If your goal is to make money, you may want to get a job.
At some point in our lives we have all received that dreaded invitation. A friend or family member is so excited because they have decided to make extra money selling [insert MLM company name here].
Before you know what is happening you are being asked to come to parties to buy things you probably do not want or need, your social media feed quickly begins to fill up with daily posts about sales, new products, and the latest excited news from someone who is still in the beginning phase of being sucked into the MLM machine.
The good news…within a few months to a year, the posts will dwindle, the excitement will fade and the parties will cease.
The bad news…your friend or family member had to come to the harsh realization that their dream of being able to take that extra vacation or even quit their full time job not only did not come true, but that they actually lost money in the whole mess.
After watching this happen again and again, I became more interested in finding out about these companies. Who are these companies and how do they manage to get away with the tactics they do? How do they manage to “sucker” so many people year after year? As I dove in, I was pretty surprised by what I found.
Please understand my goal is not to make anyone feel stupid for getting swept in one of these companies and I certainly am not here to bash anyone who still is, but what I would like to do is help people who are looking for legitimate ways to make an income avoid these incredibly risky and rarely successful ventures.
If you happen to be one of the few who is making an actual income from one of these companies, then my hats off to you! You are doing something few have been able to do.
What is an MLM?
MLM stands for Multi-Level Marketing. Multi-level marketing is a controversial marketing strategy for the sale of products or services where companies are able to utilize a non-salaried workforce to sell their products or services to make money while the people selling the products make money from a compensation commission system of some sort.
How do MLMs make their money?
Every company creates their own commission based system, however the most common practice across the board for all MLM companies offers two ways to create earned commission.
The first is a commission made for the sale of products directly to their own customers. The second is commission earned based on the sales of the other distributors they have signed up under them. These are often called “down line” distributors.
MLM companies sell everything from make-up to diet shakes and pills to purses and jewelry to adult novelty items and supplements.
What makes an MLM different from a Pyramid Scheme?
First, let me say that Pyramid Schemes are illegal.
The Federal trade Commission (FTC) has set guidelines that help to discern the legitimate companies from illegal ones.
The difference between MLM and pyramid schemes under these guidelines are:
- Sales of actual product or services to consumers, MLM offers products whereas Pyramid schemes do not
- Commissions are paid on sale of products and not on enrolments; MLM has a hierarchical commission set up on the sales of products, whereas pyramid schemes are based solely on new enrolments.
- Company buys back inventory from participants at the time of termination, pyramid schemes do not have any inventory.
Please note that just because a company is “legitimate” it does not mean this company does not provide products and services that are sub-par, do not work, make false claims, have no real scientific backing to their claims or use aggressive tactics to make money.
MLM’s and the Corona Virus
Since the pandemic started earlier this year, MLM’s have increased their use of internet marketing and began to prey on those who are desperate, jobless and looking for hope.
On top of that many MLM companies have been sent warnings by the FTC for making false claims about their products and their ability to prevent infection, spread or symptoms of the coronavirus.
The Direct Selling Association (DSA), the trade group representing MLMs, says that 51% of the 51 companies that participated in a survey in early June said COVID-19 has had a “positive” impact on their 2020 revenue; 59% reported the same in a later survey.
So if they are not illegal, they sell products, and they help people make money, why on earth would I be on here getting ready to drop some cold hard truth?
The Federal Trade Commission (FTC), found that 99% of people who participate in MLM companies lose money.
Let me reword that another way. If 99% of people lose money, that means that only 1% of people actually make any money at all. And out of those 1% very few of them become the stay at home rich of their dreams.
You are more likely to be struck by lightning or win the lottery than you are to make money by becoming a part of an MLM company.
Imagine going to a job interview. The interviewer tells you that the job will require you to work really hard, put in many hours a day, push products on all of your friends and family and even strangers.
For all of this, you will not get a salary or even an hourly rate. Instead there is a 1% chance you will be able to pay a few bills a year.
Even the companies themselves report dismal earnings from their distributors.
At Young Living, 89% of U.S.-based distributors earned an average of $4 in 2018, according to an income-disclosure statement. At the skin-care MLM Rodan + Fields, 67.1% of sellers had an annual median income of $227 in 2019. More than half the distributors at Color Street fell into the company’s lowest tier of earners in 2018, with average monthly profits below $12.
I cannot honestly imagine a single person I know who would be willing to take this deal, but some of these same people signed up to become an MLM distributor. So how did that happen?
Because from the top of the company down to the bottom distributors, they are trained to “embellish” or out and out lie to you about what you will get out of this venture.
Tall tales of being able to quit jobs, take luxury vacations, earn full time income while only working 20 hours a week or even earn a full time income working 40 hours a week all from the comfort of your own home.
It was a message just like this that prompted me to finally put hands to keyboard to write this in the hopes of helping others steer clear.
The Pitch
A few weeks ago I was innocently scrolling through Facebook when I noticed a male friend of mine post something that was unusual for them. I have seen many posts just like it, but this one said… “Would you like to be able to lose weight while drinking your morning coffee?”
My first thought was that my poor friend had been hacked. My second thought was oh no, they got him!
I went on quickly and commented hoping to save him from a financial downfall and within seconds of hitting send I was hit with a reply, a friend request and a DM.
It turned out my friend was only posting this for another friend and I had made the mistake of making myself a target!
The message has so many of the red flags I see in so many of these pitches.
- Claims that they are not like “other companies”
- Claims they were able to quit their job and do this from home (notice they do not mention if there is another income in the house or any other information about how they made that happen, just a vague comment to make you think it came from selling these products.)
- The dangling of the “nice car” as if somehow selling these products will allow you to live a lifestyle beyond what you have now.
- And my favorite part of the pitch that comes along with so many of these weight loss “scams” is that you will lose weight by making some lifestyle changes and taking this product. (In reality it is the lifestyle changes that will help you drop the weight.)
- They even included a before and after picture as they usually do! These are incredibly easy to fake.
I decided to check out her company to see what she was selling and was a little amused when I saw that it was products from a familiar MLM company called IT Works. If you do not know what IT Works is, many years ago you may remember they touted a body wrap of sorts that would make you drop inches in no time!
Sadly enough, many years ago I had purchased said wraps from a co-worker of mine who had become a distributor and cornered me at work one day. Since I paid good money for it, I gave it to the old college try and needless to say the results were…well there were none. \
This product made a lot of claims, but sadly did not deliver. (Just head online to read some of the reviews of both their wraps and the coffee supplements she was attempting to sell me on.)
Conclusion
At the end of the day I just implore everyone to do some serious research if the are planning to get into an MLM situation.
Most of these companies use very sketchy tactics at best to sell to their customers, and even sketchier tactics to sign up new distributors.
There are ways to make money from home if that is your goal, but the chances that it will be by selling any MLM products is pretty slim to non-existent.
