If you’re like me, you grew up around a lot of people who sold anything from Mary Kay to Pampered Chef to Lula Roe. You may have been dragged to “parties” your mom’s friend was having in order to sell more of their product, you may have been direct messaged on Instagram by a girl you haven’t spoken to since middle school asking if you’re interested in joining their team, or maybe you’re just now hearing about this. Either way, this is probably going to make you think a little harder about what the implications of all of that are.
Before I start writing this, I want to make one thing clear: this not an article to mock or make fun of people who get involved with direct sales, but rather to state the facts and inform people about what makes Multi-Level Marketing so horrible. If you are interested in learning more about the subject, Jane Marie takes an investigative deep-dive into Multi-Level Marketing companies in her podcast, The Dream which can be found on Spotify, Apple Podcasts or Stitcher.
So, let’s get into it! To start, what is a Multi-Level Marketing company? According to the Federal Trade Commission, MLM companies are characterized by person-to-person retail sales and the recruitment of people who will become distributors themselves. For example, say my friend Amelia were to (hypothetically) start selling Jennaware (a makeup company I just made up). Amelia can make money in two ways. She can either sell Jennaware products to me directly, or she can ask me to become a distributor in her downline. A downline is basically all the people Amelia recruits, the people they recruit and so on. Amelia receives a percentage of all the sales that her downline makes. Conversely, Amelia has an upline (the person who recruited her and above), which would be all the people who get a percentage of the money Amelia and her downline make. It’s easiest to think of uplines and downlines as a pyramid structure, sort of like a family tree.
At first, this doesn’t seem like such a bad deal. But MLMs also require distributors to pay a baseline fee to receive products and promotional materials to help them make sales. They have to meet certain quotas of products sold in order to stay in the business, which often leads to people buying their own product. You can see how this might put someone in debt pretty quickly.
To return to my hypothetical, let’s say that Amelia has recruited me, and I have bought into Jennaware. I paid the baseline fee of $300 to get the products and promotional materials. I’m having a hard time selling and recruiting people at first, so I decide to pay to get more training and promotional materials, maybe another $200. I also have to meet certain quotas in order to be eligible to get paid or get bonuses. But because I’m struggling to sell my product to others, I just purchase more than I can use or sell in order to meet that quota and be able to continue selling. Before you know it, I’m in debt trying to sell Jennaware, but I’m still trying so hard to get other people to join my downline in hopes that I can get a percentage of their revenue. Plus, I don’t want to give up. I want to be an entrepreneur and make my own money and feel successful.
I’m going to end my hypothetical there, but it can get worse. Unfortunately, it’s really easy to get caught up in the world of MLMs, especially when everyone involved is telling you that you can do it, you can work for yourself, you can be successful in direct sales. It’s the American dream.
To end my little spiel, here are a few things to ponder:
- According to this Vox interview with Jane Marie, about 99% of people involved with MLMs lose money.
- MLMs primarily aim to recruit women, especially those who are low-income or unemployed. They advertise being your own boss, being an entrepreneur, making friends, and working from home as if it’s going to be fun and easy.
- MLMs often offer the prospect of winning some grand prize for making lots of sales (i.e. the Mary Kay Pink Cadillac), but people seldom make the number of sales required to win those things.
- Being a distributor is generally an unsustainable way to make income. At some point, you will have sold to all the people who want to buy something, and you will be losing more money than you are making in the long run.
All of this being said, don’t treat the people in your life who work for MLMs like they are stupid. Maybe just tell them the facts, get them to listen to The Dream, or ask them to read this article.
All images courtesy of Jenna Ward.
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