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MLMs, or multi-level marketing companies, are extremely common and hard to spot if you don’t know what you’re looking for. MLMs are often associated with pyramid schemes due to the similar structure. While pyramid schemes are illegal businesses in the United States, MLMs walk a thin line when it comes to how ethical they are.

What is MLM?

Multi-level marketing is a business structure where there are a few top dogs, who have a downline, and the downline has a downline, and so on. These top dogs were either the pioneers of the brand or got extremely lucky with the business model. MLMs have to sell a product, otherwise, they would be illegal pyramid schemes. These companies are selling their products, but the recruits, their “boss babes,” are the real moneymakers. Pampered Chef parties, Rodan + Fields live events on Facebook, and the classic Mary Kay lady going door to door are all examples of multi-level marketing.

Grace’s Experience

My cousin Grace actually was involved with one of the biggest MLMs around, Worldwide Group, functioning for Amway. Worldwide Group provides training and support to help its distributors sell more product and recruit more members. There is a monthly fee of $55, as well as the minimum amount of Amway products distributors need to purchase each month to meet their quota. The majority of distributors lose money on the deal, even though it’s marketed to them as a way to make “easy money” or “passive income.”

In my cousin’s situation, she was one of the lucky ones. She was recruited by her friend, who was recruited by the son of two head honchos within Worldwide Group. This string of superiors, known as an upline, all make a commission off the people under them. So the more people you have in your downline, the more money you make. Although Grace had a very short upline and had support from people who did get rich off this business, she still was spending over a thousand dollars each month just to stay “active” as a distributor. The amount of money she was making off of selling products was not enough to offset the cost of purchasing products, so she was quite obviously not profiting the way they said she would.

How They Operate

[bf_image id="xv7ctjk9mc5n7zbbmfn8twcc"] Companies like Amway, Herbalife, Young Living, and Monat all use this pyramid scheme-esque business model. These companies encourage people to recruit, recruit, recruit. The name of the game is growing your downline, not selling the product. The push to recruit is so strong that distributors are told to sell to friends, family, even coworkers. By “sell” of course I’m talking about the product, but more so the company itself. You may have a friend or even experienced first-hand someone selling their brand saying, “You can be your own boss” or “You can set your own schedule, it’s a perfect side hustle!” This is very misleading because to actually make any sort of money off the business, distributors need to put blood, sweat, and tears into it.

MLMs target low-income individuals, specifically single women, with little understanding of business practices. Recruiters will use every line in the book to grow their downline. MLMs also look for people with a strong support system because these individuals have more “business opportunities” by selling to or recruiting people they interact with on a day to day basis. These people are typically part of tight-knit communities and as such are likely to produce more recruits or, at the very least, more buyers (i.e., friends and family purchasing items out of a sense of community or social obligation).

Freddie’s Experience

My good friend Freddie Ham, who was also involved with Amway told me “Something Worldwide Group did very well is using language that echoes the dreams of their targets. They call their recruits "entrepreneurs" and "business owners" and encourage them to talk about themselves that way. The allure of suddenly being able to say "I'm a business owner" or "I'm an independent consultant" for just a small down payment on goods is very strong. People, especially Americans, connect status to independent entrepreneurship and want to be viewed as "bosses" who are out in the world making their own way, running their own lives, and getting their slice of the American dream.” These self-titled “boss babes” are barely making enough money to meet their minimums, let alone turn a profit. This is not entrepreneurship, it’s a pyramid scheme hiding behind the façade of direct sales.

MLM companies have one goal: to recruit as many people as they can to make as much money as possible. Knowing how these multi-level marketing companies operate and recruit, it is much easier to spot them. Next time you have an old friend from high school hit your Instagram DMs saying “Hey girlie…” be prepared to encounter an MLM recruiter in full force. Let us know over on our Instagram if you have ever experienced this before!

XOXO HC

HC CWU Events and Marketing Director / Personal Financial Planning & Entrepreneurship / Cancer Sun
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