Every now and then when I tell people how my husband and I support our family, the conversation starts to lead to this question, “Oh, so it’s like a pyramid scheme?”. No. Scentsy is not a pyramid scheme. After a while, I began to wonder what exactly is a pyramid scheme and why do so many people consider any direct selling business to be one?
So first, what is a pyramid scheme? When in doubt, turn to Wikipedia! 🙂 –
“Pyramid schemes—also referred to as franchise fraud or chain referral schemes—are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product. The real profit is earned, not by the sale of the product, but by the sale of new distributorships. Emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses.”
The term pyramid scheme seems to be associated with direct selling businesses but it actually happens just as much if not more often in the financial sector. I just did a quick Google search for the term pyramid scheme and the first result was an article about a Montana woman who pleaded guilty to using money from new investors to make payments to earlier investors, between 2008 and 2016. The article states that “She’s accused of taking $1.5 million from 28 different people. At least four of the investors were identified as vulnerable persons because of their age and one was mentally disabled.” That’s just messed up.
Here is an Investopedia article about pyramid schemes in the financial sector. There’s also a great short video at that page explaining pyramid schemes. Below is a great video from the Direct Selling Association in Australia outlining key points of how to identify whether a business is a legitimate direct selling business or a pyramid scheme.
Specifically with regards to Multi-level marketing organizations the same Wikipedia page states –
According to the U.S. Federal Trade Commission legitimate MLM, unlike pyramid schemes:
“…have a real product to sell. More importantly, MLM’s actually sell their product to members of the general public, without requiring these consumers to pay anything extra or to join the MLM system. MLM’s may pay commissions to a long string of distributors, but these commission are paid for real retail sales, not for new recruits.”
In summary, any business model in which members make money from the signup fee of someone else rather than any actual selling of goods or services is a pyramid scheme. Additionally, in exchange, the organization promises its new members a share of the money taken from every additional member that they recruit. If a percentage of your sign up fee goes directly to those who enrolled you, or if you are a member of an business that rewards you financially when someone joins under you – then you are part of a pyramid scheme. The FTC also has more information at this link- FTC Pyramid Schemes – to help consumers understand the difference between legitimate direct selling businesses and scams. So do I sell products? Absolutely! Scentsy has a fantastic brand with amazing, innovative products namely, Warmers, Diffusers, Buddies, Laundry, Skin, and, of course, it’s very, very popular fragrances! To buy Scentsy online simply visit my Scentsy Website to browse all of the fantastic items I sell. Here’s just a few examples of the fun products Scentsy sells!
Pyramid Schemes come in all shapes and sizes but all make massive promises to individuals and always leave their members, except the few at the top, worse off. This same Wiki page tells of about a dozen notable pyramid schemes all over the world that have caused riots and robbed thousands, if not millions, of good people lots of money. Pyramid schemes are illegal ploys to rob people by promising them the world as they convince more and more people to pay the enroll fee, of which they get a portion.
In a Forbes magazine article by Nancy Collamer, she clarifies that “MLM’s are sometimes erroneously referred to as “pyramid schemes” – companies structured with the intent of defrauding the public”. So, these organizations are, from their conception, designed to move cash – generated NOT by the sell of any product or service, but by individuals who pay an enrollment fee – to a small group or individual at the top and are illegal.
So how am I paid then? I thought you might ask! Here are two different videos, providing two different approaches to explaining the Scentsy Compensation Plan.
And as always if today is the day you’re done with the rat race and ready to be your own boss, come join my Scentsy team! Ever wonder if you’d make an awesome Scentsy Consultant? Check out my blog post answering that very question – Could I be an awesome Scentsy Consultant? If you’re ready to rock ‘n roll today and begin earning trips, make great friends, make moola, and be able to enjoy more time with your friends and family then come on over to my Scentsy website and Join Scentsy! Want to learn more about Scentsy, the company? Here’s a little history about Scentsy in an article answering the question Is Scentsy a Scam?