Multi-Level Marketing: Multitude of woes for distributors

UNDER THE GLOSS: In multi-level marketing a few people do make money, but only at the expense of many who do not.

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Mizoram | Rajasthan

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New Delhi: Multi-Level Marketing (MLM) comes to your locality selling Product X. You join as a distributor. So does you neighbour and your neighbour's neighbour.

What happens next? The area is soon flooded with Product X. You run out of buyers, and are stuck with a pile of unsold goods. In multi-level marketing a few people do make money, but only at the expense of many who do not.

Today, Shivaiah watches marketing opportunities with skepticism. He has been in and out of many Multi-Level Marketing companies.

"I joined Quantum. After that it was Amway, after that Free-India, then Mother India and Modicare India," he counts off his fingers.

The sales pitch had him hooked he says.

Shivaiah says, "Aap kahreed lo, bas woh business ho jaata. Aap member bano baad me, aap paanch member ko, dus member ko, waisa mein mahina ka ek enroll kerte hue to, aapka net failta rehta hai, aapka income aate rehta hai, bolke bol diya." ("Keep buying and keep making business. You become a member and then enroll five to ten more members a month. That way the net keeps spreading and your income keeps coming in. That's what they told me.")

Many memberships and seminars later, all Shivaiah managed was to lose Rs 3 lakh. Soon the people he enrolled were competing with him.

He says, "Mera downline poora ismein ghus gaya. Mujhko maloom nahin. Koi khareed rahe hain, koi join, enroll nahin ker rahe hain. Kya bole. Mujhe to baad me mujhko samajh mein aaya." ("My entire downline jumped into this. I realised this far too late.")

Today, Shivaiah publishes pamphlets to expose the flaws in network marketing. He wants people to learn from his mistakes.

In theory this is how the popular 9-6-3 formula of Multi-Level-Marketing is supposed to work.

First you enroll as a distributor. Then you enroll nine members. They then sign up six people each. These 54 persons then enroll three persons each, resulting in a chain or pyramid of 226 people.