Unlike conventional retail, which relies on advertising, shelf space, and middlemen, direct selling builds its foundation on word-of-mouth, personal connections, and trust-driven recommendations. This is both its greatest strength and biggest vulnerability.
Because it operates outside mainstream marketing channels, it has also been misused and misrepresented by fraudulent schemes, Ponzi operations, and unsustainable money circulation models. In India, terms like Ponzi, Pyramid, or Chain Business have been wrongfully attached to MLM, causing mass skepticism.
Regulatory gaps allowed many unethical entities to masquerade as legitimate businesses, leading to massive financial losses for people and even causing disruptions in some economies. No wonder Gen Z often mocks the concept of direct selling, associating it with saturation, scams, or outdated business models.
I would have had a similar opinion if I hadn’t witnessed firsthand how ethical direct selling can transform lives—including my own.
Thankfully, the bifurcation between ethical direct selling and money circulation schemes is finally becoming clearer. In late 2021, the Indian government extended regulatory support through the Department of Consumer Affairs, giving direct selling an official framework to operate under.
But despite this progress, myths and misconceptions remain.
Myth #1 All MLMs are illegal Pyramid/Ponzi schemes
Direct selling has often been wrongfully clubbed with Ponzi and Pyramid schemes, leading to massive misunderstandings.
👉 A Pyramid Scheme is when income is solely dependent on recruitment—with no real product or service being sold. Money flows upward, and once recruitment slows, the system collapses.
👉 A Legitimate MLM/Direct Selling Company, on the other hand, sells tangible products/services where commissions are earned from actual sales, not from recruiting people.
👉 Case in Point: In 2021, the Consumer Protection (Direct Selling) Rules were introduced by the Government of India, formally distinguishing legal direct selling companies from Ponzi schemes.
If you’re unsure whether an MLM is legal, ask these 5 questions:
1️⃣ Is the focus on recruitment or product sales?
→ If the company pays you only for signing up people, it’s a red flag.
2️⃣ Do the products have actual market demand?
→ If you wouldn’t buy the product without the business opportunity, it’s a bad sign.
3️⃣ Does the company offer a product return policy?
→ Legitimate MLMs offer satisfaction guarantees because they stand by their products.
4️⃣ Are there unreasonable joining fees?
→ You shouldn’t have to pay huge amounts just to enter—that’s a common scam tactic.
5️⃣ How long has the company survived?
→ Most Ponzi schemes collapse within 2-5 years. A decade+ track record adds credibility.
🔹 Bottom Line:
Direct selling, like any industry, has both legitimate and shady players. The key is to spot the difference.
Myth #2 The folks at the top earn; the ones at the bottom lose
This is one of the biggest misconceptions because people confuse hierarchy with success.
📌 In any business, a CEO makes more than an entry-level employee—but that doesn’t mean entry-level employees can’t grow.
📌 In direct selling, earnings are performance-based—a new distributor can out-earn their sponsor by working smarter.
💡 Example:
There are countless cases where newcomers surpass their uplines because the plan rewards sales and leadership, not just tenure.
✅ Corporate Example: A Sales Manager at HUL earns more than a 20-year-old Executive if they perform better.
✅ Direct Selling Example: A highly active seller who builds strong customer relationships will always earn more than a passive old distributor.
Myth #3 Eventually the business structure gets saturated
This argument is based on flawed mathematical logic.
🚫 Saturation Myth: People say, “If everyone recruits 3 people, we will run out of people!”
✅ Reality:
- The population is not fixed. Every year, millions turn 18 and enter the economy.
- Attrition happens naturally—some people drop out, making room for others.
- Not everyone will succeed—just like in traditional business, 90% of startups fail, but that doesn’t mean people stop starting businesses.
👉 The same argument can be made about corporate jobs—should we stop hiring engineers because there are already too many?
💡 Key Takeaway:
MLM growth isn’t about infinite expansion—it’s about capturing market share within an evolving population.
Myth #4 It’s a shortcut to success! Quick Money!
People want passive income but hate the process required to build it.
📌 Reality: Direct selling is a business, not a lottery.
📌 Initial Payout vs. Long-Term Gains:
- First 6 months: High effort, low payout
- 1-2 years: Stable income
- 3-5 years: Passive income & leadership-based incentives
👉 Comparison with YouTube & Stock Market SIPs:
- YouTube creators earn little for months, but compound views over time.
- SIP investors put in money monthly and see compounding growth later.
- Direct selling works the same way—it rewards consistent effort over time.
💡 Key Takeaway:
MLM is not a get-rich-quick scheme—it’s a compounding wealth vehicle.
Myth #5 It’s a cult!
People think MLM leaders are “too enthusiastic”, but we never question enthusiasm in sports, music concerts, or startup culture.
📌 If a cricketer screams after hitting a six, we call it passion.
📌 If a motivational speaker energizes an audience, we call it leadership.
📌 If an MLM leader hypes up their team, we call it a cult.
👉 The difference?
- People feel uncomfortable with non-traditional success paths.
- The education system teaches jobs, not businesses—so high-energy business cultures feel unnatural.
💡 Key Takeaway:
Direct selling is not a cult—it’s just a high-energy, community-driven business model.
🚀 Final Refinements for the Conclusion
In a developing country like India, money isn’t just currency—it’s hope.
✅ For a homemaker, it’s financial independence.
✅ For a student, it’s a future beyond a corporate job.
✅ For a middle-class worker, it’s an escape from paycheck-to-paycheck living.
👉 If Direct Selling can create opportunities where traditional systems fail, why demonize it?
💡 The Real Question Isn’t “Is MLM Good or Bad?”—It’s “Do You Understand It Well Enough?”
🔹 Don’t reject MLM out of ignorance.
🔹 Educate yourself before forming an opinion.
📌 If you choose to do it, do it right.
📌 If you choose not to, at least understand it before dismissing it.
👉 That’s the only fair way to look at Direct Selling.
Wish you all the best in your ventures ahead. Some further reference reads below for your interest.
KPMG – FICCI Report on the Industry (2014)
