Is dropshipping a pyramid scheme or an mlm scam?

There are speculations as to whether dropshipping is an MLM scam, so we are going to answer that objectively in this article! Stay glued to this content and let’s begin!

If you’re in a hurry, here is the summary; 

Dropshipping is not an MLM scam, it’s not even an MLM or a pyramid scheme. 

Dropshipping is an ecommerce order fulfillment model!  However, the seemingly over-hype of quick money making, especially done to promote paid dropshipping courses has resulted in people starting dropshipping without the willingness to put in consistent efforts and if unfortunately they don’t get the quick results they seek, they bail out and often think that dropshipping a scam.

What is MLM or pyramid scheme 

Ever heard cliche pitches from people telling you that you can be a millionaire with the speed of flash. 

They’d try to convince you to register under them and bring two people who would bring in 4 persons then you go up to being a millionaire! Sounds familiar?

That’s MLM which stands for “multi level marketing”. It’s all also called “pyramid scheme” and this days it has a more eloquent name “network marketing”

This MLM is often run by a company trying to market its products! Well, if there is no product to market, it becomes a ponzi scheme but that’s a topic for another day.

MLM usually has lots of juicy tire incentives. For example you’d hear things like if you bring up to 5 people, you’d be a gold member and qualify for a car or a luxury trip!

Incentives like this get people grinding so hard that I’ve heard jokes of shoe soles peeling off from all the journey of trying to bring two people.

I have gotten pitches like that myself and some MLM marketers have brought in even new narratives. Okay, I’d tell you two short personal encounters of mine.

“I really don’t have the strength to go about convincing any two friends or family to register MLM and I know my family and friends don’t have any interest in trying to convince anyone else either” 

That’s what I honestly told the guy trying to pitch me into a pyramid scheme. “You don’t have to convince anyone, just tell them about us and send their numbers and I’d talk to them about it” he told me.

I wasn’t having it..  so, yes I’m skeptical as well about Pyramid schemes.

I have seen one MLM marketer only choose to call it “network marketing” and recommend some network marketing book, then he gives out cash prizes to people who could answer questions based on the book’s content.

Well, this was a good strategy and it gave out the necessary media attention! Yet up to this day, people keep tweaking the manner in which they pitch Pyramid to gain new recruits.

Nevertheless, there is still huge skepticism about the MLM scheme and too many people perceive it as a get rich quick online scam. 

Speaking about getting rich quick, there is hype around “making money online with dropshipping” and I understand why people must have their eyebrows raised.

“Is dropshipping another get rich quick online scam?” “Is it ethical, is it legal or is dropshipping an MLM scam”? 

These are valid questions and I would attempt to answer them subjectively but first let go of the basis and determine if MLM is in itself a scam?!

What is MLM scam 

MLM is not itself a scam, it’s a pyramid which involves promoting a product and recruiting family and friends to promote the product for an incentive 

However, scammers usually use another pyramid scheme known as a “ponzi scheme” to rip people off! 

A Ponzi scheme is basically MLM where there is no “product” to be sold. So it usually involves paying a ponzi internet company a membership fee and recruiting people to pay the same fees with the hopes that your investment would be multiplied and sent back to you.

The promise of the Ponzi scheme is “the higher your membership fee” the more the returns.

Some popular Ponzi scam strategy scam, had people paying membership while they dutifully paid back the interests to their members as promised.

This encouraged members to pay for an even higher membership and when they gathered more money, the Ponzi schemes shut down and its members lost their monies.

Most times,“MLM” is interchangeably used to describe Ponzi Schemes, so for obvious reasons, “MLM” is popularly used to refer to Ponzi scams.

More so, MLM itself is often pitched to new recruits in such an over-hyped marketing way. It leaves them believing that they’d be overnight millionaires if they just brought in 2 referrals.

The downside is that it can be  hard to bring in the first two referrals! Especially because most people are wary of being pitched to an MLM scheme and are avoidant in investing in any form of pyramid scheme. 

There is also no guarantee of being an overnight millionaire because earnings will depend on the two referrals bringing in their own referrals and their referrals bringing in more referrals and that’s a possibility you can’t control.

MLM is a pyramid scheme but its not in itself a scam, the real pyramid scams are “Ponzi schemes” 

The problem with MLM or what people term as “MLM scam” and the very reason it has gotten a notorious reputation- is simple!

People hate to lose money and when they are sold the MLM dream, only to get into it and find out that such dreams didn’t come on a platter -You bet they’d call it a scam! 

So, what about dropshipping?

Is dropshipping an MLM scam? 

Is  dropshipping just too good to be true? 

Is dropshipping an MLM scam 

Dropshipping is not a scam! It’s a good way to make money online but its not a sustainable business in the long run! 

Dropshipping is an ecommerce business Fulfillment model and this is how it works; A dropshipper lists products on an e-commerce store and markets it but he doesn’t keep stock of the listed products.

Product orders gotten on the dropshipper’s webstore is shipped by a third party supplier whom the dropshipper has an agreement with! 

The third party supplier would usually agree to ship these products without the supplier’s branded invoices or packages.

Think of it as the good old estate agency. An agent lists and markets houses he doesn’t own! Make sales and keep a commission! 

Is every estate agent successful? NO! Are there successful estate agents? Of course! 

If you had to pay heavily for courses in real estate not merely because the course teaches you the fundamentals of real estate agency but because you promised that you’d become a real estate agent making seven figures in a short span of time.

If you end up buying that course and not getting the desired result, you might start to ask if Real Estate agency is an MLM scam?

This is obviously why the term “fake dropshipping guru” is so popular on the internet. You’d wonder if the course instructor is even making any money himself with dropshipping? And if he is just a fake guru enriching himself by selling you those courses.

Conclusion;

Is dropshipping an MLM scam? No! Is dropshipping a scam? No. The truth is entrepreneurs can make money dropshipping just as real estate agents, make money with agencies!

The fundamentals of the business are often clear in theory but the one thing that makes any dropshipper successful is simple and practical- “Bring in the sales”!

Every real entrepreneur knows that there is a room for your own creativity and it’s the one thing that makes your business unique and sets it apart from its competitors.

You could learn dropshipping and you might even follow some strategies recommended by gurus or other dropshippers. It could work for you or it may not!

I think it makes sense to follow what works and ditch whatever doesn’t! Fact is nothing beats your own unique experience and so, there is a room for you to think creatively. 

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