We all know how they start. “Hey Girly!” The Instagram direct message from a girl you went to high school with reads, “Are you interested in being your own boss? I wanted to reach out to offer you an exclusive business opportunity!” Who then goes onto describe whatever skinny tea, beauty product, or essential oil a company is barely paying them to promote.
Who hasn’t seen a similar-sounding DM appear in their inbox before? Can’t most of us not make it through the first few sentences before rolling our eyes and leaving it on read? What – or maybe who – makes companies like Younique, LuLaRoe, and Herbalife so popular?
Multi-level marketing (MLM) business models are described by the Federal Trade Commission (FTC) as, “Businesses that involve selling products to family and friends and recruiting other people to do the same.” Think of it like the modernization of the door-to-door Avon lady of the 1950s that has manifested itself into contacting anyone you can reach through social media. Those involved in MLMs can make money by either selling the actual product or recruiting new distributors to make commission off of the recruits’ future purchases and sales. The only difference between MLMs and illegal pyramid schemes is that pyramid schemes’ main promise of income is just through acquiring more distributors under you without selling any actual product, while MLMs advertise both means.
However, the FTC says that people who do join MLMs “make little to no money. Some of them lose money.” The line MLMs are tip-toeing to ensure they aren’t an illegal pyramid scheme seems to be as thin as a circus trapeze.
This trend of people being targeted by MLMs is not uncommon. When almost the entirety of the sales teams that make up these companies are average women who promote being your own boss, making your own work schedule, and the promise of money, it can be tempting for those who are desperate for financial independence.
These ‘promises’ MLMs sell are more like pipe-dreams when it comes to how much money people actually make. About 63% of participants in MLMs signed up to make money off of selling a product, while only a quarter of those made profit, according to a survey done by AARP. Furthermore, in this 25% of people, 53% of them made less than $5,000.
In that same survey, 41% of participants said they felt the MLM they joined misled them in describing the possible money they could make. It seems that MLMs’ promises of achieving financial success through joining are unlikely at best and a sinister scam at worst.
One of the reasons MLMs cannot promise monetary success is because of the money one must spend to even participate. MLMs can be seen as “pay-to-plays,” in the way that people must order the product themselves before they can sell it to others. In fact, a scholarly study conducted for Consumer Awareness Institute states that MLMs can cost participants a minimum of $25,000 to find success in the company. These payments come in the forms of buying products to sell, incentive programs (which there are A LOT of in MLMs), travel, technology, among others. However, 66% of participants invest less than $1,000 – a potential reason to explain why the average MLM participant turnover rate is so high.
At least for Gen Z, I think the majority of us have meme’d MLMs so often that we are almost immune to their tactics. But, it’s harmful and just incorrect to believe that the rest of the U.S. thinks this way as well. It’s reported that 1 in every 13 Americans have participated in a MLM and there’s about 6.2 million Americans in the MLM industry. So, in a bustling industry with a very seedy underbelly – who are the people involved in multi-level marketing?
The biggest markets MLM companies tap into are those in health & wellness and household appliances such as Tupperware. With this in mind, it’s easy to see how there would be more interested women than men applying – though I must inject with a personal anecdote of seeing many boys in my high school try to sell Cutco knives with little to no success. In the aforementioned AARP study, it was found that “Current and former MLM participants tended to be well-educated, married, working as a paid employee, and living in a house owned by a person in their household.” It was also found that MLM participation was most popular in those aged 20-39, with the average starting age being 29.
Looking at these demographics – it’s not uneducated, homeless, or impoverished communities getting involved in MLMs. The largest reason for joining a MLM, per the study, was 40% of people with full-time jobs wanting more income. Stay-at-home parents made up 16% of the remaining responses, with students and part-time workers tagging along with around 11% each.
To explain this, we should acknowledge that a common way for people to be introduced to MLMs is through their friends or family trying to recruit or sell to them. It was shown that a third of participants were introduced through a friend and 12% through a family member. Maybe because the majority of participants have little to no prior sales experience, but it seems especially cruel for these MLMs to advise participants to utilize (or brutalize, perhaps) their already-established relationships with those who they care about and trust as a means to make money and get more recruits.
Success in multi-level marketing relies a little on the product you sell and a lot on the clientele you bring in as new distributors. So, you make a pyramid by having upline and downline workers – but it’s not a pyramid scheme because they also sell products, duh!
We all want to be America’s Next Top Girl Boss – I get that. But, I would advise everyone who even thinks about responding to the “Hey Girly!” DM in your inbox to truly weigh out the potential risks and benefits of joining. To tell you the truth – you’re probably gonna spend more money buying LuLaRoe leggings than you’ll make trying to sell them off and everyone will probably end up blocking you after too many proposed “special business opportunities.” Save your sanity and your savings by staying far, far away from MLMs, as there are much more legitimate jobs that you do not need to pay for.