Understanding Multilevel Marketing

Multilevel marketing (MLM) operates primarily on a recruitment-based model rather than product sales. Participants, often referred to as distributors, are encouraged to recruit others into the scheme, creating a pyramid-like structure where earnings are primarily derived from new recruits' investments rather than the sale of actual products. This model leads individuals to purchase expensive starter kits and inventory, with many failing to recoup their expenses as they often end up being the end consumers of the products. Consequently, MLM companies can profit significantly while many distributors incur financial losses, highlighting the exploitative nature of this business structure.