These days many people have a nice side-hustle selling items such as health drinks, makeup, oils or candles through a direct sales company. However, they may have been told by critics that these companies are no more than pyramid schemes. Is this true?
The key takeaway here is: sales. In a pyramid scheme a person pays fees to the company, and then is told they’ll receive a percentage of the subsequent fees paid by those they recruit to participate in the scheme. There is no product to sell — any possible earnings are made through recruitment alone. Eventually, the pyramid crumbles and only those at the top walk away from the scheme with real gains, while the majority of participants receive nothing. Pyramid schemes are illegal acts of fraud.
Some pyramid schemes can be very serious. Take the example of a Ponzi scheme. In a Ponzi scheme, participants are enticed with the promise of high returns for taking investment money from recruits and funneling it into the pyramid. Ponzi schemes can be multibillion-dollar illegal enterprises.
Direct sales companies that require participants to sell products that have a value differ from pyramid schemes. While some participants in direct sales can earn a commission by bringing in partners under them, all participants have the opportunity to earn money simply by selling the product, without being told they must recruit new members. That’s the key — the product has a value, and money can be made by selling it. Pyramid schemes sell no products or purportedly do so, but the so-called products have no value. Pyramid schemes, and especially Ponzi schemes, are serious white-collar crimes, but it is likely that you are safe participating in your side-hustle with direct sales.