kinds of businesses originated in America in the 1950s. One of the oldest is Amway, whose name stands for the American Way. They argue that their long history proves their legitimacy. However, history shows that they exert significant political influence to sway regulations. A recent example is the appointment of Betsy DeVos, the daughter-in-law of Amway's founder, as the U.S. Secretary of Education under Donald Trump.I don't want to sound like a conspiracy theorist, so let me get back on track!There's still hope when governments intervene to protect the public. In 2016, the U.S.-based Herbalife was investigated by the U.S. Federal Trade Commission (FTC) and fined $200 million [1]. The South African Reserve Bank (SARB) also investigated MMM and declared it a Ponzi scheme. [2,3]Although Network Marketing makes up just 0.2% of the world economy, it represents nearly $180 billion (in 2017), which gives them some clout to boast about.Let's delve deeper into the opportunity.It usually starts with buying a "starter pack" from the company, which grants you the right to sell their products. You earn a commission when you sell the products to your friends. When you refer another friend to buy a starter pack, you earn more commission on their sales. And if they, in turn, refer another friend, you earn even more commission. There's no cap on how many "levels" you can build, so you have the potential for limitless income!On paper, this sounds impressive.The company is firstly shielded from being labelled as a pyramid scheme because it offers 'genuine' products to its customers. Additionally, commissions are also not earned on the sign-up fee.However, it's crucial to scrutinize whether investing your time, effort, and reputation in the Network Marketing industry is worth it.The following statistics are from a study published by the FTC: Half of the people quit within a year; after five years, only 1 in 10 people remain. Furthermore, 99% of people lose money. [4]If you hypothetically establish a perfect referral structure, with you referring six people and then repeating the process, you would have the entire human population under you in less than 13 levels. However, promotional material often suggests that a viable business requires 100 levels.Understandably, most people need to learn marketing and working with people. In the case of Amway, a company like Network 21 will provide guidance. But the person who refers you likely won't disclose that they earn a commission on these educational products. Concealing this information at the beginning changes the nature of the opportunity. [5]Like franchise opportunities, you'll always be limited by the types of products you can sell and the markets you can enter.I will not end this essay without offering some alternatives to how you can do things "differently this year."

Invest in a skill that cannot only increase your earning potential but also make you exceptional. The potential for exceptionalism is within your reach, inspiring you to strive for the best.
If you're a master in your field, you can develop a product or service currently in demand but not widely available.
Lastly, if you're investing in something, be prepared to lose that money if it doesn't work out. Always consider the risk.