The Truth Behind Multilevel Marketing: Is It Worth It?

The Truth Behind Multi-Level Marketing

Have you ever been at a play date or at the park and someone has mentioned a new product to you? What started innocently as an informal chat between parents becomes somewhat of a sales pitch: “Oh, you should try this!” or “I know someone who can help with that!” Finding out about new products and services on the playground is something I never envisioned as a first-time parent, but it seems that this new and direct way to generate income on the side has become hugely popular. Although you may not have experienced a sales pitch like this yourself, chances are, you know someone who has. Perhaps on a Facebook or Instagram post you've seen an old high school acquaintance or distant cousin posting about amazing business opportunities selling essential oils or fake eyelashes, natural skin care products, make up and more. It seems particularly popular with those of the female persuasion. So what is this new retail phenomenon taking stay-at-home moms by storm anyways? Welcome to multilevel marketing!

According to the US Federal Trade Commission’s website, in multilevel marketing (or MLM for short), “individuals sell products to the public, often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.”

Also referred to as direct selling, referral or networking marketing, MLM is on the rise both locally and internationally and has become a popular way for people to make money as a side hustle without any need for a physical storefront. Some people even claim to base their entire annual salary on this form of income generating activity. Popular MLM brands include Arbonne, Stella&Dot, Scentsy, Isagenix, Norwex, doTerra and more.

For those who are not familiar with the MLM structure, companies basically operate through a triangle-shaped commission model. Ask any MLM company to show you a diagram of this structure and it is pretty self-explanatory. Sellers are self-employed 'consultants' as they are commonly referred to, and are usually required to pay a start-up fee or purchase a start-up kit, which can put initial consultants back about $100 to $200 and contains a complete product catalogue, business manual, sample products and training materials. As a consultant, you are now able to make further purchases at wholesale prices. Sounds attractive right? Said consultants earn money either through commissions based on sales they’ve made, or commissions based on salespeople they've recruited (known as “downlines” in MLM speak).

For example, when a 30-something mother of two buys essential oils, a diffuser and foaming hand soap from a DoTerra consultant, she gets them at the wholesale rather than retail price (you actually can’t purchase these oils at any retail stores). She may even be locked into a monthly subscription type plan, where you are required to make a purchase (albeit small) every month in order to continue getting these wholesale prices. The consultant who on-boarded said 30-something will also get a commission for these monthly purchases. MLM companies will also entice consultants with loyalty rewards or points that you can earn for higher, more regular purchase amounts. In turn, these points can be redeemed for further product purchases (you pay tax and shipping only in most cases). In several MLM companies, consultants will earn a commission fee when the consultants ‘under’ him or her make purchases or then recruit even more family and friends to buy products. Word-of-mouth is one of the key strategies in MLM sales along with online social networks, but quality content has to be constantly pumped out. And at what cost to the consultant? It seems unclear.

Having said all of this, the MLM model seems to be working. According to the Direct Sellers Association website, in Canada there are over 1.3 million independent sales consultants (ISCs) who fall under the MLM umbrella, with 82% of those females and a mere 18% males. A whopping 68% of all ISCs are either married or cohabitating, proving this trade is popular with the mom crowd. The Direct Sellers Association also claims that direct selling brings in over 2.58 billion in sales in Canada alone, with ISCs making $924 million in annual personal revenue. Interestingly, Canada ranked 11th globally in direct selling sales in 2018 on an international market, but is this revenue spread evenly throughout the company? Or are those at the top of the so-called pyramid the ones making the cash? I turned to the US and Canadian governments for advice.

“Not all multilevel marketing plans are legitimate,” the US Federal Trade Commission website warns.  “If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan.” They also caution that, however, “if the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme.” Additionally, the US Federal Trade Commission makes it clear that “pyramid schemes are illegal, and the vast majority of participants lose money” in the United States.

But what about Canada? According to the Government of Canada’s website, “when operating within the limits set by the Competition Act, multi-level marketing is a legal business activity with set responsibilities for both operators and participants.” The website also points out that however, “pyramid schemes are illegal multi-level marketing plans that require purchases for participation, compensation for recruitment, inventory loading, or the lack of a buy-back guarantee on reasonable terms”.

Now I know what the authorities are saying about MLM, but what about the consultants on the ‘front lines’ of this supposedly lucrative income-generating endeavour? Rather than just complete a simple Google search on previously written and researched MLM companies and articles, I decided to do my own investigative reporting and reach out directly to consultants currently working in the MLM field.

After some further digging, I discovered that most critics don’t see MLM companies as anything other than annoying; even going as far as branding them ‘spam’ entrepreneurism. However, a lot of individuals who have bought in to the allure of making income as a side hustle think otherwise.

A local, anonymous mom (who we will refer to as Jade here) jumped on the MLM bandwagon and got into the business for two reasons: 1. She genuinely believed in the product and 2. She was hoping to make positive connections with other proactive, like-minded moms in her community. Jade saw it as more of a relationship building exercise with the added bonus of some extra income while raising a busy family of five. “I personally feel that these MLM companies feed into the desire to belong to a community and so they're very desirable to those people who might feel a bit lonely, like stay at home moms,” she says. “And the reality is that a lot of those women really don’t have a lot of extra cash and so they ‘invest’ in this idea and it works for a while, but being honest,  it rarely sticks.”

“The only people who actually make any money are the ones who are actively getting people on their team over and over again,” Jade continues. “Asking your friends and family to buy items that they normally wouldn’t is tough. I can’t ask someone to willingly spend hundreds of dollars a month on products they may not actually be interested in. It seems irresponsible.”

Jade goes on to warn about the downfalls of becoming an MLM consultant. “I have only ever had one person ‘under me’ on my team and when she asked me to tell her about the opportunity, I spent more time trying to convince her out of it than I did telling her the benefits. I knew it wouldn’t be long lasting, and that it was too easy to go into debt on items you can’t sell.”

Jade confides that she did ultimately onboard this potential consultant and “now she has a closet full of products she can’t move”. She adds that her new consultant will ultimately lose money on those investments and also lose a little self confidence. “I saw it coming,” Jade admits. “It happened to me.” Jade goes on to explain how when consultants are under-performing, consultants higher up in the chain can try to actively coach you. She goes on to admit that this coaching made her feel like dog poop.

“I had a good friend before she joined a local MLM company,” Jade explains. “We would have play dates with our kids and talk about eco-friendly living. Now when we see each other, she just wants to ‘support me’ as she says it. She never asks about my regular life. It’s all business now and I miss the friendship”. Jade also describes how that with some MLM companies, if you don’t make monthly targets, you are demoted to a lower tier consultant rank.

“But I will tell you the good stuff, too,” Jade counter offers. “It’s fun to get to know new people and some of the incentives are fun to achieve. Plus the discount helps, but ultimately, I found myself buying a lot of stuff I didn’t need.”

So the question remains: do multilevel marketing companies make promises they cannot keep? Enforce unrealistic goals in order for consultants to actually make profits? Are they empowering or exploitative experiences?

While some MLM companies reassure consultants by saying they have no targets to meet – the fact remains, you NEED to sell to make money. There are, however, plenty of MLM consultants who say that the business model does work for them and that it is an overall positive experience.

According to Dara Randall, a local Thirty-One consultant, “There are some great companies out there and MLMs in general get kind of a bad rap”. Dara explains that when she started, her husband was convinced it was a pyramid scheme and wasn’t really into the whole idea, “but I joined because I have loved the products for a long time and I really just wanted the discount.” She describes how Thirty-One is definitely not a pyramid scheme and how the entrepreneurial endeavour turned into more than she ever expected.  “I have met a lot of awesome women since I’ve joined, both customers and fellow consultants,” Dara explains. “My network has grown so much because of it,” she continues. “I don’t earn a lot doing it, which I think is the norm. The majority aren’t able to quit their full time jobs and just do their MLM gig. That’s not why I do it. For me, it’s fun and it’s something I do for myself, which I think a lot of women, especially moms, need.”

Dara goes on to explain how MLM companies are a way of supporting other local women. “I love a lot of products from other MLMs too,” she admits. “There is a lot of great stuff out there! I also like supporting other women. I am more likely to buy from someone I know, so for me, that model works.”

Another consultant who is willing to openly advocate for her MLM company is Jennifer Walker, a consultant or ‘wellness advocate’ for doTerra. Not only does Jenn sell doTerra brand essential oils and their affiliated products, but she also operates a business called Soul Kind, a Facebook page devoted to spreading the word about the positive health benefits of essential oils. Posts include practical ways to incorporate essential oils into your daily life like preventing illness, treating burns and even making DIY foaming hand soap. It also doesn’t feel very pushy or sales pitchy, like many other social media posts I've seen.

According to Jenn, her overall experience with doTerra has been very positive so far. At first, however, she admits “I was a hard no”. What started out as a hobby and genuine interest in the benefits of essential oils quickly became a passion for her. She goes on to explain how she got hooked into the MLM world by a neighbour. “(She) kept asking me to teach her friends and family about the oils, just as I had taught her. I politely declined and said I don’t do that. She ended up asking me again about a month later and within that time frame (my son) became so sick.” Jenn admits that her son’s illness, which took awhile to diagnose, literally rocked her world. “I knew at that point,” she continues “that I would not be returning to full-time work anytime soon. I had my part-time retail job that I quite liked so I still wasn’t thinking of saying yes, but it was my husband that encouraged me.”

And so, after some convincing, Jenn joined the ranks of doTerra as a wellness advocate. “I was being asked by so many people to help them through their struggles with chronic pain, heavy emotions, sick kids... it ended up feeling a little selfish not to.” Since then, she adds, “I found myself saying yes, more often to things than ever before. I’ve overcome fears, I’ve met the most incredible people and I’m teaching my kids about taking risks and figuring things out when you don’t have the immediate answer.”

Jenn goes on to explain that her original intentions were never to sell the products, but more to spread the word on the benefits of essential oils and the positive impact they have had on her and her family’s life. “I think when you come from a place of serving; it’s so different than selling just a product. I have never once felt like I'm being “salesy” and it’s a great compliment when people refer others to me because of this.” She adds that “this little oil biz allowed my family and I to move halfway across the country to live where we always wanted to. I am doing the same job here as I was in my hometown. I have customers and a team under me that cross provinces and even go over to Europe. I can go as far as I want with this and as fast or as slow as I need to. I can take on another full-time job, or work this full-time. There is so much power in that.”

Jenn does admit that working for a prominent MLM company is not all smelling of roses. “It’s not to say it’s without its stresses,” she admits. “When it’s all up to you, there is a different kind of pressure, especially when you rely on the income that you’ve created.”

When I pressed Jenn about the so-called spam that some MLM consultants consistently pump out, she admitted that “there are some in this direct-sales business that leave messages in people’s inboxes out of nowhere, just trying to sell what they’ve ventured in to”. She goes on to explain how “they give this business a bad name” and “those are not the people who will succeed in this. I think most do not take it much farther than a hobby anyway”.

Jenn also described to me how she has lost several consultants on her team who found that this endeavour just wasn’t for them. “It takes grit,” Jenn admits. “It takes really staying connected to why you’re doing this. As leaders drop from my team, new ones emerge and I attract people along the way that are ready to make a change, whether it’s financially motivated or because they need to do something for them”. Further evidence that for some women, joining an MLM company can in fact be an empowering experience.

At the end of the day, Jenn is content with her choice in joining an MLM company. “I’m so grateful for the push from my husband, my neighbour and my friends,” she says. “I still come up against sme haters (even within my extended family), but I have learned that their opinion doesn't affect how I run my business and in the end, when I have my house on the lake and my kids put through University, that’s all that matters.”

It appears that there are both positive and negative aspects to multi-level marketing companies and even those directly involved in the industry admit the pros and cons. While some women feel empowered, others may feel taken advantage of or exploited. There also seems to be a disconnect between what most people think about MLM companies and what the women who are on the front lines actually participating in these businesses experience. Are we doing a disservice to these women by characterizing all MLM companies as scams? Or are we justified in being apprehensive and judgemental?

At the end of the day, you do you. While I have never had a salesy bone in my body and know that this likely is not the avenue for me personally, it may be just the right fit for others!

Considering joining a multi-level marketing company? Here's the overall advice: Make sure you do your due diligence and research the company, its code of conduct, core values, etc. Network and connect to others in your community who are already well-established consultants to get first-hand experience of the role, the type of commitment and initial and subsequent investments required. It is important to get the big picture - including the good, the bad and the ugly. And as always, trust your gut. 

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Picture of Jill Campbell

Author: Jill Campbell

A mother and lover of all things practical, Jill is a 30-something, former educator, world traveler and self-proclaimed pragmatist trying to navigate this journey called life. She currently works as a freelance writer, part-time teacher/tutor and full-time mom to two fabulous daughters. Her blog www.pragmamamma.net features simple and family-friendly recipes, original photography and hot parenting topics. Jill loves getting creative in the kitchen, reading, spending time with her family and snapping photos around her neighbourhood in Burlington, Ontario.

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