We’ve all experienced it. That girl that we went to high school with 15 years ago sliding into our DMs with the overly familiar ‘Hi hun! How have you been? I’ve just started my own business and I think that you would be AMAZING at what I do! Would you like to know more? xxx‘ message, which seems super out of the blue considering that you guys NEVER EXCHANGED TWO WORDS WHEN YOU WERE AT SCHOOL TOGETHER.
Curious, and probably a bit befuddled, you go to their feed to see images of them boasting about how their new hair/skin/fitness regime has transformed their life, and how they are absolutely loving being a boss babe ‘business owner’ who is ‘working from their smartphone’ and living a lux life just by recommending ‘products that they already use’ to their family and friends.
It sounds amazing, right? We’ve all dreamed of travelling the world and running our own businesses from the beach as we sip piña coladas and rake in passive income.
It is this glittering image that multi-level marketing companies (also known as MLMs or network marketing companies) are selling, along with the promises that ‘anybody can do it’ and ‘running your own business is easy.’
Does all of that sound too good to be true?
Well that’s because it is.
However, it is sometimes difficult to get the facts from these notoriously vague ‘MLM huns’ (known as such because of their over-familiarity with people they barely know and excessive use of words like ‘hun,’ ‘babe’ and ‘chick.’). Because of this, I decided to put together a post designed to educate people about the realities of MLM schemes, to try and avoid more and more people being sucked in.
This post will define just what an MLM scheme is and why they are so bad, how MLM schemes differ from illegal pyramid schemes, how the worst MLM companies actually oppress women, and how they all employ shady cult tactics to recruit their victims.
It may seem a little off-topic considering this is a travel and human rights blog, but the way I see it, if a certain type of business is ruining friendships and relationships, causing people to incur huge amounts of debt and ensuring that less than 1% of employees ever achieve ‘success,’ (more on all of this later) then that is equivalent to labour exploitation and THAT, my friends, is a human rights issue.
Why MLM Companies Are the Absolute Worst
Anti-MLM Basics – What is an MLM scheme?
MLM stands for multi-level marketing, and these companies are also known as network marketing, direct sales or party plan companies (or, controversially – pyramid schemes).
MLM schemes have been around for years, and popular MLMs include Amway, Avon, Arbonne, Herbalife and even Tupperware! As of November 2018, more than 18 million Americans were involved in an MLM, and with the multi-level marketing industry as a whole generating a staggering $192 billion in 2018 alone, MLMs are not something that we can ignore.
Distributors in MLM schemes do not receive a salary, but instead earn money from selling products to people they know, also making commission from every person that they sign up to the company, as well as commission from the sales and recruits generated from THAT person, continuing down in multiple levels (hence multi-level). The people underneath you in an MLM are known as your ‘downline,’ and additional commission is earned from the initial ‘investment’ that everybody must make in order to join the MLM.
You see, in order to be part of an MLM, you first have to purchase their products in bulk as well as purchasing a training or starter kit. A Monat sales rep tried to get me to spend 299 USD to join her ‘tribe’ and be a Monat seller, but MLM startup costs can amount to thousands of dollars (Lularoe’s startup costs range from 5000-6000 USD – yes, you have to pay to work in an MLM).
Thus, if the person at the very top of an MLM scheme recruits 10 people, and each of those 10 people recruit another 10 people, and each one of those people recruit another 10 people, there is a lot of income trickling up to the top of the pyramid structure, and so the person at the top is making a lot of money, with the people at the bottom of the pyramid structure making the least amount of money.
The ultimate aim of somebody in an MLM scheme therefore, is to have as many people in their ‘downline’ as possible, enabling them to make large amounts of passive income for little work.
It is important to note that upon first reading, this may seem no different to a typical corporation in which the CEO makes the most money. However, in a legitimate company, the people below the CEO are guaranteed benefits and salaries, and do not depend on infinitely recruiting new members to the company. This is in stark contrast to the people in an MLM, of whom 99% actually lose money.
What Are the Worst MLM Companies?
All MLMs are bad, but some are worse than others. Below is a list of MLM schemes that have either faced lawsuits, are notorious for making people lose money, or are generally just shady (even for MLM standards).
The worst MLM companies include:
- LuLaRoe – sellers pay up to $6000 dollars to join this women’s leisure-wear company and receive bad quality clothes in prints they cannot choose. LuLaRoe is currently facing over a dozen lawsuits.
- Herbalife – the FTC mailed cheques to 350,000 people who lost money selling Herbalife products and ordered it to significantly restructure itself.
- Monat – haircare company plagued by lawsuits for making people’s hair fall out.
- Jeunesse – skincare MLM facing a billion dollar lawsuit for operating as a pyramid scheme.
- doTerra – essential oils company claiming its oils can cure almost anything. Sellers have been known to suggest that people turn away medical treatment in favour of using oils instead.
- Amway – has been investigated multiple times in many countries for pyramid scheme allegations.
- Younique – bad quality makeup sold by ‘makeup artists’ who have not had any training.
- Arbonne – very overpriced makeup and little chance of making money, this MLM scheme preys on women, with 75% of its consultants being female.
6 Reasons Why MLM Companies Are The Absolute Worst – The Anti-MLM Chronicles
1. 99% of People in an MLM Lose Money
Do people actually make money from MLM schemes?
Let’s start with the numbers, shall we? After studying 350 MLMs, the FTC found that 99% of people who join multi-level marketing companies lose money. This statistic does not just apply to the worst MLM companies. It applies to ALL MLMs.
That’s right. If you join an MLM scheme then you only have a 1% chance of not losing money. Not a 1% chance of getting rich. A 1% chance of not losing money.
The statistics available on the income disclosure statements of the MLM schemes themselves don’t seem to do much to contradict this. In Arbonne, 66% of ACTIVE consultants (read: those not in the 99% of people losing money) make an average of $839 per year – this meagre sum does not include expenses incurred by the consultants on buying the products in the first place or ‘promoting their business.’
In It Works! ‘distributors’ (accounting for 83.2% of the company) made an average of $47 a month, and ‘executives’ (accounting for 6.53% of the company) made an average of $223 per month.
I’ll repeat – I am not talking about the income disclosure statements from just the worst MLM companies. The numbers remain shockingly low across the board.
Of course, when you have a business model that involves actively recruiting your own competitors (resulting in an oversaturated market), no base pay and fees to join and participate, the only money to be made in an MLM scheme is at the top of the pyramid triangle, where your income depends on the failure of those beneath you.
Nice, huh?
2. MLMs Alienate You From Your Family and Friends
Being a network marketer means that you, by default, become annoying. With your only potential customers being your family, friends and social media followers, you have no choice but to endlessly bug those around you to buy your products.
We’ve all seen those girls on our friends lists whose entire feeds are aggressively promoting Monat shampoos or Arbonne face creams, and even the posts which are not explicitly selling products are promoting the MLM ‘boss babe’ lifestyle. I actually saw an Instagram Arbonne babe posing with her friend’s newborn baby with the caption ‘It’s days like today that I’m grateful I work for myself…I didn’t have to ask a “boss” if I could take the day off.’
Yep, that’s right. MLM huns are exploiting using their friends’ babies in order to recruit people to their downlines (if you think that the aforementioned caption was anything but clever marketing then you’re a dummy), and it doesn’t stop there. I’ve seen MLM gals use everything from their friends’ cancer diagnoses and deaths to terror attacks as an excuse to guilt-trip people into buying their products (not surprising why so many people are anti-MLM when you think about it).
As if all that isn’t doing enough to alienate MLM huns from their friends, MLM schemes actively encourage their distributors to cut ties with anybody that isn’t supportive, saying that they should just forget about what everybody else thinks, cut out the ‘haters’ and focus on living their best #girlboss life.
Anyone in an MLMer’s life who questions the pyramid scheme multi-level marketing scheme and whether their loved one is making the best decision in investing into it is dismissed as a ‘dream stealer,’ or someone who is ‘stuck’ in their 9 to 5 and ‘brainwashed by society.’
It may sound dramatic, but MLM destroys families.
3. MLMs Blame You For Not Succeeding
In a system that is totally stacked against you, where 99% of participants lose money and the vast majority of those that do make money do not meet the national minimum wage, people in MLM companies are trained to blame you, the victim, for failing in a system that is designed in a way that makes it statistically impossible to ‘win.’
Despite the initial promises of ‘you can get paid to post on Facebook,’ and ‘become a millionaire using your smartphone!’ that imply a ‘get rich quick’ deal, as soon as MLM participants begin to crack under the immense pressure from their uplines to recruit recruit recruit, they are told that ‘you just aren’t working hard enough,’ and ‘if you wanted it badly enough you’d try harder,’ and ‘you have to spend money to earn money.’
People that give up the ‘boss babe’ lifestyle, often in thousands of pounds worth of debt, are shunned by the MLM community and the ‘friends’ that they thought they had there. Told that they just ‘didn’t have what it takes’ and ‘weren’t meant for success,’ they are made to believe that it is down to some fault of their own that they are not swanning around on a yacht dripping in diamonds.
4. You Are an Unpaid Sales Rep, Not a Business Owner
One of my biggest MLM pet peeves, and one of the reasons why I am so anti-MLM is the fact that everybody in a multi-level marketing company seems to enjoy telling the world that they are a ‘business owner.’
No, honey.
You are an independent contractor. While this does not technically make you an employee of the company, it also does not make you a business owner. Come on now.
People working in MLM schemes do not get to choose the products they sell, how much they sell them for, what the returns/refund policies are, and the rate of commission that they receive from their downline. They do not get to create their own business strategies, change the company name, or anything else that you might expect a business owner to do.
Despite their cries to the contrary, people working in MLMs are kept on a very tight leash. Not only are they under constant pressure and scrutiny from their uplines to reach unrealistic targets every month, but their social media activity is closely monitored (with MLMers being required to post a certain number of things and cold-message a certain number of people every day), they are expected to attend online team meetings and webinars (all unpaid), ‘check in’ with their uplines (wait – I thought you didn’t have a boss?), and even do required reading of self-help books every day!
The idea that joining an MLM company can result in you being your ‘own boss’ is nothing more than a big fat lie. After all, if you really were your own boss then why would you be moving up the ‘ranking’ system? Why would your job title be ‘area manager’ or ‘product distributor’ rather than CEO?
You’re a sales rep. A sales rep that doesn’t get paid.
5. MLM Schemes Prey on Vulnerable People
A big reason to be anti-MLM is that MLMs prey on people who they see as being desperate. Stay-at-home moms, college students and military wives are often prime targets for MLM huns because they are often bored, eager to make money from home, and with broad social networks ripe for recruiting. Chronically ill people are also attractive to MLM recruiters because they can be told ‘hey – want to make an income while you’re too unwell for a regular job?’
Stay-at-home moms are especially vulnerable because they can simultaneously be guilt-tripped (‘don’t you wish you could financially contribute to the household?’) and have their loneliness taken advantage of. MLM recruiters know that new moms are often isolated and craving adult company, and so they promise to connect them with other moms and provide them with an entire community of supportive new ‘friends’ who understand exactly what they’re going through and will be there for them.
Other people that fall victim to unscrupulous multi-level marketing companies are undocumented migrant communities who are desperate for work and lacking the knowledge to properly understand what it is that they are getting into. The Netflix documentary Betting on Zero talks to several Latina families that lost their entire life’s savings to Herbalife after being told that it was impossible not to make big money in the company (Herbalife was later fined $200 million and ordered to ‘start operating legitimately.’)
It would be one thing to recruit vulnerable people if you were genuinely providing them with a great business opportunity, but when you KNOW that there is a near impossible chance of these people making any money (because you yourself are statistically not making any money and your recruits will make less than you) and proceed to encourage them to invest their last $200 into an MLM regardless, you are almost as bad as the dude sitting on top of the pyramid cone-shaped object.
6. MLMS ARE PYRAMID SCHEMES
If you’re STILL asking yourself ‘why do MLMs still exist?’ then I shall leave you with this final point.
MLM companies are nothing more than pyramid schemes that found a loophole and thus manage to operate legally.
The issue of multi-level marketing schemes vs. pyramid schemes is a huge one that not even the FTC can fully grasp, but I will attempt to explain it in brief here.
In a very small nutshell: pyramid schemes are illegal because their only focus is on recruiting others to the business and not actually selling a product. Multi-level marketing companies sell products as well as recruiting others to the company (sticking to the 70/30 rule of 70% product selling and 30% recruitment), and so they can be seen as legitimate companies.
HOWEVER, when you realise that the people buying the MLM products are actually just the ‘independent contractors’ of said MLM in order to sell them on to future ‘independent contractors’ of the same MLM, you have to wonder if any regular, non-MLM person is actually buying these products or if they are destined to remain within the MLM forever.
Technical BS loopholes aside though, the fact that MLMs have products doesn’t really make a difference, even if some of those products do make it out to the general population. Given that the vast majority of participants cannot make a net profit and overwhelmingly make losses, MLMs function as pyramid schemes, whether the law has caught up or not.
With a business model that is designed to generate profit for only a tiny number of people at the very top levels of the pyramid triangle, it isn’t difficult to argue that all MLMs are pyramid schemes; some just come with protein shakes.
SO, that concludes the first post in The Anti-MLM Chronicles about just why MLM companies are so bad! While MLM babes can gloss over the fact that their ‘business’ alienates them from their friends by saying that their friends ‘just don’t support them,’ what you CANNOT hide from is the numbers. 99% of people in an MLM will lose money, and if you take away ONE THING from this article, then let it be that.
Did you enjoy this post? I know that it’s a big change from my usual posts but this is something that I feel so strongly about as it disempowers women and can legitimately ruin lives. Please let me know your thoughts in the comments section below, and if you have personal experience of being in an MLM then I welcome your comments even more – disagree with me by all means, let’s talk!
Until next time, xoxo
You’re inaccurate in many areas. Mainly Network Marketing companies are not a pyramid. All organizations are diamond in shape if you actually look at a downline report, Its not a pyramid shape like the ones in Egypt.
Secondly, you’re not a distributor just because you buy a distributor kit. The high failure rate, do to speak, is human nature. It’s not the business models fault if the rep fail to share their products and services to anyone out of fear and procrastination.
Thirdly, let’s examine the failure rate of:
– Any traditional business.
– Real Estate Agents
– Insurance Agents
– Car salespeople
Are those professions a scam as well? Why not? If a Real Estate Agent spends $2,000 to get certified and another $1,000 to list on MLS and they don’t hustle and never make any money isn’t that a $3,000 scam then?
Franchises can cost $100,000 to over $1,000,000 to buy.
Network Marketing?
$50 to $1,000.
Are franchises a scam?
Yes there are bad Network Marketing Companies. Guess what? There are bad companies and people in Wall Street as well. The day it was learned that Bernie Madoff actually made off with over $70 Billion dollars guess what happened the next day? IPO’s opened. People still invested in Wall Street. Isn’t Wall Street a scam since one person is able to defraud the public of $70 million? When was the last time you heard in Network Marketing that a company or individual defraud individuals of $70 Billion? How about never!
I’m any sales model the 80/20 rule applies. Why? Because you’re dealing with people. All of us join something and never use them.
Want to know the drop out rate at gyms? Google it. Aren’t they a Scam if I join a gym to lose weight but I don’t because I didn’t combine common sense of diet + exercise on a daily consistent basis down at the Gym
Aren’t gyms illegal them by collecting membership fees when members actually never go to the gym month after month? I’d that the gyms fault of the member?
Hmmm…
Seems you’ve never joined a program and actually rolled up your sleeves and did some work. Rather, you’re looking from the outside in listens to people who quit too early, or they had or were told unrealistic expectations about how sales and building a legit organization.
There are many companies that have zero sign up fees or where you have to personally buy products you’ll kick yo the curb just yo qualify for commissions.
If you’d apply the same scrutiny to all sales professions I think you’d be amazed at how high the failure rate is!
Network Marketing pays out globally over $100 million dollars a day in commissions to people who actually opened their mouth to a family, friend, co-worker or a complete stranger.
It’s a volunteer army in Network Marketing. You’re not an employee. And, you aren’t on a salary. You are 100% commission.
I’ve being doing this for 40 years.
I don’t compare MLMs to pyramid schemes because of the triangular structure. You are correct, many businesses have a triangular structure. I compare MLMs to pyramid schemes because of the emphasis on RECRUITMENT, and how most MLMers focus on THAT rather than the actual product, the product being nothing more than a loophole the vast majority of the time. Most people in an MLM make their money from signing up others, NOT from selling haircare products/health shakes etc.
As for the failure rates, yes, there will always be people who don’t try to succeed in something and who fail as a result. 40% of new business fail within their first year – your odds of becoming a millionaire from starting your own business are SLIM but POSSIBLE. The fact that 96-99% of people who join an MLM either don’t make any money or LOSE money is nothing to do with people simply not TRYING. It is a problem with the business model itself. That’s why we don’t see similar numbers in franchises or other types of business. MLMs are the only ones where literally 1% of people make any kind of real money. But your attitudes of blaming the workers for ‘not trying’ is definitely in line with what I have seen others in your industry do.
As for your point about joining the gym – yes, most people will drop out. But that is nothing to do with the gym itself or the odds being stacked against them. With hard work and dedication, they WILL get results. They choose not to. The same cannot be said for MLMs, where the system literally does not ALLOW for a large (or even more than 1-4%) of people to succeed. It is statistically impossible.
Yes, you are not an employee or on a salary. You are on 100% commission (I think businesses that only pay in commission are highly unethical anyway but that’s just personal opinion). This does not make you a ‘business owner’ as so many MLM people claim. It makes you an independent contractor. However, as I’ve said, it is statistically impossible for the majority of people who join an MLM to make money. Not due to lack of trying. But due to the fact that there are simply not enough people on this planet for the scheme to keep growing and generating revenue. That, to me says that by their very nature, network marketing companies are predatory and morally bankrupt.
Congratulations for being in the 1% and making a career out of delivering false hope and exploiting vulnerable people.
You shouldn’t be advocating for banning something because you don’t like it. If businesses are willing to offer commission based compensation for certain services and there are people willing to accept commission based compensation for their services, they should be allowed to do so. As long as no force or fraud is involved, it should not be illegal. It is a business owner’s right to offer commission based compensation for services and it is my right to accept that offer if I choose to do so.
You raise an interesting point, but you’ll be surprised to hear that I actually agree with you.
While I think that commission-based compensation plans are UNETHICAL, I don’t believe that they should be ILLEGAL, as it is a person’s right to choose to accept those conditions if they choose to, as you rightly pointed out.
MLMs however, are extremely different from commission-based compensation plans in a number of ways – first, you have to actually PAY to work, so you are beginning your journey at a loss. Pro-MLMers may contend that many businesses have start-up costs, but the percentage of people who start their own businesses that make a loss in the first year is 40%, in contrast to people in an MLM where 99% of people either make no money or actually LOSE money. Therefore the business model functions as a scam, not giving people a realistic opportunity to make any money, as opposed to genuine commission-only sales jobs, that have an actual marketable product rather than ‘products’ sold by MLMs, whose primary customer is actually the distributor rather than the general public. This simply cannot be considered a viable business model.
You also mention fraud, which I find very interesting. Sure, *most* MLMs (not all by any stretch) have income disclosure statements online, therefore they cannot legally be considered as fraudulent companies – after all, the data is there if somebody wishes to look. However, the distributors promise 6 figure salaries and the opportunity to be ‘financially free’ which is incredibly misleading seeing as only 1% of people in an MLM will ever be ‘financially free.’ The facts are that nobody would join a business if they knew there was a 99% chance that they were going to fail, and so MLM recruitment tactics can definitely be considered fraudulent.
I’m not in MLM, but I’m doing my research. I can’t help but think as I read your blog post that you don’t fully understand the world and sales. There are easy ways to accomplish things, and there are hard way. There is risk and there is reward. It’s common knowledge that the more reward there is the more risk there is. IE: I can invest in small cap stock that have a high risk, but I have the potential of high reward. Everything in live requires investment as we live in a capitalist system.
My ex-wife wanted to be a teacher, so we invested 60K for her to acquire a degree in teaching. However, once she started looking for a job, she found that the market was totally saturated, and had to take a position making far less than she wanted. It took years for her to pay off that initial investment. Did she get rich? No, she made 30K a year.
What about restaurant servers? They make far below minimum wage with the HOPE of making tips based on the level of their service. Isn’t that also unethical for a restaurant owner to essentially pay slave wages? Why is this? Because to be a server requires little risk and investment to train.
Your assumption that 1% make money in an MLM assumes that everyone continues in the “scheme”. Just like when I went to college for Computer Program, very few had the ability to actually graduate. If everyone did, I would have not found a job as the job market would be saturated. I counted on the fact that many would fail, and that is why the pay is high. Few can do it.
What about a regional sales manager of a “legit” company? He gets paid on his team’s sales based on how he trains, motivates, and manages that team. What happens if his team does poorly? He loses his job.
You fail to realize that in America there is a top 1% of folks who are making the majority of the money. A middle class person may make 100K a year, but most likely, unless certain risks are taken, he will never make the millions the CEO makes, or the owner of a small business.
If open a business that is Non-MLM, then I have to invest a lot of money to get that business up and running. How do I make a passive income? Buy hiring people to run that business for me. I pay them based on what the market rate is. Most of them can barely pay rent, but I’m profiting nicely from their work.
If MLM does not work, and it saturates the market, then explain to me how Avon has been in business since 1886? Is an Avon rep raking in millions? No, but they earn an income based on the amount of work they put in, how good they are at selling the products, and how well they train and motivate their people… just like a sales manager does.
To address the cult like approach you claim they have, consider this. You are the sum total of the 5 people you associate with. I don’t know how many times when I simply wanted to change jobs, change a church, or buy a house, how negative my family was. “You are making a mistake.”, “you should be happy with what you have” etc. I back away from those people. I don’t want negative people in my life. do I love them? Yes, but will I listen to them? No. Why would I listen to a sister that makes $10 an hour in a job she hates when she is trying to tell me not to change jobs to gain a $30K a year raise?
If we did not distance ourself from naysayers, America would never have been founded. Steve Jobs would have never created the products that he did.
You really should think about this a little deeper in the context of sales, capitalism, risk vs. reward, etc. It’s clear you were burnt by an MLM, but they do not operate much different than the rest of the world.
Well thank you for such a presumptuous and condescending comment 😉 Actually I have never been burnt in an MLM because you could not pay me enough to ever join one. I’d rather pull off my fingernails than join an MLM if I’m being honest.
I did not ‘assume’ that less than 1% of people in an MLM make money. It is a mathematical fact. You can fact check me by using the sources that I provided, or by doing your own research. You will find that every income disclosure statement out there backs up my research.
A business model where 99% of people lose money is insane. I would love for you to show me something similar. All of the examples you have used are not valid because I can promise you that 99% of people in those industries are not losing money. Your wife making 30k a year after investing 60k is actually very successful, no? In 2 years, she would have earned back her initial investment. I will repeat – 99% of people in an MLM LOSE MONEY, and NEVER earn back that initial investment. The two are not comparable.
You mention paying people what the market rate is. Exactly. It may not get them rich but they are paid minimum wage, or more. You don’t expect them to work endless amounts of hours, pay YOU for the privilege and never make any money. Because THAT would be insanity. MLMs do this.
And yes, you speak about people working in hospitality in the US (people from America seem to have this strange assumption that everywhere in the world operates just like they do, lol). Actually, most places in the world do NOT operate like this because it’s highly unethical. Servers all across Europe get paid a living wage in ADDITION to tips. Again, not comparable.
So, I think that it is YOU who should do a little more research. Look at the numbers. Or better still, join an MLM and let me know how it works out for you!
Amazing post! It’s always been shady when Acquaintances from high school would randomly hit me up about “incredible opportunity” and how I’d be financially independent, work for myself, etc and you did a great job articulating everything. I’m just shocked how brainwashed people are even after you present the obvious facts.
Oh my god, I know – as soon as I hear the words ‘opportunity’ or ‘financial freedom’ I’m like – RUN!!!!! Hahahaha.
It’s insane, go and check out some of the hate comments on my other MLM posts if you want a laugh, haha.
Absolutely. And don’t be surprised if Mark and Robert Blackman are on some MLM’s payroll. They have aggressive marketing campaigns to silence folks like you trying to warn people. Keep up the good work!
Thanks so much!