“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.
Shortly after, Stern began to pull in anywhere from $18,000 to $24,000 a month in sales. She was working 80-hour weeks with seven women selling underneath her. “The moment I woke up, I was taking pictures and answering questions,” she says. “My husband had to do the food shopping. My daughter has dance one day a week. While she was dancing, all the other moms would talk, but my face was always in my phone. I was uploading albums, or I was part of a multi-consultant sale.”
Eric Scheibeler, a high level “Emerald” Amway member: “UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, ‘only about 90 made sufficient incomes to cover the costs of actively building their business.’ That’s a 99.7 percent loss rate for investors.”
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.
Traci Costa, Chief Executive Officer, President and Director of Peekaboo Beans Inc., can speak to that disparity. Not long after Costa founded her company, a kids’ clothing retailer, in 2005, she realized she needed to rethink her sales strategy. She’d tried the boutique route, but found the experience impersonal, and she didn’t feel like she could compete in the online space. That left only one viable option: direct sales.
During the Mary Kay heyday in post-war America, consultants would invite their friends to in-home parties (think Tupperware) or go door-knocking to sell their products in their neighborhood (think Girl Scouts). However, in the digital age, the game has changed. Consultants who had previously run out of doors to knock on or neighbors to invite over had to put their goods in a car and drive to the next town for fresh clientele. Now they just form a group on Facebook, fire up a Live video stream, and sell to eager customers across the country, like their own miniature Home Shopping Network.
Give your team members good commissions. By compensating your recruits well, you’re ensuring that they have a good incentive to sell. That way, they’ll earn more money for you and for themselves. It will also help keep them around longer, which is good for you- you want to keep talented sellers on your team so keep your business successful.
Another common practice is “channel stuffing” – requiring distributors to buy large minimums of company product, ostensibly for retail sale or for “personal use,” which serves to inflate sales numbers to give the appearance that an MLM is more sales-driven than it really is. However, the only support materials usually provided by their recruiter(s) are ones that promote the signing on of more new distributors. As a result, many a person out there has a closet full of Mary Kay cosmetics that they don’t need, and can’t sell. Type the name of any well-known MLM into eBay or Craigslist and you’ll see evidence of what becomes of that “investment” of “just a few hundred dollars” made in order to achieve new wealth and prosperity in ten hours a week from home.
So concerned, we felt the need to write this article, as we know mothers are a big target group for MLMs (read on to find out why). So if you are considering joining one, please do read this first – and forward to any friends tempted by promises of ‘income opportunities’.
“Let me tell you about an incredible ground-level business opportunity,” and you are invited to a house or to lunch for “a discussion.” Funny enough, you feel sick in your gut that there is some hidden agenda or deception. “Probably a multi-level marketing (MLM) organization,” you think. Suppose it is? Should you trust your instincts? Is there anything wrong with MLM?
“Retailers can generate a sense of excitement among consumers because the garments they purchase are unique to them,” says a LuLaRoe spokesperson. “Many retailers report that they use the unexpected nature of the shipment to build excitement among existing and new consumers for their new inventory. This also fosters a sense of cooperation among retailers as retailers will often refer consumers to other retailers to help consumers find the patterns that they seek.”
Or, you create opportunities to sell. For example, by starting a buggy fitness group for mums in your area and selling to/recruiting them while their guards are down (a strategy we’ve seen Herbalife reps use).
Regardless of LuLaRoe’s official policy, the selling community is rife with consultants strong-arming risky decisions with smiling faces. Emails outlining new policies are sent out to independent retailers directly, who then discuss the company’s communications between themselves. Directives for how to interpret rules are often filtered through Facebook groups by team leaders eager for bonus checks, leaving the door to miscommunication—and manipulation—wide open.
Scheibeler, a high level “Emerald” Amway member: “UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, ‘only about 90 made sufficient incomes to cover the costs of actively building their business.’ That’s a 99.7 percent loss rate for investors.”
There are many diverse opinions when it comes to Network Marketing. Some people will swear by Network Marketing, whereas others will swear Network Marketing is a scheme where only a few make money and the ones on the bottom of the tier make little to no money.
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.
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.
Apparently, it is difficult for gung-ho MLMers to see how they look from the outside. They can watch lifelong friendships unravel, churches and civic groups poisoned, the avoidance of friends and family, etc., and never see that MLM was the cause.
Jump up ^ Ryan (Editor), Leo; Wojciech, Gasparski (Editor); Georges, Enderle (Editor) (2000). Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. p. 75. ISBN 0-7658-0037-3.
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.
Stern was taught ways to unload her unwanted stock on unsuspecting buyers by her group’s leaders. “You have to be creative about how you sell it,” she says. Stern would bundle 10 pairs of leggings together—nine less desirable ones and one unicorn pattern—into “mystery sales,” where the first 10 women to comment “sold” would purchase a random pair, but only one would get the coveted leggings. She feels guilty about using this psychological gambling trick, but it worked.
Ami Chen Mills Shaking the Money Tree captures the “stink” of MLM pathology and culture most vividly. Hold your nose, and dive into major deja-vu at http://www.metroactive.com/papers/metro/10.03.96/cover/multilevel-9640.html
If you are a materialist, you only have to get over the cheekiness of the presentation. But if you do not wish to promote such ideas, if you consider them sinful, then this puts you at the focal point of a moral dilemma. Do you wish to be a salesperson for materialism?
“The community I’ve found within Arbonne is unlike any other I’ve encountered,” she says. “I previously worked in science/research/education, where there is a lot of job scarcity, competition and uncertainty. In our community, we all assist each other and lift one another up, as we have a common goal of sharing what we love.”
The main issue with MLMs is in the way they usually work. Rather than your profit coming from the actual products you sell, it comes from recruiting people into the business as sellers under you (your ‘downline’) and making commissions on their sales (and their downlines).
In some cases, of course, direct selling does replace full-time, salaried gigs. That was the case for Sarah Millar, a 25-year-old personal trainer from Ottawa who joined Stella & Dot because she wasn’t making a consistent enough income on her fitness biz. Since signing up in January 2016, she’s paid off her student loans, gone on two vacations and started saving for a down payment. (She and her high school sweetheart are aiming to buy a home this spring.)
NXIVM, a self-described MLM specializing in LGAT, turned out to be an abusive sex cult in which members signed themselves into sexual slavery and were branded with the founder’s initials.
All products and services have partial market penetration. For example, only so many people wish to use a discount broker, as evidenced by the very successful but only partial market penetration of Charles Schwab. Not everyone wishes to join a particular discount club, or buy gold, or drink filtered water, or wear a particular style of shoe, or use any product or service. No one in the real world of business would seriously consider the thin arguments of the MLMers when they flippantly mention the infinite market need for their product or services.
Jump up ↑ Danny Robbins (September 10, 2006). “Nobel Prize winners say sites falsely cite research”. Fort Worth Star-Telegram. Archived from the original on 2006-12-06. https://web.archive.org/web/20061206191858/http://www.dfw.com/mld/dfw/news/nation/15486298.htm.
In most MLMs you will have no choice. You are going to have to sit through meeting after meeting after meeting after meeting. You are going to be “motivated” to coerce your friends and family to hear “the pitch.” This is the way the “dream” is planted and fertilized. Get used to it.
And bigger companies are feeling the heat, too. Last year, Herbalife narrowly avoided being branded a pyramid scheme (the U.S. Federal Trade Commission instead opted to cite the company with a less-serious “unfairness” charge). But, it did have to pay a $200 million fine to the FTC and was required to restructure its operations so that it “tracked and rewarded sales that ended in purchases by consumers” — as opposed to rewarding employees for bringing in new recruits. And of course, there’s an oft-cited report by consumer advocate Jon Taylor, which claims that 99 percent of people who participate in MLM actually lose money on their businesses.
After a slew of complaints, LuLaRoe rolled out a Happiness Policy in April 2017, which states that customers can get a credit, cash refund, or replacement pair (but not the same pattern) for defective leggings purchased between January 2016 and April 2017. However, many are saying their refund checks have still not been issued, even though they were told they’d arrive several weeks ago.
Such a transparent appeal should make people suspicious. “Why the bait?” “Are they trying to ‘get my juices going’ so that my brain turns off?” “Couldn’t they show people doing more wholesome things with the money they make?” “If this is really a legitimate opportunity, why not focus on the market, product, or service instead of people reveling in lavish materialism?”
Stern decided to get out after she realized she had $20,000 in unsold wholesale inventory sitting in her living room. “It clicked for me that if you order 30 items, they send you 10 quick movers and the rest sit. It’s a false sense of actually being successful,” she says. “I noticed all these people started going out of business. I started getting scared that my inventory would be worth nothing, and I would be stuck with $8,000 on my credit card.”
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.
Who has an eye on “X,” the point of market saturation at a given price, in an MLM? Well, the funny thing, or perhaps the tragic thing, is that “X” will be reached and exceeded without anyone noticing or caring.
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.
Herbalife was able to show its revenues were based more on the sale of its products than through recruitment, and it offered numerous protections, such as a money-back guarantee, so members would not be stuck with products they could not sell. According to Herbalife, 80% of its members do not recruit other members.
Use of invented jargon and euphemisms, which has led to a predictably hilarious euphemism treadmill (i.e., “network marketing,” “referral marketing”, “affiliate marketing”, “home-based business franchising”, “Independent Business Owner”)
This is just an inkling of the things you need to learn, in order to run a successful network marketing business. You know that this isn’t a get rick quick scheme. You may get rich, but it won’t be quickly. If you focus on learning all you can and applying what you learn, you will see results.
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.”