Why don't they know what they're talking about?
FitzPatrick and Taylor make many claims that are based on false assumptions and in some cases outright lies (for example they claim for an MLM to be legal it has to sell 70% of products to people who aren't registered as distributors).
They make their living as professional "critics", not only providing "expert witness" services but actively encouraging people to file lawsuits. They almost always lose. In a recent case in Canada they encouraged a couple to file a class action lawsuit against Amway. They lost and the court awarded costs to Amway - potentially millions of dollars, far more than any individual has "lost" participating in an MLM. Amway, to their credit, has apparently chosen not to pursue them for this. Much of the current Herbalife short battle is based on their claims, FitzPatrick is liberally cited as a source by Bill Ackman. Ackman and his investors currently stand to lose
hundreds of millions of dollars on this.
A basic truth with MLM that's hard to get around is the fact that the products are just not competitive.
You've made an extremely broad claim here. The direct selling industry, which is primarily multi-level, is a $150
billion industry involving over 90 million people and tens of thousands of companies, some of which are market leaders in their product categories.
Of course there's scams and BS products and overpriced products. There is in traditional retailing too. Can you support your overall claim of this being a "basic truth" for direct sales companies?
If you have a competitive product, you're going to sell that product to retailers and make lots of profit.
Why wouldn't you sell it through independent distributors and make lots of profit?
If you have a product that people actually want to buy, there's no benefit to using an MLM model.
For many products direct selling has advantages over typical retail outlets. Take water filters. A direct seller will come to your home, demonstrate it, show you how it works, and often even install one for you to test for a while before you decide to purchase.
Or weight- loss programs, where the "product" may come with personal coaching and support networks.
Or skin care cosmetics, another big seller in direct sales. "Home parties" are an ideal setting to be able to try out different products in (done properly) a relaxed atmosphere.
Sex toys have been another ... ahh... growing ... field in direct sales.
It's difficult to differentiate your product if it's sitting on a retail shelf, the cost of mass market advertising is enormous, and decreasingly effective. Direct sales isn't appropriate for every product but it has distinct advantages in some categories.
If you don't have a competitive product, you can instead sell the opportunity to sell the opportunity to sell the opportunity to find some other sucker to sell the opportunity to sell the product to people seeking opportunities to sell opportunities to maybe at some point sell a starter kit of the product.
If you don't have a competitive product that people don't want to buy then you won't last long in direct sales either. If you're just selling the opportunity, and people are just buying because of the opportunity, then you're a pyramid scheme. Critics like Taylor and FitzPatrick believe this to be the case with all MLMs, but it's simply not supported by the data. Heck, I'm not building an MLM business but I've been buying products from an MLM company for years. Why? I like them and find them of good value. I'm not the only one.
A University of Westminster study a few years ago, on
Public Perceptions of Direct Selling found that nearly half of people had purchased from a direct seller, and those that did so found the experience positive, with value and appeal of the product being a major reason for purchase. Furthermore
90% would purchase from direct sellers again, and more than 80% of would recommend it to family and friends. (note: 13% of the sample were direct sellers themselves).
That's the reality. Interestingly, the study also found that people who had never been a customer of a direct seller had negative views of the industry. They're views are obviously driven either by hearsay or a negative experience with a particular direct seller.
