This model has gained popularity because it offers an alternative to traditional office work, giving people the opportunity to build their own business with a low initial investment. Companies such as Amway, Herbalife and Mary Kay are well-known examples of organizations that operate based on multilevel marketing. According to the Brazilian Association of Direct Sales Companies (ABEVD), this sector generated more than R$50 billion in Brazil in 2021, indicating constant and significant growth.
How Does Multi-Level Marketing Work?
The multi-level marketing model involves two main ways for distributors to earn money: direct sales of products and recruitment of new distributors. Earnings can vary greatly depending on the level of the distributor in the structure, as well as the volume of sales generated. This business format is different from pyramid schemes, which are illegal and do not rely on the sale of legitimate products or services, but rather on membership fees and recruitment of new members to sustain the growth of the network.
Direct Sales
Distributors can buy products from the company and resell them directly to consumers, earning a profit margin on each sale. This is one of the main sources of income in multi-level marketing and encourages the distributor to develop a loyal customer base and to have a good knowledge of the products they offer.
Recruitment and Network Expansion
Another key aspect is recruiting new distributors. Distributors who recruit new members to the network are rewarded with commissions on the recruits’ sales. This creates an incentive for each distributor to expand their team, maximizing their earning potential and expanding their sales network.
Main Differences Between Multi-Level Marketing and Financial Pyramids
It is important to distinguish between multi-level marketing and financial pyramids , as many people confuse the two models, and Brazilian legislation severely punishes pyramids. While multi-level marketing focuses on real products or services, financial pyramids are supported exclusively by recruiting new members and charging membership fees, without offering real value to the consumer.
In a pyramid scheme, the main mechanism that sustains the network is the entry of new members, making it unsustainable and illegal in the long run. However, legitimate MLM companies offer quality products afghanistan business email list or services, ensuring that distributors earn revenue from direct sales, not just recruitment.
Benefits of Multi-Level Marketing
There are several positive aspects associated with multi-level marketing that attract new entrepreneurs to this business model:
Low Initial Investment
Multi-level marketing typically requires a low initial investment, which covers the cost of initial products and sales tools. This affordable cost allows many people who may not have the resources to start a traditional business to start their own business and grow as they develop their network.
Flexible Schedule
Another attractive feature is the flexibility, as distributors can set their own hours and work according to their availability. This makes the model ideal for people looking for an extra source of income or a part-time business.
Opportunity for Personal and Professional Growth
MLM companies often invest in training to empower their distributors in sales and leadership, providing personal and professional development. These companies often host conferences and events that encourage networking and help distributors improve their skills.
Risks and Challenges in Multilevel Marketing
Despite the benefits, it is important to consider some risks associated with multi-level marketing:
Low Retention Rate
A survey by ABEVD shows that although multilevel marketing offers good opportunities, many distributors end up giving up after a short period due to high competition and the difficulties in building an effective sales network. It is estimated that around 50% of new distributors abandon the business within a year.
Limited Earnings Possibility
Contrary to what is often promised in recruiting speeches, earnings are not guaranteed and, for most distributors, can be limited. A study conducted by the United States Federal Trade Commission revealed that, on average, only 1% of participants in a multilevel marketing network achieve substantial earnings. This small percentage should be considered by those who decide to enter this market, since success depends on specific sales and leadership skills.
Regulation and Legality of Multilevel Marketing
Multilevel marketing is regulated in Brazil and is considered legal as long as it is practiced within the limits of current legislation. Law No. 13,966/2019 defines and regulates the practice of direct sales, establishing criteria for multilevel marketing companies to act in a transparent and ethical manner. This law aims to protect consumers and distributors from deceptive practices and prevent the occurrence of financial pyramids.
Furthermore, ABEVD acts as a regulatory body, offering guidelines and best practices for companies operating in the sector. Adherence to these principles is essential for MLM to be seen as a reliable and sustainable business model.
Multilevel Marketing in Brazil and the World
Multilevel marketing is popular in several countries and is growing significantly in emerging economies, such as Brazil and Mexico. According to the Direct Selling Association (DSA), the sector generated more than US$ 180 billion globally in 2020, with important markets in Asia, the United States and Latin America. In Brazil, the sector generated around 5 million direct and indirect jobs in 2021, according to ABEVD, demonstrating the social and economic relevance of this activity.
Expansion in Times of Crisis
In times of economic crisis, multilevel marketing gains even more strength, as many people seek alternatives to supplement their income. In 2020, a year marked by the COVID-19 pandemic, direct sales saw a significant increase, with more people joining the sector as a way to get around unemployment. This factor contributed to the expansion of the distributor network, even in an unfavorable economic scenario.
Tips for Success in Multi-Level Marketing
For those who want to get into multilevel marketing, it is important to follow some practices to maximize the chances of success:
Choose a Reliable Company
It is essential to choose a company with a good reputation and quality products. Check if the company is a member of ABEVD and evaluate the comments from other distributors about the support offered.
Multi-level marketing is a business model that offers real opportunities for profit and personal growth, but it also presents challenges that require dedication and skill. By choosing a reliable company and adopting a professional approach, it is possible to build a successful career in this sector. However, it is crucial to remember that success depends on consistent and strategic work, as well as a clear understanding of the expectations and challenges of multi-level marketing.
