Before we begin: As a stay-at-home mother in my early thirties, I’m a member of the prime target demographic for MLM companies. I know a lot of people who are, or have been, involved with them at one time or another. This post is not directed at any of those people in particular; it concerns the broader trends.
So, what’s an MLM, anyway?
MLM stands for Multi-Level Marketing, also known as “direct marketing,” “referral marketing,” “pyramid selling,” or “network marketing”. People who work for MLMs make their money through sales-based commissions, and also through recruiting, where they can get bonuses based on the number of people in their “downline” and/or get cuts of their downlines’ sales. When (rather, if) people show a profit in an MLM scheme it typically comes from their recruitment/downlines, rather than product sales. Does this sound like a pyramid scheme? It’s not. Technically. Because they do sell products. But if “technically not a pyramid scheme!” doesn’t sound like a great selling point to you… you’re not wrong.
There are too many MLM companies active for me to list here, but you will probably have heard of some of the big names already. Perhaps you’ve already been asked to buy some of these from a friend, coworker, or family member. You might recognise names like doTerra and Young Living (essential oils); Rodan+Fields, Younique, Mary Kay, Jamberry, or Avon (makeup); LuLaRoe (clothing); HerbaLife, Plexus, Forever Living, Beachbody, or ItWorks! (fad diets / nutritional supplements); Norwex, Pampered Chef, and Scentsy (household items / cleaning supplies); and those are just a drop in the bucket. There’s an MLM for legal services! There’s an MLM for sex toys! There’s an MLM for travel agents! There are MLMs for your hair! They’re everywhere.
Okay, there are a lot of MLMs — what’s the big deal?
There are a lot of things wrong with MLMs. In no particular order, here is a small sampling of issues:
MLMs promise easy money, but lead only to debt.
Becoming an MLM distributor/ambassador/consultant/etc. means shelling out hundreds or even thousands of dollars for the privilege of working for the MLM company. The start-up costs for becoming a LuLaRoe consultant, for example, will cost you $5-6,000 out of pocket (source). Plexus ambassadors need to agree to have products auto-shipped to them monthly — regardless of whether or not they’re selling (source). The costs don’t end there! Younique, for example, pays its presenters with a branded debit card — that carries charges with every transaction (source). Legitimate companies don’t make you pay to work for them. But that start-up cost means that MLM participants are very vulnerable to the sunk-cost fallacy; they feel that they can’t leave until they’ve gotten their money back.
But what about after those start-up costs? Can you make money with an MLM company? Unless you’re at the top of the pyramid: no. You’re not going to make money. Don’t believe me? Check out this report on the Federal Trade Commission’s website. Here are some highlights:
Failure and loss rates for MLMs are not comparable with legitimate small businesses, which have been found to be profitable for 39% over the lifetime of the business; whereas less than 1% of MLM participants profit.
How does MLM participation compare with gambling? Comparisons of odds of profiting from gambling with participation in MLM have shown conclusively that participants in many games of chance fare far better. For example, in an earIier analysis, I found the odds of winning from a single spin of the wheel in a game of roulette in Las Vegas 286 times as great as the odds of profiting after enrolling as an Amway “distributor.”
Comparing MLM to other options, it is safe to say that that MLM is the most unfair and deceptive, and the most viral and predatory of all business practices and should be illegal per se, as are pay-to-play chain letters and no-product pyramid schemes.
Therefore, to promote as a “business opportunity” an endless chain or pyramid selling activity (MLM) that in fact leads to almost certain loss for all but the founders and primary promoters (who are enriched from the purchases of victims/recruits), is a misrepresentation of the facts, and can lead to the defrauding of large numbers of participants. MLM is the epitome of the type of business activity the FTC) is pledged to protect against – “unfair and deceptive acts or practices.”
If you’re willing to do some digging, MLM companies will give you some of these numbers themselves: just google “[MLM company] income disclosure”. For example, here is Plexus’s income disclosure document from 2016. About 82% of their Ambassadors made, on average, a whopping $301 per year. About 5% of ambassadors made around $1,700 per year, and another 9% made $3,700. Per year. To put that in perspective, you can also make $3,700/year by working a minumum-wage job for about seven hours once a week. All in all, less than 4% of Plexus ambassadors are making more money than you can by working as a waitress for one shift every weekend. And those numbers only report gross income; they doesn’t include what ambassadors may have spent on inventory, advertising, fair booths, training, and the list goes on. Remember: 99.9% of people who join MLM companies lose money. Yikes.
MLMs encourage dangerous magical thinking.
One of the surprising things I found when I started digging into MLMs was the prevalence of magical thinking, based along the so-called Law of Attraction. That’s the idea that by focusing on positive or negative thoughts, people can make positive or negative things happen in their lives. If this sounds like woo-woo garbage, that’s because it is. But it’s dangerous woo-woo garbage, because it’s attractive. We all like to think that we can control what happens to us. Imagine if we could become more successful, more wealthy, more beautiful, more happy, just by thinking our way there. It sounds great! And it’s incredibly prevalent in the MLM world. Here are some typical examples:
Networking marketing business success: about 99% depends on holding positive attitudes within a distributor. The rest 1% is action only. (source)
The truth is that working hard at the how-to is not enough. To get significant results, you need to create a winning network marketing mindset. (source)
When it comes to MLM network marketing your attitude will go a long way to determining your success. By having a good attitude you are more likely to have success in the industry. If you put out only negative energy like my friend, then you will probably fail. (source)
Write down your intention before you do anything else. Do it now. Writing down your intention sets the Law of Attraction into motion. The Law of Attraction states that like attract likes. It is the primary Law of Success in the Universe. (source)
The law of attraction is always responding to the vibration of your thoughts and beliefs and it’s doing it every moment of the day, so if you have set a goal to be a success in Network Marketing and as yet it hasn’t happened, you need to review what you really believe, and you can do that quite easily by paying attention to the thoughts you have. (source)
But consider the ramifications of this kind of thinking. If we are totally in charge of our own success, that means we’re also totally responsible for our own failures. What’s the trouble there (besides that the universe isn’t actually responding to the vibrations of our thoughts, whatever that means)? In an MLM, you’re set up to fail. So when 99.9% of MLM participants fail at their venture, the law of attraction dictates that it’s their fault, not a problem inherent to the whole MLM system. They weren’t positive enough. They allowed themselves to doubt. They didn’t cull the negative people from their lives (more on that in the next section). Never mind that it’s virtually impossible to succeed at an MLM business without being a founding member: it’s all because the participant didn’t try hard enough, want it enough, or fake it till they made it enough. It’s not a business failure anymore; it’s a personal/moral failure.
This constant striving to maintain a positive attitude, good vibrations, or whatnot, can also make it harder for someone to leave an MLM company. If it’s a moral failure to doubt, how much more so to quit! And ignoring negativity/pessimism also means ignoring rational doubts, genuine red flags, and the concerned input of others. It’s blinding. And that’s dangerous.
MLMs damage relationships.
Related to the above, if you express your doubts or concerns to someone in an MLM — depending on the extent to which they have drunk the MLM koolaid — you are likely to be branded a “hater” or even a “dream stealer”. You’re just jealous! You just can’t stand to see your friend succeed! If you search for “MLM hater” you will see the prevalence of this term (along with webinars and articles on how to deal with haters, and all the anti-hater memes your heart desires). MLM “uplines” (the people who have recruited other participants underneath them in the pyramid) are known for emotional manipulation similar to the “love bombing” used by some cults. Now your fellow MLMers are your true friends, your true sisters — and they will encourage you to cut ties with anybody you know in real life who doesn’t support your MLM dreams wholeheartedly. There’s a good write-up of that here.
The second way that MLMs damage relationships is by turning friends and family members into prospective marks. If the whole point is to sell to your “network” then everyone in your network is a target for a sales pitch. Every social interaction becomes an opportunity for a sales pitch or for attempting to recruit another “downline”. And if your friends don’t want to buy your products? That’s when you ditch the haters, hun. Here’s one woman’s experience when her friend “Tawney” got involved in an MLM: part one, part two. It’s not a coincidence that people who join MLMs can exhibit many similar behaviours to people who join cults.
MLMs prey on the vulnerable.
As I mentioned in my disclaimer way back at the top of this post, a prime target for MLM recruitment is stay-at-home mothers. SAHMs are often vulnerable: it can feel strange to be out of the workforce, being a home with small children can be tremendously isolating, and MLMs can look like an easy way to make money while still being able to care for our children at home. MLMs push the cultural narrative that if someone is not making a financial contribution to the family, she’s not contributing at all (see my thoughts on that here: In defence of bringing home no bacon). In a country like the United States without mandated maternity leave, MLMs can look like the only way to have some flexibility and still be able to make money (and MLM companies often vilify mothers who go back to work at regular jobs). The list of reasons goes on — but what it comes down to is that MLMs prey on the financially and emotionally vulnerable. Related: MLM is a Feminist Issue.
The bottom line:
Multi-Level Marketing companies use cult-like recruiting tactics and impossible promises to prey on the vulnerable, who have no hope of making money. MLM involvement leads to fractured relationships, victim-blaming after failure, and financial losses that can be devastating. If you’re considering joining an MLM company, stay far away! If you are involved with an MLM and thinking about leaving, see here and here for help.
How to Spot a Pyramid Scheme [6:21]
John Oliver on MLMs (language warning) [31:57]