Is Color Street a Pyramid Scheme? A Deep Dive Into the Color Street MLM
Chances are you’re here because you’re considering signing up with the Color Street MLM and becoming an Independent Stylist.
You’ve probably seen the social media posts, talked with a friendly Stylist, and maybe even tried the products, and you’re intrigued about the potential to make money recommending products you love to family and friends, get some time freedom and escape the rat race.
However, you don’t want to just jump into something without doing your research. You want to know if Color Street is legit, if you can really make money with Color Street, and you also want to make sure that the Color Street MLM isn’t a pyramid scheme disguised as a regular direct sales business.
So then, let’s take a look at the Color Street MLM ‘business opportunity’ and see if we can answer some of those burning questions.
So, without further ado, pour yourself a drink and let’s get into it.
Is Color Street a Pyramid Scheme? A Color Street MLM Review
What is MLM?
Before we dive into the Color Street MLM specifically, I should explain exactly what MLM is and how an MLM company functions compared to a regular business.
MLM stands for multi-level marketing, and MLM companies are also known as network marketing or direct sales companies.
MLMs have been around for years, and popular MLMs include Beautycounter and Avon!
MLMs can be presented as business opportunities, games, or get-rich-quick scenarios, like the Secret Sister Christmas game.
You don’t receive a salary in an MLM.
Instead, you earn money from selling products to people you know and recruiting others into the business. When you recruit a new person and that person begins earning money, you will earn commission from the sales and recruits generated from THAT person.
This continues down in multiple levels (hence multi-level).
Imagine a triangle. If the person at the very top of the triangle recruits 10 people, and each of those 10 people recruit another 10 people, and each one of those people recruit another 10 people, you will be making commissions from EVERYBODY in the triangle because they are all in your direct downline (the people underneath you in an MLM are known as your ‘downline’ and you are their ‘upline’).
All you had to do was recruit 10 people and you make money from 1100.
While you can always make money from selling whichever product your MLM company offers, most people in MLM companies prefer to recruit others because they stand to make a lifelong passive income from that person, whereas if they sell a product they will just receive a one-off commission.
As there is a lot of money trickling up to the top of the triangle, the people at the top are making a lot of money, while the people at the bottom are making the least.
The ultimate aim of somebody in an MLM company like Color Street therefore, is to have as many people in their ‘downline’ as possible, enabling them to make large amounts of passive income for little work.
What is Color Street?
Color Street was founded in 2017 in New Jersey by Fa Park. It is a multi-level marketing company with one product – nail polish strips.
It all started in 1988 when Fa Park was on a bus and he noticed a woman struggling to paint her nails. He thought that there must be an easier way, and so he bought some nail polish products and began experimenting with them on paper.
Eventually, he developed a formula which meant that the top was dry but the base remained moist, meaning that it would stick to the nail.
Color Street now has nail strips in many varieties and designs, from glitter, patterns and French manicure style to Christmas, Halloween and Valentine’s strips. Each set comes with a nail file/applicator, a nail prep pad and in-depth instructions.
They are apparently easy to apply and last for up to 2 weeks (although anti-MLM YouTuber Savannah Marie found that hers were chipped after 5 days), with a set costing 11-13 USD.
Although $11 doesn’t seem too expensive considering the strips are supposed to stay on for up to 2 weeks, an interesting thing to note is that Color Street’s parent company, Innovative Cosmetics’ Concepts, sells the same strips for 4-6 USD in places like Walmart and Amazon.
To those who know the business, this makes sense – MLM companies mark their products up a lot because the reps are getting their commissions from the products, and there has to be enough commission generated to travel all the way to the top.
On the other hand, why would you pay $11 for a set of nail polish strips when you can pick some up from the store for $4?!
You wouldn’t, making it very difficult for Color Street Stylists to sell the product.
Regardless, Color Street reviews are generally good when it comes to the quality of the products.
How do you make money as a Color Street Stylist?
I took a look at the Color Street compensation plan to see how the Stylists are making money.
Unsurprisingly, it was incredibly long and difficult to understand, which is common practice in MLMs (I am convinced that this is just to bamboozle you so that you don’t find out the full story).
With that said, the ways of making money as a Color Street Stylist are the same as any other MLM, give or take.
There are 10 main ways that you can make money with Color Street (no wonder the compensation plan is so long!):
1. Jump Start Bonus
Hit some goals when you sign up and you’ll receive a bonus.
2. Base retail commission
You’ll earn 25% on every product sale you make. These can be sales to the public, sales to members of your ‘team’ or even ‘sales’ to yourself.
3. Enhanced retail commission
If you sell more than 600 USD worth of products in a month, you make extra commission. This increases by as much as 10%.
4. Enroller matching Jump Start bonuses
For everyone you recruit who gets a Jump Start bonus, you will also receive a bonus
5. Enroller bonuses
You will earn a 3% commission on the Personal Volume (sales) that your recruits make
6. Leadership Level Bonuses
You will earn a 3% commission from the sales of the person that your recruit recruited (so the person 2 levels below you in the scheme)
7. Leadership Depth Bonus
You will earn a 1.5% commission from the sales of people 4 levels or more below you in the scheme
8. Team Bonus
An extra 1.5% commission from the total sales of your ‘team’
9. Generation Bonuses
You receive higher commissions from your downline as you rank up in the company
10. Car/Lifestyle Bonuses
Like many MLMs, Color Street has a ‘car bonus’ incentive. You can read my article about the Arbonne Mercedes to see that this is not all it seems.
What I found really interesting to learn is that 8 out of 10 of these involve recruiting people, and there appears to be no limit to how large you can grow your downline.
It really seems as if the focus is on growing a team of people who are also growing their own teams, rather than actually selling nail polish strips.
How much money can you make as a Color Street Stylist?
To see whether it is likely that you will ever make money as a Color Street Stylist, I decided to take a look at their Income Disclosure Statement (IDS).
An Income Disclosure Statement is a document which outlines exactly how many people are registered as Stylists within the company and how much money they are making.
Before I break down the numbers, I do want to point out that the Color Street Income Disclosure Statement is actually comprised of two statements.
One shows the average earnings without subtracting the money spent by Stylists on sign-up fees and website fees (which we will get into in the next section), and one shows the average earnings after subtracting the money spent by Stylists on these things.
In this breakdown, I will be looking at the average earnings after the sign-up fee and website fees have been subtracted, because these numbers will be closer to the actual amount of money earned.
However, it is very important to know that Stylists will definitely incur more expenses than just the sign-up fee and website fees, and so we can’t take these numbers as final profit, but they do give us a slightly more accurate representation of the facts.
So, let’s see how much money people are earning with the Color Street MLM (figures depict the year 2020).
The IDS shows that:
- 49.31% of Stylists earned an average of $67 in 2020
- 36.95% of Stylists earned an average of $1933 in 2020
- 1.3% of Stylists earned an average of $17,198 in 2020
- 0.51% of Stylists earned an average of $35,278 in 2020
- 0.08% of Stylists earned an average of $260,443
- 0.04% of Stylists earned an average of $781,322 in 2020
As you can see, these numbers vary wildly, with the top 0.08% earning close to a million dollars, while 93.91% of all Color Street Stylists earned between $5.69 and $358.86 per month, on average.
This is not enough to replace a regular job.
We should also remember that, while the Starter Kits and website fees have been accounted for, none of the other expenses have been.
This means that the bottom 49.31% of Stylists, who ‘earned’ $67 in 2020 likely lost money.
How much does it cost to be a Color Street Independent Stylist?
While the Color Street Income Disclosure Statement takes into account the Starter Kit ($129) and the cost of your personalised Color Street website ($9.95 per month), the numbers do not take into account the other costs of running your Color Street business.
A Color Street Independent Stylist will also rack up other expenses such as:
- Phone/internet bills
- Hosting ‘Nail Bar’ parties (products for guests, food drink)
- Buying products to use as samples, for personal use, giveaways and competitions etc.
- Costs of running your own blog or promotional channel such as YouTube
- Gas used driving to Nail Bar parties, meeting potential recruits/customers etc.
- Social media promotions
You also have to take into account the time spent working on Color Street and whether the money you made justifies the hours spent.
Is Color Street a pyramid scheme?
I am not the FTC. I cannot say, without a shadow of a doubt, whether or not Color Street is a pyramid scheme.
I’m also not trying to get sued by Fa Park!
So, it is important that I make clear that everything which follows is alleged and my own personal opinions.
Okay, so, in order to determine whether or not Color Street is a pyramid scheme in disguise, we must first outline what exactly a pyramid scheme actually is.
What is a pyramid scheme?
Pyramid schemes are very similar to MLMs, but the main difference is that MLM reps sell a product as well as recruiting others into the business.
A pyramid scheme simply takes an initial investment from each member and promises to pay them for enrolling others into the scheme.
You are never buying a product; you are buying into an ‘opportunity’ to get rich.
However, as members of the scheme increase, recruiting quickly becomes impossible and so most members are unable to profit from the scheme or even make their initial investment back.
The Wikipedia diagram below illustrates just how unsustainable this business model is – after just a few levels of recruitment, the scheme would have recruited everybody on the planet and there would be no-one left to recruit!
Because it is impossible for most people to make any money in a pyramid scheme, pyramid schemes are illegal.
MLM companies are not illegal because there is a possibility to make money from selling products and not just recruiting.
However, although a business may be carefully crafted to appear like a totally legit multi-level marketing company, it could still be exploiting loopholes in order to skirt around the law and function as a pyramid scheme in disguise.
In order to determine whether the Color Street MLM is functioning as a pyramid scheme, we must try and answer 3 questions.
1. Are most people unable to profit?
When we looked at the Color Street Income Disclosure Statement, we saw that the vast majority of Stylists were not making anything close to a full-time wage, and it is likely that many of them are actually losing money.
Although the people at the very top are making hundreds of thousands of dollars per year (from their downline), most people are unable to make a profit with Color Street, and the idea that it is a legitimate ‘business opportunity’ seems laughable.
2. Do you have to ‘pay to play?’
The absolute minimum that you can spend to remain in Color Street for 1 year is $248.88 ($9.95 x 12 = $119.88 + $129 starter kit = $248.88).
This is assuming that the Stylist never purchases a single Color Street product after buying the Starter Kit, but as we’re about to find out, it is very likely that many of them do.
You see, while Color Street Stylists do not have to hit a monthly target, they do have to sell $300 worth of product for at least 1 month in every 6. This doesn’t mean selling $50 a month. The $300 sales value has to be hit in a single month, which is a crazy high target when you’re selling $11 nail strips.
However, like with most MLMs, this target can be met by the distributor EITHER selling products to the public OR purchasing products for themselves.
If a distributor is struggling to hit her $300 target, it makes sense that she would buy Color Street products herself in order to hit that target and stay ‘active’ as a Stylist.
It is also common for distributors in MLM companies to purchase from one another in order to hit the 300 PV requirement.
This shows that even though you don’t have to continue purchasing Color Street products, there is definitely an incentive to do so.
Targets aside, network marketing is all about showing how awesome the product is 24/7.
You have to use the product so that you can post about it on social media and garner interest from your followers.
It’s just how it works.
This is interesting for 2 reasons.
Not only does it suggest that lots of Color Street Stylists are likely spending a lot more money on Color Street products than they’d like to admit, but in order to be avoid being classified as a pyramid scheme, a multi-level marketing company to be making most of their sales to the general public, not other distributors within the company.
We have no way of knowing the percentage of Color Street’s genuine retail sales compared to distributor consumption, but it is something to be aware of, because as far as the FTC is concerned, those sales would not count as retail sales to the general public.
So, getting back to our original question – do you have to pay to play with Color Street?
Yes.
3. Is there a heavy focus on recruitment?
When we look at the Color Street compensation plan, we can see that out of 10 ways to make money within the company, 8 of them involve recruiting others.
Honestly, that kind of says it all.
However, an important detail, and one that allows Color Street to place such a hefty focus on recruitment without getting classified as a pyramid scheme, is that you don’t get paid directly for recruiting people. You get paid when those people make sales.
This is a fine line, but an important one.
Does the compensation plan place a huge emphasis on recruitment? Yes, absolutely.
Does it directly reward the act of signing somebody up to the company? No, you earn your rewards later.
In summary?
Yes, you can make money selling Color Street products, but, as with most MLMs, the real money is made by signing other people up to the company and growing your ‘team.’
Is Color Street a Pyramid Scheme? | Final Thoughts
I hope I’ve managed to show that while they may make pretty nail strips, Color Street is not a good business opportunity.
Not only will most Color Street Stylists never make a significant amount of money with Color Street, but Color Street also screams ‘pyramid scheme in disguise!’
If you’re thinking about joining Color Street, run for the hills.
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