Thursday, May 4, 2017

Direct Cellars MLM Scam?

Today's blog post is venturing very far away from the original premise of the blog, but it has become important to take a moment and go over a "new" MLM called Direct Cellars. This blog post has been inspired by Ethan Vanderbuilt's style of writing about MLM mixed with a recent personal experience involving losing a friend to this business opportunity. Unfortunately, my experience, much like others dealing with MLM adherents, has been a frustrating combination of toxicity mixed with denial and cognitive dissonance resulting in a harsh and immediate severance of friendship which has induced a mixture of frustration, rage, and sadness. All of this grievance, in this particular instance, can be chalked up to an MLM called Direct Cellars.

Direct Cellars is an MLM based on wine distribution. The idea is to sign up for this business opportunity, and enjoy lots of different wines that have been carefully selected through their "Wine Tasters". There are four different packages you can choose from when you sign up for Direct Cellars, and each package is designed to suit both your wine and business dedication.

Here is the Direct Cellars Mission Statement: "To enable you to enjoy your wine experience, in the comfort of your own home, having fun with your friends and family. Discovering wines you would have likely never found by searching through hundreds and hundreds of selections at your local retail wine store. With our simple, easy and fast Wine Club selection and deliveries, you’ll never spend hours trying to decide which wines you might like, only to be disappointed. You won’t have to drive across town, or settle for the poor wine selection at your local supermarket, ever again."

Here are the four subscriptions Direct Cellars offers:

Two Bottle Wine Lover ($49.95): You get two random bottles of wine per month based on their "Wine Tasters" selections.

Four Bottle Wine Lover ($79.95): You get four random bottles of wine per month. If you sign up for this program, you will save about $5.00 per bottle compared to the two bottle wine lover plan.

Premium Wine Lover (PWL) ($249.95): You get four random bottles of wine and the opportunity to earn $125.00 for each (PWL) that signs up directly below you, and you can receive commissions based on the "BV" you generate from your weaker leg (This starts to get convoluted and I will link the compensation plan at the bottom). You must also pay $79.95 a month to continue to get your four bottles of wine per month.

Premium Wine Lover Elite (PWLE) ($499.95): You get twelve bottles of wine and the opportunity to earn $250.00 for each (PWLE) that signs up directly below you, and you can receive commissions based on the "BV" you generate from your weaker leg (This stars to get convoluted and I will link the compensation plan at the bottom). You must also pay $79.95 a month to continue to get your four bottles of wine per month.

They also have this statement. "Enroll any combination of PWL’s and earn the Fast Start Bonus associated with that PWL!" This is important because it means if you enroll a PWLE and you are only a PWL, then you will only receive $125.00. This essentially forces you to subscribe as a PWLE, because the most lucrative part of the payment plan is in the Fast Start Bonus, not the commissions based on residual purchases (Unless you are at the very top).

Once you have signed up at least three "Wine Lovers", then you get your wines for free.

Noticeable flaws:

1. We'll start with the inability to actually choose wines that you like. I've been to many vineyards since I live close to wine country and have never heard of a subscription based wine service where you received wines completely at random. Even when you get to choose your wines, you may get some that are disappointing, but at least you have an idea of . There is no way of knowing if the wines they are selecting are good vintages, come from the types of grapes you like, or are even worth the $20 or $25 you are paying per bottle (Which is extremely cheap for wine and probably means all of the wines are going to be low quality. This opinion is subjective).

2. Adding onto the first point, you are restricted to only getting four bottles a month. This seems like an extremely odd stipulation for a subscription based service, and actually seems like bad business by not offering the ability to buy more.

3. There is no actual wine advantage when signing up to be a distributor instead of signing up to be a four bottle wine lover. In fact, the only way to make any substantial money is to continue to sign people up as distributors and earn 50% of their initial sign up cost. The amount of money generated through monthly subscriptions is extremely small, and you only qualify as long as you have recruited at least two other distributors. Recruiting two new distributors is not only extremely difficult once this MLM becomes well-known, but is mathematically impossible to sustain. This business model appears to be inherently flawed.

On a side note, the former friend that joined Direct Cellars claimed the wine values were worth it because he was getting them at "Wholesale prices", however I quickly looked up one of the bottles based on a FB picture he posted as an advertisement and found a website that was selling the same bottle shipped for cheaper.



You can find "12th Blend Eye of the Needle" at their own website for $15.00 (http://eyeoftheneedlewinery.com/product/12th-red-wine/). Needless to say this MLM does not offer a significant perk for purchasing wine through their service.

Overall, Direct Cellars appears to fit the status quo for an MLM and appears to be another pyramid dressed up as a business opportunity. Not only do they not offer a good business opportunity, but the actual subscription service does not appear to appeal to an actual wine enthusiast. I would venture to say a high percentage of actual wine enthusiasts would find this service to be a bad option for both learning about wine and enjoying it with friends and family. This business opportunity appears to target low-income earners as well as beginner wine drinkers, and should be avoided.

Source: Compensation Plan https://www.directcellars.com/content/documents/DC_2PgCompPlan.pdf

Source: About Direct Cellars https://www.directcellars.com/NOID/aboutus

14 comments:

  1. Who the hell would buy wine at random, sight unseen? That would be like telling a bookseller to send you "fifteen feet of books."

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    1. Anonymous --

      I completely agree, and to not have a catalog of wines to choose from with a strict price point of approximately $20.00 a bottle makes me believe you will receive some stinkers. I'm not trying to be a price snob, and I don't know a whole lot about wine, but I do know that you will never get to try wines from certain regions based on that low price point and they act as though this a premiere service.

      It also feels like you are trying to learn about tennis, but the only thing you are allowed to use is a wooden racket.

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    2. One thing puzzles me. The right to sell alcohol in the USA is strictly-controlled. Laws concerning the sale of alcohol vary from state to state - so what arrangement has the front company for this 'Direct Cellars MLM' racket come to with the American authorities concerning the legal status of its adherents?

      I observe that 'Direct Cellars' is launching in the UK where a personal license is required to retail alcohol. These licenses can only be granted by a local magistrate to responsible adults of good character. They cannot be granted to companies. Again, it would be interesting to know what is the legal status in the UK of the adherents of an 'MLM' racket hiding behind wine.

      https://www.youtube.com/watch?v=QtBadwbAv68

      I think that I, and other interested parties, might soon be making some calls about 'Direct Cellars' to the UK authorities.

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    3. David --

      It appears to be an extremely grey area of law. I searched high and low on the Direct Cellars website to see if they have any type of license to sell liquor and I have had no luck finding anything. One thing they do mention on their "Terms" page in the "Availability" section is:

      "Not all of the products or services described on this Site are available in all areas of the United States and/or you may not be eligible for them. We reserve the right to determine eligibility. Due to local laws, alcohol may not be shipped to some locatons. All membership payments associated with wine selections that are not shipped due to state or local regulations will be fully refunded."

      https://www.directcellars.com/%7B%7BprofileID%7D%7D/terms

      This leads me to believe they are not licensed and have found a legal loophole by providing a courier service instead of an alcohol sales service.

      I also read this article in the Boston Globe dated in 2013 about the murkiness of the laws regarding alcohol sales going directly to people's homes.

      "Drizly, meanwhile, doesn’t deliver alcohol itself. Rather, it partners with liquor stores to fill and deliver the orders — 11 so far in Boston, Cambridge, and outlying municipalities such as Acton and Winchester. The company charges liquor stores a flat monthly fee to enroll in the service."

      https://www.bostonglobe.com/business/2013/12/27/alcohol-delivery-services-offer-convenience-but-state-law-murky/4duEnwlrmcTGLEkFQ45gdM/story.html

      I don't think Direct Cellars actually delivers the wines themselves. According to their "FAQs" page:

      "Q. Do you deliver to rural areas outside of towns and cities?

      A. Our contracted fulfillment is with UPS so if you currently receive US Postal services most likely we can deliver directly to your door.

      https://www.directcellars.com/%7B%7BprofileID%7D%7D/faqs

      This again, leads me to think they have really towed the line and have essentially no direct connection with the wines they are providing.

      Hopefully this helps to decipher what is actually happening.

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    4. This wine 'MLM racket' where the front company is acting in association existing producers, appears to be like the (Scandinavian) 'Zinzino MLM' racket, in that traditional products are being used (at fixed-prices) to launder the unlawful losing investment payments into the pyramid scheme.

      In the 'Zinzino' racket, a well-known Belgian coffee (Rombouts) has been used, but this remains unavailable in Scandinavian retail outlets. However, Rombouts coffee has been available on the Net at prices vastly inferior to those being charged to 'Zizino' adherents (even including the cost of post and packing). Thus, the real unlawful reason why 'Zinzino' adherents have been regularly buying it at the higher fixed-price, and recruiting others to do the same, is in the false-expectation of future reward.

      The 'Direct Cellars' racket would appear to be occupying this same dangerous area (from a regulatory point of view), in that, if the same wine is available elsewhere at an inferior price, 'Direct Cellars' bosses can't pretend that adherents have been buying via the 'MLM' scheme solely on value and demand.

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    5. David,

      The only advantages my friend mentioned about Direct Cellars are:

      1. The delivery to your door versus having to go to a store.

      2. The idea that an expert is picking out the wines for you, and that you will get different wines each month.

      3. The opportunity to get free wine once three people have signed up as "customers" or "distributors" below you.

      All three of these "advantages" have significant issues with legality. As you mentioned, they are in a dangerous area by proposing that the wine can't be delivered at a cheaper price (which it can based on the wine example from the OP). The "Wine Experts" don't appear to have any wine acumen or they probably would've posted it everywhere on their site. Therefore they are simply picking out wines based solely on price since they cannot make an actual wine preference decision based on training or experience (i.e. being a sommelier). Of course the third advantage is the most troubling because it confirms that this is a pyramid. If the main advantage is to simply get 3 people to pay for your wines for you, then the person would be better off financially and legally just having his 3 friends go to the store and split the purchase directly on the bottles of wines for him.

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  2. On a slightly different note, but talking of wine frauds, might I recommend a book, 'Billionaire's Vinegar.' This is partly because, in the early 1990s, I met (and did business with) one of the wealthy wine collectors who features in this book and who privately revealed the truth many years before it became public knowledge.

    This wealthy witness (LLoyd Flatt) is now dead. He even retained empty bottles as souvenirs. One of these empties is still in the possession of a friend of mine.

    'Billionaire's' Vinegar tells the tragicomic saga of the discovery (in the 1980s) of a stock of (fake) rare French vintage wines (supposedly) bought by Thomas Jefferson when he lived in Paris.

    The bottles were genuine 18th century, but their engraved labels, contents and corks were added by Hardy Rodenstock, a well-connected con-artist who had been secretly counterfeiting rare bottles of vintage wines on a semi-industrial scale. Many people had been making money out of this con-artist (auctioneers, expert wine valuers, dealers, investors, etc.). Thus, even his victims didn't want to face the truth.

    In 1985, one of these fake 'Thomas Jefferson-owned' bottles of wine was fraudulently sold for £150 000 at a Christies auction. 4 more 'TJ' labelled bottles of wine were privately sold for $300 000+.

    I believe a movie is going to be released in 2017 based on 'Billionaire's Vinegar'.

    https://www.theguardian.com/film/2015/mar/27/matthew-mcconaughey-the-billionaires-vinegar

    http://www.comingsoon.net/movie/the-billionaires-vinegar-2017

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    1. David --

      That is a fascinating history of some of the more prolific wines. I believe Direct Cellars is the less clever version, and are proposing they know their stuff about wine, but then neuter themselves with a $20.00 a bottle price tag.

      This whole wine subscription service fraud fits the MLM mold perfectly. They pretend to be "Wine enthusiasts" and "Wine Experts", but are only catering to the most ignorant of wine drinkers. It is reminiscent of the Double X miracle pills that Amway proclaims are the best and highest quality vitamins with the markup prices to match.

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  3. Some states in the American Union are still "dry" in the sense that no unencumbered sale of alcoholic drinks is allowed within their jurisdiction. This means that in such states one must have a special license (as Mr. Brear describes for the UK) to sell and to purchase such drinks, and they must be bought at what is called a "package store," an outlet under local governmental control. Other states (like my own, New York) allow for the free sale of alcoholic drinks, but the independent storekeeper must obtain a license to run such a business, and all restaurants and bars that serve drinks must obtain a similar "Liquor License" as well. Of course, any private individual can make and consume his own wine, beer, or whiskey, and this was true even during Prohibition (our stupidest mistake since the Civil War).

    Laws vary from state to state about age limits for the purchase of alcoholic drinks, and about the legality of buying such stuff by mail. The Byzantine complexity of American laws on this subject makes it easy for unscrupulous companies like Direct Cellars to maneuver.

    Of course, local governments are not blameless in this matter. New York State shamelessly writes its laws to favor its own upstate grape growers and the Long Island vineyards, while placing silly taxes and restrictions on the purchase of wine from elsewhere. As a result, excellent California vintages are grossly overpriced for the New York market, while you can buy godawful and cheap "wine coolers" (made from New York State grapes) at your local grocery. Such wine coolers are two steps below what the French call "pinard," and what the English call "plonk."

    Of course, many independent and industrious Americans bypass all of this absurdity by making their own moonshine (or illegally distilled and tax-free whiskey) for self-consumption and for very lucrative sale. We have been doing this since colonial times, and in fact moonshiners are now in the midst of a renaissance, producing excellent stuff flavored with local herbs and fruits. George Washington may crushed the Whiskey Rebellion in the late eighteenth century, but no American government will ever crush moonshining, thank God. It is a sign of the indomitable American spirit, and our ingrained habit of telling governmental bureaucrats to go screw themselves.

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    1. Anonymous,

      Thank you for your comment! I was not aware that there are still "dry" states, especially since, as you mentioned, Prohibition was a gigantic failure. It seems difficult for cities to try and maintain a certain "dryness" as the city I live in doesn't allow bars to be built, but they can't stop places like Dave and Busters from having a bar and selling alcohol.

      Are you sure there are states with different age limits for purchasing alcohol? I believe it is very uniform at this point, and that nobody under the age of 21 can purchase liquor.

      I agree the complexity of our laws around alcohol are troubling as we seem to still need a certain level of political correctness so certain states can be more strict than others. This system of states controlling their alcohol policies seems to be failing.

      As a frequent New York visitor, I have noticed that their taxation on products like alcohol and cigarettes is completely insane. California seems to be following suit and is starting to install new taxes on cigarettes as well, which is fine, except the money has not been allocated to any particular need, so it is just a get rich tax on addicted persons. Their next step is to add taxes to the rest of the tobacco products and then go after an alcohol tax since cigarette sales have not decreased.

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  4. Actually, Dr. Doe, the taxes on cigarettes and other tobacco products in New York (especially New York City) are spectacularly idiotic failures. The Police Department will tell you (off the record, of course) that over 70% of all cigarettes sold in our metropolitan area are illegally smuggled in from low-tax states down south. The only persons being hurt are honest storekeepers and tobacconists who refuse to purchase these illegal cigarettes. They have seen their business dry up. And thousands of New Yorkers make trips down south every few months to buy huge amounts of low-tax southern cigarettes for their own use, and for the use of their friends and neighbors. You can also buy cigarettes cheaply on many Indian reservations all over the country. American ingenuity at work!

    By the way, high taxes on cigarettes are NOT intended as a way to increase state revenue. They are intended for the surreptitious political purpose of discouraging smoking. It's the politically correct blue states like New York and California that have these insanely high taxes. When I was a child, cigarettes in New York cost 15 cents a pack. Today a pack of cigarettes will run you TEN DOLLARS a pack. That is punitive and tyrannical, and I hope everyone who smokes will travel down south and stock up on plenty of cheap North Carolina and Virginia cigarettes.

    When governments become intrusive and domineering, you have the right to defy them or circumvent them. That was the lesson of our Revolution of 1776.

    As for the legal age for buying alcohol, I always recall that it varied from state to state. Things may have become more regularized and standard now, with 21 being the legal age. That too is absurd, for many persons begin drinking at the age of 17 or 18. The new law simply criminalizes them for no purpose.

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    1. The guise that the government is looking out for their population's health by raising taxes on cigarettes is perfect for lining their pockets. Their carefully brainwashed citizens of California and New York are the perfect pawns to help them get richer by voting these stupid things through. The government cares as much about the health of the general population as Purdue cared about making a boat load of money getting people addicted to OxyContin while the government kept marijuana out of reach. The worst part is people are attacking the problem from the wrong angle. Raising taxes but maintaining availability will never stop the addicts, but for some reason that logic doesn't seem to penetrate their thick skulls. If they want to make a difference, then they need to find ways to eliminate the production of cigarettes.

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  5. Personally speaking, I am opposed to the government regulating ANYTHING: tobacco, alcoholic drinks, hard drugs, prostitution, or guns. Anyone who is an adult should be able to buy anything he wants. If he kills himself with it, that's his choice. If he kills others, he can be arrested and punished.

    Yes, of course governments are only interested in tax revenues rather than in the health of the population. But you have to understand that the real impetus behind high taxes for tobacco products didn't come from the politicians, but from the ideological health Nazis who are so dominant in the Western world today. They are the ones who are screaming bloody murder for more and more regulations on what we can eat and what we can drink. Consider those stupid vegans and PETA fanatics who are working hard to crush the meat industry, or the weepy sentimentalists who won't let us buy pate de foie gras. They are precisely like the left-Labourite scum in Britain who have forbidden fox hunting for ideological/political reasons.

    By the way, this was also the case, in a totally parallel fashion, with Prohibition. The U.S. government did NOT want to pass the 18th amendment that brought the curse of Prohibition on our nation. In 1910, the great bulk of American tax revenue came from the thousands of whiskey distilleries and beer breweries that dotted the country. But the fanatically religion-driven prohibitionists insisted that the U.S. government end the sale of all alcoholic beverages, and they managed to compel politicians to impose an Income Tax on us in 1913, as a way to make up for the loss of tax revenues from the distilleries and breweries. It was IDEOLOGICAL AND RELIGIOUS FANATICISM that brought about Prohibition, just as is the case today with the insanely high anti-tobacco taxes.

    Anybody who wants to tell me what I can or cannot eat, drink, purchase, or consume is an embryonic totalitarian. And anyone who works to compel the government to pass laws against my freedom to do so is no better than a Communist or a Nazi.

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    1. Anonymous,

      I agree that these types of regulations are overbearing and unnecessary. It should be up to the citizens to be responsible for themselves when it comes to substances and weapons. If the government chooses to use propaganda and lies to trick its citizens into unarming themselves or fear plants, then it is up to the citizens to ignore the misinformation and go against the government.

      I'm surprised the "Weepy sentimentalists" have so much power. I'm a pretty decent observer, and have noticed that people generally don't think for themselves and are simply charged up by their surroundings. I don't believe "vegans" or "PETA fanatics" would be a thing if it wasn't for the media and fake research constantly pumping this misinformation or disinformation out into the universe. It all feels like "Big Brother", and the objective is to turn people into emotional, unthinking, illogical, fat, weak, idiots. They want people to constantly be tuned into the propaganda machine and they come up with new "wars" daily against their own population until there is only one synonymous population left and they all think the way the television instructs them to think.

      I came to this conclusion when I was watching Rebel Media and how they explained the craziness that was the "Women's March". These sharia law people got WOMEN to march with them for an ambiguous reason (i.e. some were there for women's right they already have, some were against Trump, some were for the "wage gap" that doesn't exist), and most people thought it was a normal healthy women's march. These people are so screwed up by the media and political puppet masters, that I don't even think they have the ability to voice a non-parroted position about anything.

      Bringing this back to the point. I don't believe these people are in control of their own brains anymore, and their emotional passion driven by media and fake news has presented us with a new population of lunatics. It all feels like mass government control and distraction techniques, and the side effects are things like higher taxes and stupid regulations on drugs and cigarettes.

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