MLM Basics: The eBay Test

"Jason McRiffle" brought up an interesting test in a BehindMLM comment for the "legitimacy" of an MLM, and it's more useful than it first seems. He dubbed it "the eBay test".

If an MLMer wants you to join "for the product", the way to check whether it's viable or not... is to take the product name and size, and go search on eBay for the same item.

If you can buy it cheaper on eBay including shipping than what you are supposed to sell it for, then it's clearly NOT profitable to join at all as you can't retail it at any profit.

Let's randomly pick one product from each of the top 3 MLM companies by revenue: Amway, Avon, and Herbalife.

Amway Nutrilite Double X Refill "retail price" is $88 on Amway's website

Same refill is easily found on eBay for $50-$60, and if you want to bid, even less

That's not a surprise, is it?

Bad Propaganda: Avon was NOT a sterling example of MLM success

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Avon logo  (Photo credit: Wikipedia)

When trolling for new members, the recruiters for MLM often cite Avon, Amway, and until recently, Herbalife as sterling examples of network marketing. But are they really?

Since Amway is a private company, I have no stock data to show you, and Herbalife prices are crazy because some hedge fund managers are having an ego trip by playing with HLF stock. That's not a good indicator of the confidence in the company.

But Avon, that company had been around for over 100 years. How did it do?

If you enter AVP into Google, you'd find that Avon had been in STEADY DECLINE for the last ten years... since it adopted MLM. That's right, Avon did NOT adopt multi-level marketing until 2005. And it had been FAILING every year.

Avon Products, as of 18-FEB-2014

The stock chart is clear: for the last 10 years, S&P 500 had gone up 71%, while Avon stock price had gone DOWN 52%.

And one of the MAJOR change during that decade is Avon adopting MLM in 2005.

Please recall that MLM was started in 1979 when Amway survived an FTC challenge in court.

It took 25 years for Avon to go MLM, after MLM was created, and 100+ years AFTER the company was founded.

And it had done steadily WORSE every year, ever since.

Think about that. What do the stockholders know that we don't?

(And why would MLM defenders cite Herbalife's stock price rise since Ackman's challenge as proof that MLM is thriving, while ignoring Avon's price drop?)