Is Norwex a pyramid scheme?
No. Norwex is a direct sales company like Tupperware, Avon, Mary Kay, etc. and sells legitimate retail products to consumers. Here is how to tell whether any opportunity is a legitimate multi-level marketing opportunity rather than a pyramid scheme.
1. Product and Price
Does the company offer a high quality product for which there is a strong demand in the real world marketplace? Is the product fairly priced and priced competitively with similar products? Can the product be demonstrated, and does it stand out when you show it to friends? Is the product proprietary to the company, and available only through its distributors? (Have you ever noticed that you can’t buy Avon products in stores or Shaklee vitamins at pharmacies?) Is it backed up with a customer satisfaction guarantee? Is post-sales service or customer assistance available? Do the people who participate in the program buy the product enthusiastically based on its own merits, even if they don’t participate in the compensation program?
2. Second, No Investment Requirement
Can you participate in the company’s program without having to make any investment other than purchasing a sales kit or demonstration materials sold at company cost?
3. Third, Look at Purchase and Inventory Requirements
Can you become a distributor or sales representative without having to fulfill a minimum up-front purchase or inventory requirement? (When you are pitched to put thousands of dollars of inventory at the very beginning, run fast in the opposite direction.) Does the company’s compensation plan discourage inventory loading? Garages and backrooms filled with product serve no useful purpose to anyone.
4. Fourth, Look at the Sales Commissions Sources
Are sales commissions paid only on actual products or services sold through distributors in the network to the end-user or ultimate consumer? (This means that products don’t end up in basements and closets. They are used, because they have genuine value.) Does the compensation plan avoid paying commissions or bonuses for the mere act of sponsoring or recruiting? (If it pays headhunting fees, it is illegal.)
5. Fifth, Check the Buy-Back Policy
Will the company buy back inventory and sales kit materials from distributors who cancel their participation in the program, as long as these items are in resalable condition? (This policy is required in states that have adopted multilevel distribution statutes.)
6. Sixth and Very Important, Look for Retail Sales
Is there an emphasis on actual retail sales to end-consumers? Can the company demonstrate efforts to market products to the ultimate consumer? Do the company’s distributors have ongoing retailing requirements to qualify for commissions? What is a “retail sale?” The industry and many MLM statutes include both sales to nonparticipants and purchases in reasonable amounts for personal use by distributors. Some regulatory groups, including the FTC, have historically rejected personal use as a legitimate retail sale. Stay tuned as this debate continues. The legislative trend is definitely supportive of the industry position.
7. Seventh, Expect an Active and not Passive Role for Distributors
Are distributors in the company required to actively participate in the development and management of their networks? (Many of the MLM statutes require that distributors perform bona fide, supervisory, distributing, selling, or soliciting functions in moving product to the ultimate consumer.)
8. Eighth, Watch Out for Earnings Misrepresentations
Do the company’s literature and training materials scrupulously avoid claims of income potential that is promises of specific income levels other than demonstrations of verifiable income levels within its program? (The Federal Trade Commission, attorneys general, and postal inspectors all have their eyes on the matter of earnings representations. The acceptable approach emerging is that there should be no earnings representations unless they are based on a verifiable track record of the average earnings of distributors. For instance, a company should have statistics to show the percentage of active distributors and the average earnings of active distributors.)
9. Finally, Look for Good Training
Does the company offer its independent distributors solid training opportunities in sales and recruitment? Are different levels of training offered to match the increasing levels of experience and responsibilities of distributors?
Source: http://www.mlmlegal.com/pyramid.html – Jeffrey A Babner