Starting in fall 2016, customers started reporting that LuLaRoe’s “buttery soft” leggings were falling apart. That figure may be low because LuLaRoe products used to be so hard to return. For a long time, angry customers couldn’t send back faulty products directly to LuLaRoe: They had to return them to the consultant they purchased them from. Customers are instructed to hand-wash leggings inside out and air-dry them, but that hasn’t stopped the company from getting sued by angry consultants alleging that the leggings are poor quality. Some LuLaRoe retailers have even taken to fat-shaming customers, telling them if the leggings rip, it’s their fault.
They will claim to have made “new friends,” most of which are MLMers or new acquaintances who could be considered “future prospects.” The shallowness of these “new friends,” the stilted conversations among the “old friends,” and the embarrassment, in general, for what seems clear to everyone but the MLMer go unnoticed. Callousness sets in; standards are lowered.
“I realized if they’re making the money that they say they’re making all over their Facebook pages and how it’s life changing, why can’t it change my life?” Kayla assumed she could just buy a couple of hundred dollars’ worth of leggings to get started, but she found out that she was required to buy a startup inventory package, which costs between $4,900 and $6,000. “Initial inventory packages are designed to provide sufficient inventory to help retailers succeed,” says a LuLaRoe spokesperson. “If a retailer can’t afford it, a retailer should not buy it.”
Multi-level marketing is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits’ sales; the recruits are known as a distributor’s “downline.” All distributors also make money through direct sales of products to customers. Amway is an example of a well-known direct-sales company that uses multi-level marketing.
“As of the end of first quarter 2017, approximately 90% of all retailers who started an independent fashion retailer business since the time LuLaRoe was founded still maintain their businesses today,” says a LuLaRoe spokesperson. “We are very proud of this figure.” In part due to this high retention rate, the market is becoming saturated, both online and off. Multiple retailers now often live within a few blocks of each other—and how many pairs of leggings does one neighbor really need? “They’ve flooded the market with so many consultants, nobody is making money, and everyone is so stressed out,” Sophie says. “Now it’s like, ‘Oh, there’s another consultant down the street.’”
Many have left high-paying jobs to “pursue their dreams” in an MLM. Having been conned so dramatically, they do not easily admit defeat. It seems easier to cling to the bad dream in an increasing cycle of desperation to make the MLM work against all odds. “Losers” at the bottom congregate into support groups, perhaps spinning-off another MLM where they can be “boss.”
I chose the oils company that I will recommend next week because I believe it’s a solid oils company with unwavering commitment to quality and purity. As with everything on my blog, if I can make money appropriately from my recommendations, I will do it. This is standard blogging practice.
For most people, thankfully, the MLM experience usually ends in very quick financial failure and is then sidelined. Two possible responses are: 1) being embarrassed about participation, or 2) becoming even more intractable when the MLM has failed. You will find the latter chasing after the latest “get rich quick” scheme with similar results. “If we could have just sponsored so and so–they have so many friends–we would have made it.”
In 2014, two MLM companies selling essential oils, Young Living and doTerra, were issued warnings by the FDA for falsely claiming their products could protect against ebola, autism, Parkinson’s Disease and other illnesses.
Walter J. Carl stated in a 2004 Western Journal of Communication article that “MLM organizations have been described by some as cults (Butterfield, 1985), pyramid schemes (Fitzpatrick & Reynolds, 1997), or organizations rife with misleading, deceptive, and unethical behavior (Carter, 1999), such as the questionable use of evangelical discourse to promote the business (Höpfl & Maddrell, 1996), and the exploitation of personal relationships for financial gain (Fitzpatrick & Reynolds, 1997)”. In China, volunteers working to rescue people from the schemes have been physically attacked.
Honest confession: until we recently we thought MLMs were fairly harmless. In fact, we’ve even unknowingly profiled them on our site (we weren’t aware some businesses were MLMs). While they didn’t particularly appeal to us, we didn’t see the harm in them.
In an October 15, 2010 article, it was stated that documents of a MLM called Fortune reveal that 30 percent of its representatives make no money and that 54 percent of the remaining 70 percent only make $93 a month. The article also states Fortune is under investigation by the Attorneys General of Texas, Kentucky, North Dakota, and North Carolina with Missouri, South Carolina, Illinois, and Florida following up complaints against the company. In 2013, the FTC’s court-appointed receiver determined that Fortune was nothing but an illegal recruitment MLM and that least 88 % of the members did not even recoup their enrollment fees and that more then 98% had lost more money then they ever made. Refund checks mailed out totaled over $3.7 million.
For more, see the Frequently Asked Questions, Additional Points and Rebuttals section at http://www.vandruff.com/mlm_FAQ.html E-Mail the author of this article, Dean Van Druff, at end of this section.
Interestingly, the issue of supply and demand is what brought the USSR to its knees. By design, the Soviet government tried to macro-manage supply, where bureaucrats would decide how many potatoes were needed, how much toilet paper, etc. Assuming these bureaucrats did the best they could, unfortunately their efforts to deliberately manipulate the control “knob” of supply and demand was not good enough. Notwithstanding their good intentions, they were usually wrong, which created huge shortages and surpluses, and led to a massive economic collapse.
Jump up ↑ “Women say they were branded and traumatized by secret group’s doctors”. CBS. https://www.cbsnews.com/news/nxivm-women-say-they-were-branded-traumatized-group-doctors/. Retrieved 13 November 2017.
For most people, this means if we are going to be materialistic or greedy, we would rather not be obvious about it. Thus, Madison Avenue has subtle, highly polished ways of appealing to these vices without being heavy handed. We don’t mind so much… as long as it is “veiled.” This hypocrisy, while sad, is the status quo. So, Madison Avenue is trying to be ever more subtle in appearing not to be manipulating our immoral “bent” towards greed and materialism.
One of the main issue with people who are against Network Marketing is that there is a potential for abuse by unscrupulous businesses that take advantage of them, pocketing their money and returning very little in the way of dividends to the investor. One of the key areas of abuse with Network Marketing is what is known as the ‘Pyramid Schemes,’ so it would be right at the outset to explain what Network Marketing is and the difference between legitimate Network Marketing companies and Pyramid Schemes.
MLM companies have been trying to find ways around China’s prohibitions, or have been developing other methods, such as direct sales, to take their products to China through retail operations. The Direct Sales Regulations limit direct selling to cosmetics, health food, sanitary products, bodybuilding equipment and kitchen utensils. And the Regulations require Chinese or foreign companies (“FIEs”) who intend to engage into direct sale business in mainland China to apply for and obtain direct selling license from the Ministry of Commerce (“MOFCOM”). In 2016, there are 73 companies, including domestic and foreign companies, have obtained the direct selling license. Some multi-level marketing sellers have circumvented this ban by establishing addresses and bank accounts in Hong Kong, where the practice is legal, while selling and recruiting on the mainland.
Whichever oils company you decide on, one of the best decisions I made was to take oils with me wherever (almost) I go. This carrying case is the perfect size to take while on the go or traveling so you always have your oils with you should the need arise.
Business failure of any type is traumatic on the relationships involved, but in most small businesses there is at least the chance of success. And this is never the case in an MLM, unless “success” can be defined as profiting off of the failures of others.
Using this model, LuLaRoe sellers busted out of the traditional confines of heritage, Avon-style MLMs. One of the reasons Avon had so much success in the 1960s was that it was the easiest way for suburban Americans who were an hour away from the closest department store to sample and buy makeup. Convenience won out. Now Facebook can provide their contemporaries with that same easy purchase availability from the comfort of their couches.
But having devotion to a company despite evidence that they are not telling the truth or that their products are not superior taints the reputation of all MLMs and their reps. It’s frankly uncalled for.
Many readers will share the experience of observing MLMs divide families, friends, churches, and civic groups. Lifelong friends are now “prospects.” The neighborhood is now “a market.” Motives change, suspicions rise, divisions form. The question is begged: “Is it worth it?”
Read your contract carefully. Don’t sign anything right away. Take some time to read over and understand the entire contract. You may even want to consult a lawyer or accountant to make sure you’re getting a fair deal and that the company is legitimate.
^ Jump up to: a b Merrilees, Bill; Miller, Dale (1999). “Direct Selling in the West and East: The Relative Roles of Product and Relationship (Guanxi) Drivers”. Journal of Business Research. 45 (3): 267–273.
Jump up ^ Vander Nat, Peter J.; Keep, William W. (2002). “Marketing Fraud: An Approach for Differentiating Multilevel Marketing from Pyramid Schemes”. Journal of Public Policy & Marketing. 21 (1): 139–15. doi:10.1509/jppm.22.214.171.12403.
MLMs disproportionately flourish in suburban and rural America: According to LuLaRoe’s retailer map, it only has 10 consultants in all of Manhattan, which has a population of 1.64 million. By comparison, Pueblo (Colorado) has the same amount for its population of 110,000, St. George (Utah) has 12 sellers to its 82,000 residents, and Idaho Falls (Idaho) and Casper (Wyoming) both have nine sellers servicing each’s 60,000 citizens. In 2016, the US Census Bureau stated that the median rural household income is 4% lower than it is for urban families, and income inequality is also higher. Job growth in metropolitan areas has far outpaced that in rural areas since 2008, and the job market in these regions has shrunk 4.26% in the same time.
Founded in 2012 by a Mormon mother, Deanne Stidham, LuLaRoe is named after her three grandchildren, Lucy, Lola, and Munroe. As the company lore goes, she designed clothing for her daughter and had so much success selling copies to the parents of her daughter’s friends that she hired consultants to sell for her. In just four years, her company’s range of leggings, dresses, shirts, and other wares generated $1 billion in sales, making it one of the largest MLMs in the US; between October 2016 and June 2017, it claims it sold nearly 40 million pairs of leggings. Mary Kay, one of the oldest and most successful MLMs, had $4 billion in sales in 2015.
* Why 10 years? Because that amount of time really seems to matter. For example, according to research, since 1956 thousands of different MLM, Multi Level, or Network Marketing companies have opened their doors; and to date only +/- 50 MLM companies have found a way to celebrate their 10th anniversary and still remain in business today. Now, to be completely fair, we should also point out that each and every company on our list was at one time a start-up company too.
Regardless of all the vehement denials, MLMs are all to some extent pyramid schemes, and pyramid schemes are illegal. Sure, some are “getting away with it,” but so did the Mafia for decades. It is hard to stop a juggernaut, especially one that has taken such pains to look legitimate and misunderstood, that is highly organized, and that has so much money from its victims to propagandize, lobby, and defend itself. And so the exploitation goes on.
This is a list of companies which use multi-level marketing (also known as network marketing, direct selling, referral marketing, and pyramid selling) for most of their sales.
Look up CEO’s and other company leaders. Keep the same things in mind as when you investigated companies. Is the company leadership reputable and law-abiding? If company leaders have been accused of carrying out scams or have had legal trouble, you may want to avoid this company.
Though emphasis is always made on the potential of success and the positive life change that “might” or “could” (not “will” or “can”) result, it is only in otherwise difficult to find disclosure statements (or at the very least, difficult to read and interpret disclosure statements), that MLM participants are given fine print disclaimers that they as participants should not rely on the earning results of other participants in the highest levels of the MLM participant pyramid as an indication of what they should expect to earn. MLMs very rarely emphasize the extreme likelihood of failure, or the extreme likelihood of financial loss, from participation in MLM. MLMs are also seldom forthcoming about the fact that any significant success of the few individuals at the top of the MLM participant pyramid is in fact dependant on the continued financial loss and failure of all other participants below them in the MLM pyramid.
Mannatech, a dietary supplement MLM notable for featuring future US Presidential Candidate Ben Carson as a spokesperson, later accumulated more than $15 million in fines and settlements for falsely claming their products could cure cancer, diabetes, autism, AIDS, and other diseases.
To be fair, MLM isn’t the business style for everyone. You do have to look at your personal network as a potential customer base, which requires a delicate balance — one that not everyone enjoys. That was the case for Nadia Manes, a 34-year-old from Oakville, Ont., who recently dabbled in selling Arbonne. “Did I like the product? Yes,” she says. “Did I like harassing people and convincing them to sign their paycheck over to me so they can get a new face wash? Absolutely not!”
Manes invested about $4,000 into her Arbonne business, which she maintained for a year. By the end, she’d only made $600. “I had vendor shows, so I had to purchase product for display. Obviously, I used the products that didn’t sell… but I wouldn’t have initially bought them,” she says. “I also felt pressure from my upline to purchase more to make the business successful. It was constantly said that you should have the latest products and try everything before you sell it.”
You can definitely generate a hefty income through Network Marketing, but ONLY if you are willing to put in the effort to generate leads, train others, and make it your focus to get the word out. Network marketing is ultimately not a ‘get rich quick’ scheme, as it requires an ample amount of work and effort to make it work. However, if you are willing to put in the work, it could be the door to your financial success.
But even if LuLaRoe were to go out of business tomorrow, another MLM pushing scented candles, jewelry, or kitchen products would rise up to take its place. “The regulators cannot keep up with these companies,” Brooks says. “There are so many of them. When one company blows up, the founders and high-level distributors move on to another company, and it goes on and on.” At best, LuLaRoe is a company that grew too fast; at worst, it consciously preyed on business-naïve communities eager for a sense of self-sufficiency.
Stern jumped in during the heyday phase of a MLM when the people at the top grew rich, and quick. By the start of 2017, nine months after Stern joined, LuLaRoe was pushing 80,000 independent retailers. According to interviews with several consultants, this is also the time when sales suddenly became tougher: The hundreds of thousands of ravenous customers who once clamored to buy leggings from 10,000 consultants flipped in less than a year to eight times that amount selling to just a fraction of the clients. The scales began to tip.
Build new leads. In network marketing, leads are potential customers. You’ll need to keep finding new leads if you want to keep making money. There are various ways you can find new leads, and you should use multiple strategies to attract the largest market possible.