MLM has too many middlemen?

One of the claims of critics of the multi-level marketing model is that due to having paying the independent distributors, there’s too many “middlemen” to be able to distribute products efficiently, thus it forces the prices of MLM products to be too high. Well, if you’ve been paying attention to European news in the past week, there’s been a great example showing how MLM critics aren’t just ignorant of the MLM model – they’re ignorant of business models in general.

What’s happened is that it was discovered that some pre-packaged food products, such as lasagne, being sold in supermarkets around Europe contained horse meat instead of the advertised beef. Following the trail of blame shows just how many middlemen there are involved in “traditional” supply and distribution -

  1. The customers are upset at
  2. The supermarkets who are upset at
  3. Findus (brand) who blames their supplier

  4. Comigel (manufacturer) who blames their supplier

  5. Spanghero (meat processer) who blames their

  6. agent in Cyprus who blames their

  7. agent in the Netherlands who blames

  8. abattoirs in Romania who bought

  9. the horse meat off local farmers

So to get the product (meat) to the customers, there are at least 8 different middlemen, including at least 3 in the distribution chainIndeed there’s almost certainly more, such as transport companies, local wharehouses. advertising companies, legal and accounting firms and more. All of these get paid out the final price of the product as paid by the consumer.

How does it work in Amway? Well, back in the 1970s when the FTC investigated (and cleared) Amway, they found -

43. Currently about half of all Amway distributors were sponsored by a Direct Distributor or by a distributor sponsored by a Direct Distributor. More than 70% were within three positions of a Direct Distributor and 99% were within seven positions. (RX 423)

So for half of all distributors, it went -

  1. distributor
  2. direct distributor
  3. Amway (manufacturer)

So just 3 levels of “middlemen” for half of all transactions in the distribution chain, and only two when you consider the distributor as customer, which is a common scenario. That compares to 3+ levels in the distribution channel for the Findus product – and then you have 5 levels in the supply chain. How long is the supply chain for Nutrilite, Amway’s largest brand? Amway is the supplier, they own their own farms which supply their core ingredients. Yes there’ll be some suppliers for other ingredients, but it’s nowhere near the total of 8 levels in the supply and distribution chain for the lasagne.

MLM critics – not just ignorant about Amway and the MLM model.

7 thoughts on “MLM has too many middlemen?”

  1. Your explanation of the question that Amway has too many IBO’s is flawed.

    Amway has thousands of distributors in your three layer distribution system and it leads to over saturation. You do not have a McDonalds or target on every corner but it seems Amway does not care if every person on one block is a distributor.

    I hope you can better explain how Amway can continue to have so many individual distributors. There has to be a point where bringing in another person. It will eventually have to be about sales and not more distributors.

    I’m trying to understand because I want this to work and I want to get family and friends involved, but if this is something that I knew isn’t going to work, then why would I destroy my name and bring them in?

    I think if Amway could better explain how it controls theses things than it would work so much better for its IBO’s

    1. Hi,
      (1) The point in this particular post is that some people believe the revenue in Amway is split over too many levels (some even believe it to be “endless”), this is completely false.
      (2) The MLM model is of a lot of people doing a little. Some just want to shop, some want to earn a small amount of income, some want to make a lot of money. It’s up to each individual to decide what they want and how hard they’re willing to work for it
      (3) 53 years and nearly $12 billion in sales shows it obviously “works” so I’m not quite sure what your comment is about there.
      (4) It is always about sales, not “bring in more distributors”. If you bring in a million distributors and have no sales, then you make no money. “Saturation”, which seems to be your concern, is an issue in *any* business. Heck, it’s a *goal* for any business! Saturation occurs when you’ve got no more customers for your products. In the case of “outlets” or in this case, distributors, it might be considered to occur earlier, when an “outlet” can no longer earn a sustainable income. There’s no evidence at all to suggest Amway is remotely close to that. The US is Amway’s oldest market and there were over a thousand new platinums last year alone. Anyway, the “protection” is that you have, in the US, 180 days to give it a try and if you don’t think it’s for you, then you get your money back. If a theoretical saturation point was being approached, Amway would get significantly more refund requests, which would mean they have to change strategies.

  2. Amazon doesn’t provide you with the compensation plan that Amway does, nor does it train you how to build a big business like World Wide Group does, which is an associate of Amway.

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