Shop To Earn: Is it a scam or a legitimate business?

There's a new multi-level marketing company on the scene, with a not-so-new concept. The idea is to capitalize on an increased instance of online shopping and create a great big network of distributors who each receive a cut of the action. This isn't new. MyPowerMall, TeamNational, and Quixtar have pushed the same concept, encouraging potential recruits to "shop from themselves" and save on their purchases.

In my opinion, all of these programs are a waste of time and money. You can often find better deals on your purchases outside their systems, and you don't have to pay a signup fee or meet some silly minimum purchasing requirements.

ShopToEarn is a typical MLM, in which recruiting is the real focus. I don't believe shopping is the true focus of the company. Just like Mary Kay isn't really focused on selling cosmetics and Usana isn't really focused on selling vitamins… these companies are really focused on recruiting new distributors into the plan.

 Here's why I think ShopToEarn should be avoided by customers:

Get the same thing for free elsewhere: You can get money back on items you’re already going to shop for for free on a variety of sites. One example is Jellyfish, which rebates part of every purchase you make through the site. No fees. No catches. No recruiting.

Cost of Shop To Earn is too high: To become a “website owner” you must pay $349, or to become just a “business builder” it’s $99. To become a “broker” which is a website owner and business builder, it’s $448. There is also an annual renewal fee that is charged, which is $69 for a website owner or business builder, or $119 for a broker.

You could duplicate the system for free: ShopToEarn is basically a huge collection of affiliate links. When you want to buy something, you click on an icon, which takes you to the particular retailer’s site. Shop to Earn is paid a commission each time you shop using those links to the retailers, and you are given part of that money. You could actually get access to the exact same links by creating your own website and signing up through LinkShare, Commission Junction, and ConnectCommerce.

You can make more from shopping on your own: Once you set up your affiliate account with the companies listed above, you can shop with them and get all the money generated by shopping. Most of these affiliate links offer payments in the range of 1% to 10% of purchases, with the most typical payments being 2% to 4%. ShopToEarn only gives to associates up to half of the money, and they only reach half if they meet all the requirements of the complicated commission pay plan. The actual money given back to associates is likely far less than half of the total collected from the affiliate links.

Don't be mislead by the high percentages quoted: Shop to Earn says you can make up to 30% back on your online purchases, but those payouts don’t occur often. The payouts from the retailers rarely come close to that, even with volume incentives or bonus programs.

Most won't earn back their investment by shopping: How can I confidently state my opinion that the real name of the game for ShopToEarn is recruiting rather than shopping? Simple mathematics. Suppose a member makes 5% back on their purchases. That member would have to purchase $9,000 of merchandise to even earn back the initial investment of $450.

And I’m not even convinced that most people are even making an average of 5%. I bet they're making a much smaller percentage. Those figures demonstrate that without recruiting new people into the company, the average consumer is probably unlikely to make their initial investment back.

Is it a pyramid scheme? Multi-level marketing companies craft their plans very carefully so as to avoid being deemed a pyramid scheme. If there is a legitimate looking product or service involved, they can probably successfully claim it's not a pyramid scheme. Yet that doesn't mean the structure of the recruits and downline doesn't resemble a pyramid.

There is continuous recruiting, and the bottom of the pyramid shape is ever-expanding. The people at the bottom can only hope that they can find enough new marks to recoup their original investment. Check out this graphic from the company itself, and see if you think it looks like a pyramid or not.

Better deals elsewhere: You can probably find some really good deals through the Shop To Earn affiliates. But you will be restricted. Not all retailers are invovled in this program, and if you find a better deal with a non-affiliated company, you can't take advantage of that deal and get your ShopToEarn kicker. How much of a deal are you getting if you can't have full control overy the brands you use?

You don't really own a business: You don’t really own a business when you sign up with ShoptoEarn. Heck, you don’t own anything with them, other than your login and password. You can build a downline, but you don’t own them either. The company really owns them, and you operate as long as they allow you to. When the company goes away, so does your “business.”

Need to qualify to get commissions: You can get commissions and bonuses from your Shop To Earn downline, but as with any MLM, there are lots of catches and confusing details to the pay plan. As with all MLMs, you must “qualify” to get commissions. You don’t just get them automatically when someone you recruited buys something. You initially need 3 recruits to purchase the website owner option and generate $100 of “monthly volume” to even qualify to get a commission.

Then there are the complicated bonuses that you could get depending on your number of recruits and and their purchases. Check out these two illustrations of the commission structure here and here.

Problems with earnings claims: Claims of earnings of thousands of dollars a month with MLM companies are normal. That’s how they entice you into the scheme. Sometimes these earnings are real. But the people getting the big checks are far less than 1% of all the people involved in the scheme, and that check has been generated based upon massive recruiting of new marks.

Your chances of making that much money are slim to none. And the claims that all you have to do is work hard and you’ll make that much money too? Not true! Millions of Americans have invested significant time and money into MLM ventures and have lost money because of them. Your odds of success in an MLM are extremely low, and unlike real businesses, your hard work isn’t a good predictor of how much money you’ll make.

MLM recruiters tell you those people failed because they were lazy, didn’t want to work hard, didn’t really want to make any money, or just wanted a get-rich-quick scheme. Those are nice phrases to explain away the high failure rates in multi-level marketing schemes, but they’re just not true. The truth is that the structure of MLMs ensures that the vast majority of people will fail to turn a profit.

Other similar programs: MyPowerMall initially looks like a better option than ShoptoEarn because there is no sign-up fee. However, there is a catch, of course. You must buy at least one thing a month to keep your store with MyPowerMall. They cleverly call this program “One Thing.” If you don’t make a purchase during a month, you lose your store. (Well, the owner of the company gets your store and anyone who thought they were shopping with you is now shopping with her!)

Team National uses a similar concept as Shop To Earn and My Power Mall, but it is much more expensive to sign up. Depending on who you believe, the TN membership costs between $795 and $2,195. They call what you’re “buying” a “benefits package.” Apparently jewelry and insurance are some of the more prominent offerings of TeamNational, but there are other things available as well.

It’s going to take a lot of recruiting and buying to earn your money back with Team National. And as with the other shopping sites, consumers often find that they can get better deals elsewhere on their purchases, so they’d actually be losing money if they bought via TeamNational.

What’s the bottom line? In my opinion, ShopToEarn, MyPowerMall, and TeamNational are a waste of time and money. You’re not really building a business with them, you’re just participating in a grand scheme to recruit as many new victims as possible. The amount of money you’ll save by shopping through these sites is questionable at best, and in many cases, I think you’ll actually lose money. Avoid these companies like the plague.