Founded in October 2016, the LuLaRoe Defective/Ripped/Torn Leggings and Clothes Facebook group was initially intended for posting pictures of holey leggings. Now it has more than 30,000 members and has become a place for women to share pictures of ugly merchandise, screenshots of vicious consultant behavior, and to upload documents from the numerous lawsuits against LuLaRoe. (At last count, there are nine ongoing legal battles.)
That sense of camraderie often starts with a love of the product. Jen Marie Rowsell, a 33-year-old Canadian arachnologist-turned-Arbonne area manager who now lives in Texas, wasn’t even interested in joining the business at first — she fell in love with Arbonne’s product line, which claims to be pure, safe and effective. But, much like the other women FLARE interviewed, she quickly realized that if she was excited about about Arbonne products and telling her friends anyway, it only made sense to actually sell them herself. And that’s when she really began to benefit from the company’s famously tight-knit sorority.
On July 1, LuLaRoe instituted a much fairer Leadership Bonus Plan (pdf) that awards compensation based on sales to consumers rather than wholesale purchases. But there are still thickets of obscure rules: Leggings only count as half a piece; your bonus is based on your downline’s wholesale value of sales, not their retail value; and your team’s per-piece average needs to be at least $30, meaning that if you want to get your bonus, you can never sell your wares for discounted prices.
For any company selling a product the concepts of marketing and sales are very important as they can mean the difference between success and failure. While they are often used interchangeably or grouped together they are two different concepts … Read more
At this point, even if she had quit the next day without selling a thing, LuLaRoe would have made its profit. Kayla acquiesced on Jan. 1st, 2016—and was then immediately encouraged by her upline to buy an additional $1,000 in Valentine’s Day-themed clothing. (Brooks says this tactic is called “channel stuffing” or “inventory loading.”)
Jump up ^ Berkowitz, Bill (January 28, 2009). “Republican Benefactor Launches Comeback”. Inter press service. Archived from the original on September 12, 2010. Retrieved July 11, 2009. (in reference to BERR vs Amway (Case No:2651, 2652 and 2653 of 2007) in point of objectionability”c”)
In April, Stern quietly put all her inventory on sale for 25% off, paid off her credit-card debt, and got out. She’s an example of someone who rode the wave and managed to leave before wiping out entirely. She has now started a new company selling leggings using the same skills she learned from selling LuLaRoe—without the binding policies, and with an added charity element. She’s one of the fortunate ones. But what about the rest?
In 1991, some distributors in the MLM FUND AMERICA began to produce their own, improved recruitment material. They were summarily fired, which did not please them since many of them were founding members who had “gotten in early.”
Any business must carefully consider supply and demand. For example, if the ReVo Corporation thinks that it will have a full-fledged fad on their ovoid sunglasses next summer, perhaps they should plan to build and distribute, say, 10M units. This involves gearing up factories, setting up distribution and dealer networks, and carefully managing the inventories at each level so that ReVo will still have credibility with their distributors, retail outlets, and the public the following year.
These are only a couple of examples of people who went from struggling with their finances to being financially secure, and continuing to make a fortune. There are hundreds of more examples of people who have literally gone from rags to riches through Network Marketing. However, it should be emphasized that these people did not just sit back and collect money, they had to put in the hard work and dedication necessary to grow their network of sales, as well as doing the work required to get the word out and represent their companies.
Dr. Jon Taylor’s website includes surveys of MLM tax preparers (do they really make money?), answers the question of “odds of success” at MLM vs. gambling (hint: you are way better off in Las Vegas,) and provides a history of MLM at http://www.mlm-thetruth.com
But we have reason enough to know, having read this far, why the distraction is needed. Unbridled greed suspends good judgment. When the eyes gloss over in a materialistic glaze, common sense is a stranger.
With all this, not to mention numerous high-profile failures and legal troubles, it’s no wonder MLMs have a poor reputation with consumers. Nevertheless, in the USA alone, MLMs had a combined total of more than 20 million suckers members and swindled generated more than $36 billion in revenue in 2015. The situation is worse in emerging economies in regions like Latin America, Africa and Asia.
In a normal sales business, you are hired and promoted based on a holistic assessment of a variety of factors: one’s character, temperament, and contribution to the company and its profitability. In an MLM, there are no qualifications to join and you advance based on one factor alone: recruitment. The problem is that as the market saturates at an exponential rate, the pool of potential new recruits rapidly dries up, and new distributors must sink lower and lower and engage in steadily shadier and more desperate practices to build their downline. Far from being the behavior of “just a few bad apples,” as the MLM industry would have you believe, this practice is encouraged and rewarded by a system that prioritizes raw recruitment numbers above all else. This virtually guarantees that the ones who make the most money in MLM are the ones with the fewest scruples – which is unsurprising, given point #6…
Jump up ^ “Hong Kong multi-level marketing plan needs closer look (editorial)”. South China Morning Post. October 31, 2013. Archived from the original on December 8, 2015. Retrieved November 26, 2015.
Two-tier: Participants are paid based on the direct traffic or sales they refer to a merchant or its site, as well as the direct traffic or sales generated by the affiliates who joined the affiliate program via their recommendation.
“One of the unique facets of this business is that the victims are also perpetrators,” Brooks says, speaking generally of MLMs. “You’re trained to recruit your friends and family and neighbors.” He points out that when you onboard someone underneath you, especially if they live in your town or are in your friendship group, you are essentially creating a competitor. It’s as if you open a Subway sandwich shop and then encourage your neighbor to open a Subway right next door—and everyone is already sick of sandwiches.
“Retailers should absolutely never put their personal financial situation at unreasonable risk to establish or operate their retailer business. Period,” Lyon says. “If any retailer is encouraged to do that, we do not support it.”
“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.”
Sarah Stern, a stay-at-home mom in southern Florida, signed up with LuLaRoe in March 2016 after receiving a glowing review from a friend. “She told me that they have a cult following, the clothes sell themselves, and it’s under 10,000 people now, so you want to get in while it’s on the ground floor,” she says. Stern joined her friend’s LuLaRoe Facebook page and saw women fighting in the comments to buy beautiful leggings and dresses. She showed her husband, a VP of sales for a consumer-products company, the profit margins, and he told her to go for it.
the upline/downline: a normal franchise model is flat, and all franchisees deal with corporate headquarters or a regional manager for supplies, point-of-sale materials, and the like – in MLM you deal directly with who recruited you (your “upline”) and in turn manage those directly underneath you (your “downline”) in a weirdly feudal hierarchy
Jen Donald first heard about Arbonne a few years ago. A dental hygienist in Oakville, Ont., she was in the middle of scaling a patient’s teeth when she noticed her amazing skin. When Jen asked about her beauty regimen, her patient raved about products from Arbonne, a health and beauty direct sales company that claims to use a botanically based formula and premium ingredients. (Though not everyone agrees — nutritionist Meghan Telpner believes Arbonne’s marketing materials count as “healthwashing.”) Donald began buying Arbonne products, which range in price from $44 for cleansers and $88 for night cream to $364 for the company’s complete suite of anti-aging products, from a friend who had recently joined the company, but never really considered signing up as a salesperson herself.
Jump up ^ Jeffery, Lyn (March 21, 2001). “Placing Practices: Transnational Network Marketing in Mainland China”. In Chen, Nancy N. China Urban: Ethnographies of Contemporary Culture. Duke University Press. pp. 23–42. ISBN 9780822326403. Archived from the original on April 22, 2016.
Jump up ↑ News, A. B. C. (December 16, 2017). “Former NXIVM member says she was invited into a secret sorority, then branded”. http://abcnews.go.com/US/nxivm-member-invited-secret-sorority-branded/story?id=51617201. Retrieved February 10, 2018.
Draw up a business plan. When you have a few potential companies in mind, write out your plan for building and expanding your business. Even before you’ve officially aligned with a company, it helps to have this plan figured out early. Thant way you can hit the ground running when you do eventually start at a company. Keep these things in mind when designing a business plan:
Often the only way to make these sales is to recruit people under you (making commission off their starter kits) or to buy products yourself. Otherwise you’re left trying to sell your products to friends, family, mums at the school gates, and anyone you come into contact with (one of the reasons why some of the more pushy/desperate MLM reps get a bad reputation).
The Times: “The Government investigation claims to have revealed that just 10% of Amway’s agents in Britain make any profit, with less than one in ten selling a single item of the group’s products.”
Yes, some people do make money from MLMs. But most appear to just learn a very expensive lesson. This is why billionaire investor, founder of Pershing Square hedge fund management company and philanthropist Bill Ackman has put a short bet of US$1 billion on Herbalife, as featured in Betting on Zero.
While participants’ movement up the pyramid of an MLM can be accomplished in theory, and indeed this is one of the distinguishing factors between MLMs and traditional pyramid schemes (besides featuring actual sales of products or services), said upward movement is so extremely improbable as to render it practically impossible, despite all efforts and investments of time and money by a participant.
Where is the “switch” that can be flipped in an MLM when enough sales people are hired? In a normal company a manager says, “We have enough, let’s stop hiring people at this point.” But in an MLM, there is no way to do this. An MLM is a human “churning” machine with no “off button.” Out of control by design, its gears will grind up the money, time, credibility, and entrepreneurial energy of well-meaning people who joined merely to supplement their income. Better to just steer clear of this monster to begin with.
“A statistical analysis of income disclosures made by 10 major multi-level marketing (MLM) companies… reveals that, on average, 99% of all participants received less than $10 a week in commissions, before all expenses.”
Many LuLaRoe Facebook groups have the word “addiction” or “addicts” in their titles: Christine’s LuLaRoe Addicts Anonymous, LuLaRoe Addicts, LuLaRoe Addiction VIP Boutique. It’s supposed to be a joke, but it’s truer than many women realize.