Friday, July 27, 2012

Genre Analysis: MLM and... luxury goods like jewelry?

18 or more karat gold jewelry is an example of...
14K or more karat gold jewelry is an example of a luxury good. (Photo credit: Wikipedia)

EDITOR'S NOTE: Genre Analysis is my personal opinion on a particular genre of network marketing, like MLM + pennyauction, or MLM + daily deals, and so on. 

In recent years MLM has spread to an interesting category: luxury goods. While MLMs are usually linked with cosmetics, nutritional supplements, and very... fringe products, can luxury goods change the image of MLM? I don't think so. 

First, by luxury goods, I am talking about pieces of jewelry, and not cheap stuff either. We're talking pieces that supposedly have MSRP of several hundred to thousands of dollars. I am not going to mention any names, as this is a GENRE analysis, but if you look for it I'm sure you'll find some. 

So does MLM and luxury goods make sense? I would say... No. 

Why? Because luxury goods are just that, LUXURY goods. 

Luxury goods are not "consumable" like nutritional supplements or super-juice. There's no NEED for them, merely WANT.  You can convince people they'll live better with nutritional supplements. You will have a much harder time convincing people they'll live better with some jewelry or other luxuries. 

Luxury goods can only be afforded by people who can AFFORD them, and still have DESIRE for them, even in a down economy. You can convince people they need health, but it's much harder to convince people they want LUXURY. That automatically shrinks your available market by a HUGE degree. 

While luxury goods would be more profitable, and have the huge margins that a MLM product would need for the individual to cover the marketing and training costs of downlines, the slower sales would potentially cause cashflow problems for the affiliates UNLESS the affiliate has a lot of connections to people who can afford such luxuries. 

Think about it... how many pieces of expensive jewelry does a man or woman buy per year? I mean, $500 level stuff? $1000 level stuff? Higher? 

You will need a HUGE social circle to recruit enough people to average even 1 sale a month. Unless you mingle with the moderately rich and famous. But then, if you are, you're probably moderately rich and famous yourself, so why do you need a MLM? 

Another problem is you won't have samples to show your potential customers... unless you buy one with your own money. You'll probably just have a catalog to show, making it little different from a Neiman Marcus catalog. 

Which brings up the next problem... the idea of a "starter credit". 

At least one company in this genre (again, no names), sells their "starter kit" for like $500, but comes with "$1000 store credit". 

So even if you haven't sold a thing, they made $500. 

And you know they had a huge markup on the item, so even offering to you "$1000 store credit" they can't be losing any money.  

So as affiliates, your challenges are as follows:

  • Do you KNOW people who can AFFORD jewelry in this economic climate? 
  • Do you know if those people actually WANT more jewelry?
  • Do you know if these people will buy jewelry they can't hold in their hands? 
  • Can you SELL to these people? 

It's one thing to sell people a $50 nutritional supplement that would make them feel better. It's a VERY DIFFERENT thing to sell people a $500 or $1500 necklace, ring, pendant, whatever that they don't really need, but merely WANT. 

If you actually KNOW a lot of people like that, and thus have a market for such, then go for it. 

But if you don't think you know many people like that, then maybe you should not join, unless you think you can score some "cheap" jewelry. 

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