Making America Great Again (Part 1)

Unless you have been living off the grid, you have probably had it up to here with the slogan “Making America Great Again”.

Whether you like what the new administration is doing or not, it is impossible to deny that changes are taking place.

What will those changes mean to our lives? I don’t think any of us, including the policy makers, have a clue how this will all shake out.

What I am fairly certain about is that any political policies that are being made today will probably take a long time (if ever) before they start having a personal impact on our lives. I would rather take my own destiny into my own hands, thank you very much.

The Elusive American Dream

We all know about the American Dream. You know how it goes. You work hard and everything turns out great.

There are plenty of examples of the American Dream at work. However, for every example of success, there are far more examples of struggle. The recent American election results, the Brexit vote, the Arab Spring, and many more lesser known skirmishes point out that discontent is everywhere, not just in America.

Since it is all about your life, What are you going to do?

Watching the world unfold these days is not comforting for most of us. The rich continue to get richer, but doubt has crept into the fabric of our society.

Iconic retailers are closing stores as people are finding better value online. Malls that were once the backbone of the American buying experience are being shuttered across the country.

Good jobs have been getting harder to find over the years. Until manufacturing undergoes a profound revival in America, finding jobs, any jobs, is going to remain difficult.

The answer to “What are you going to do” to survive for 13 million Americans for the past decade has been Direct Selling (see: http://mlmattorney.com/blog/2012/06/21/network-marketing-a-growing-industry-hard-facts-and-the-future/. The article points out the the Direct Selling industry has been responsible for $30 billion per year in sales.

Along Comes the Federal Trade Commission “FTC” to Protect American Consumers

You may know Direct Selling by another name: MLM (Multi Level Marketing) although not all Direct Selling is conducted through MLM organizations. Unless you are one of the very small percentage of MLM participants who has earned a lot of money, you may have a bad taste in your mouth when it comes to MLM. The bad experience is not just limited to customers who over pay for products that don’t meet unsubstantiated claims. Many participants inside the MLM industry often suffer significant financial losses when they discover that they are unable to sell the large volumes of inventory that they have purchased in order to take advantage of volume discounts or to meet quotas (known as garage loading in the industry). Unfortunately, the cycle often continues as people who are stuck with excess product encourage others about the “business opportunity” in order to dig themselves out of the hole they have created for themselves.

The FTC typically doesn’t get involved in business or industry matters unless people complain in large numbers. If someone feels “hard done by”, whether they are a customer, an affiliate of a MLM company, or a competitor, they are likely to complain to someone, and those complaints typically end up in the hands of the FTC by one means or another. When the number of complaints hits a critical mass, the FTC is essentially forced to look into the matter.

Starting in 2015, the FTC began insisting that companies sell products to those not involved in the industry as opposed to “garage loading” Affiliates within the network. In the fall of 2015, the FTC levied an massive undisclosed fine against a MLM company (Vemma) for non-compliance which effectively crippled the company. That action was a proverbial “shot across the bow” of the MLM industry. For the most part, the MLM industry turned a blind eye to the incident in the belief that it was just another in a long line of “warnings” which the industry treated as nothing more than a notice to keep the MLM industry on its toes.

In the summer of 2016 Herbalife announced with great fanfare that they won their ongoing battle with the FTC as the FTC withdrew their claim that Herbalife was a pyramid scheme. The win came at the cost of a paltry $200 million check from Herbalife to the FTC. That may seem like a lot of money, but for a company with $4 billion in sales that operates on huge profit margins, the $200 million dollar fine was a win. However, what the people selling Herbalife products (Affiliates) didn’t learn at the time was that Herbalife also committed to revamping their entire business model.

The FTC has made it very clear that they believe the MLM “pydramid” business model is not a fair business practice. While the FTC has not declared the MLM business model to be illegal, they have made it abundantly clear that if a successful company operates within the existing MLM business model in the USA, the company will be subjected to massive fines that will effectively cripple the company. Note that I used the word “successful”. So far the FTC seems to only attack the successful companies, as they are the organizations that can afford to pay huge fines.

The Impact of the FTC on the MLM Industry

In the most simple terms, the owners of the MLM industry are suppliers of products to a distribution network of “one-on-one” sellers. The manufacturers make approximately the same profit margins under both the MLM and retail store distribution systems. The decision by manufacturers to choose a MLM distribution model typically arises out of the high cost associated with creating sufficient brand awareness to satisfy retail chains who do not make any attempt to sell products.

The secret to the success of MLM companies is the relationships Affiliates have with their families, friends, and other customers. The owners of the MLM companies don’t make claims in order to avoid lawsuits and as a result, they pretty much leave their Affiliates to their own devices. As you can imagine, the result of an almost total lack of policing of the selling strategies of individuals who are trying to provide for their families can get pretty messy.

The “hands off” attitude of the MLM company owners has left the “power” in the hands of the elite recruiters who have been responsible for building the companies. It is easy to understand the chaos that the MLM industry currently finds itself in as the companies now are being “forced” to comply to FTC mandated “fair” business practices thereby stripping the power from the elite recruiters.

My analogy for what is happening in the MLM industry goes as follows (it helps if you are a bit of a basketball fan). The FTC has informed the superstars (Lebron James, Steph Curry, Kevin Durrant, etc.) that they will now be earning workman wages instead of superstar wages. That means the superstars now make about $60,000 per year instead of millions of dollars per year. To make matters worse, the superstars actually have to sell themselves or they don’t get paid at all. That may seem normal for the average person or to most MLM Affiliates, but the MLM superstars have been making the rules for years and this new direction in untenable. To keep the basketball analogy going, the superstars feel like they are playing in charity games and they are scrambling to find a new league to play in. This wouldn’t be a problem for the companies except for the fact that the superstars have been effectively running the companies for the past 25 years and as they leave, there is a huge leadership void.

The Devastation to MLM Affiliates is an Opportunity for the MLM Companies

The FTC didn’t make the MLM companies change the multi-level payout concept. That is why Herbalife was heralding their settlement with the FTC as a huge win. While the FTC didn’t make MLM pyramids illegal, they have made it clear that unless you as an individual participate in the actual sale of a product, you can’t get paid. That means most of the higher level MLM people have experienced a huge drop in income. As you might imagine, the elite recruiters are angry and are leaving their companies. When the elites volunteer quit due to their incomes being slashed by 90%, the MLM companies get to keep all of the unpaid commissions as profit.

The new rules certainly look like a big win for the MLM companies at the expense of the Affiliates. However, the MLM owners have overlooked the fact that their companies have been built upon one-on-one personal sales. When the leaders leave the company, the people they recruited also leave because a huge void in leadership has been created.

None of the above will mean anything to you unless you are one of the 13 million Americans involved in the Direct Selling industry. But 13 million is a big number.

If you are one of then tens of millions of customers of the MLM companies, there is little doubt that the MLM companies will reach out to you in the hope that you will continue to remain a customer. As a customer of a MLM company, you may choose remain as a customer, but don’t be shocked when the personal service that you have grown accustomed is no longer around because they no longer have leaders to guide them. At that point in time, you will simply be paying for overpriced products that may or may not be living up to the claims.

What does any of the above have to do with Making America Great Again? Like so much of the recent campaign rhetoric, talk is cheap until you come up with a solution. Hopefully you will click on Part 2 to read my thoughts on how people in the Direct Selling industry (and anyone else) can find a solid footing to build a real business upon (I will add the link to Part 2 here when it is ready).

Still quiet here.sas

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