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 –
- The customers are upset at
- The supermarkets who are upset at
Findus (brand) who blames their supplier
Comigel (manufacturer) who blames their supplier
Spanghero (meat processer) who blames their
agent in Cyprus who blames their
agent in the Netherlands who blames
abattoirs in Romania who bought
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 chain.¬ Indeed 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 –
- direct distributor
- 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.