Network Marketing, Multi-Level Marketing, Direct Selling – different terms used to describe the same business model, an elusive and often misunderstood phenomenon that has been around for almost 100 years and is showing no signs of slowing down.
With the rise of social media and changing attitudes towards traditional 9-5s among Millennials and Gen Zers, combined with a global pandemic that made being able to work from home a necessity for millions, Network Marketing is bigger than ever.
And it makes sense.
Nowadays, dreams of ‘being your own boss,’ achieving ‘location independence’ and being totally ‘financially free’ are shared by many, with a growing number of young people preferring to carve out their own path in life rather than follow the route their parents took.
And that’s fantastic.
As somebody who has never had a traditional job, and has been completely, 100% location independent for 6 years, I can get behind these values.
I love to travel.
I live to travel, and in addition to an absolute sh*tload of backpacking over the last few years, I have also been lucky enough to call various countries ‘home,’ including Cambodia, Poland and Italy.
I adore passive income. There’s nothing better than waking up, checking my emails and finding out that I’ve made over £1000 in my sleep – and yes, that’s happened.
I also can’t imagine having to wake up early to take public transport to an office somewhere, answer to a boss or not be completely in control of how, where and when I make my money.
So I get it.
However (there’s always a however).
My lifestyle has almost come about accidentally. As in, I started doing this, which then gave me time to do that, and now that makes money too, which allows me to start doing that other thing etc. And it all happens to be online. And freelance. So I have been increeeeeedibly fortunate.
Most people though, are not as fortunate as me, namely because they simply aren’t aware that such online opportunities exist. Many people do stay in 9 to 5 jobs that they aren’t fulfilled in, dreaming of the day that they too, can be a digital nomad who can work anywhere from their laptop.
And that’s when it happens.
You’re bored at work, or home, or wherever, and you’re scrolling through social media.
You see a post from an old school friend bragging about her wonderful life as a business owner and how incredibly grateful she is to have been given such a fantastic opportunity and how YOU TOO can be a part of her team if you want to achieve financial freedom and true Boss Babe status.
‘Hurry though,’ it reads. ‘Limited spots available!’
You’re sceptical. You’ve heard about online scams, get rich quick schemes, and even pyramid schemes (but wait – aren’t they illegal?), and you’re not convinced that this too good to be true opportunity is legit.
But whatever. You send her a quick message, asking for more info. After all, it would be nice to be sipping piña coladas by a pool right now while raking in passive income.
Almost immediately she responds.
‘Hey girl!’ she says, before enthusiastically telling you about how you’d be perfect as a part of her team, and how all you have to do is recommend your favourite beauty products (or wellness products, or essential oils) to your friends and family and you can live the dream just like her!
But you’re not stupid. You have questions. You ask them, determined to find out the catch, but there doesn’t seem to be one.
It is a little off-putting when she tells you that there’s a ‘small start-up fee’ of a couple hundred bucks, but as she quite rightly says, all businesses come with start-up costs, and they’re usually much bigger than this!
That’s because it is.
You have just been pitched to join a Network Marketing company, otherwise known as MLM, Direct Sales, Affiliate Marketing* or Referral Marketing.
But Jezebel, what IS Network Marketing?
Well sis, I’m glad you asked.
What is Network Marketing?
Network Marketing has been around for years, and popular Network Marketing companies include Amway, Avon, Arbonne, Monat and It Works!
As of February 2020, 60 million people worldwide were working as Network Marketers, and with the pandemic causing many people to lose their jobs and seek work from home opportunities, one can only assume that this number is even higher at present.
But how does Network Marketing work?
Well, Network Marketers 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 (this is why Network Marketing companies are also known as Multi-Level-Marketing companies).
The people underneath you are known as your ‘downline,’ and additional commission is earned from the initial ‘investment’ that everybody must make in order to join the company.
You see, in order to be part of a Network Marketing company, you first have to purchase their products in bulk as well as purchasing a training or starter kit. The amount that you have to spend varies, but is typically anywhere from a couple of hundred dollars to a few thousand.
This means that if the person at the very top of a Network Marketing company 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 company, and so the person at the top is making the most amount of money, with the people at the bottom making the least.
The ultimate aim of somebody in Network Marketing therefore, is to have as many people in their ‘downline’ as possible, enabling them to make large amounts of passive income for little work.
This all sounds great, especially when you consider that, if you have a big enough social network and can build an impressive downline, you could well be making six, or even seven figures a year in passive income.
It’s easy to see the appeal.
However (I told you there was always a however).
Nothing in life is ever simple, and unfortunately Network Marketing is very different.
Chances are, the person trying to recruit you will be painting a very specific picture of what Network Marketing is like, but that picture cannot always be trusted. After all – your upline stands to make a big juicy bonus if you join her team, as well as income on every sale you make and every penny you spend in the company.
It’s safe to say that she has a vested interest in you signing up.
This is where I come in.
In this article, I will be addressing the biggest lies that Network Marketing people will tell you when trying to get you to join their team and when posting about their lives on social media.
It is no secret that I am firmly anti-MLM (I am not against one particular company – I am against the entire business model), but I will only present you with the facts in this article. After all, I have nothing to gain if you decide against joining a Network Marketing scheme – I just want to make sure that you’re going in with eyes wide open.
Ready? Then let’s begin.
The Truth About Network Marketing – Exposing the Biggest Network Marketing Lies
1. You will own your own business
This is one of the biggest lies in Network Marketing, and as an actual small business owner, I have to admit that it does irk me.
People in MLMs will often say that they own their own businesses, but this simply isn’t true.
What they actually are is independent contractors for somebody else’s business.
Now, I don’t think that these people are lying per se. I think that they genuinely believe that they are business owners, probably because they have to fill out their own taxes. In the UK, this would make you self-employed but it would NOT make you a small business owner, and there is a BIIIG difference between the two.
Network Marketers generally cite the fact that they can choose when and where to work and sometimes the fact that they can hire people as reasons for why they are a business owner, but – and I mean this in the nicest way possible – none of these things make you a business owner.
Many jobs allow you to work from anywhere, and many jobs allow you to get the work done at whatever time of day (or night!) you like, so long as it’s done in time for a deadline. Being able to recruit people also doesn’t make you a business owner. It means that hiring people is part of your job description, same as it is for almost every manager on the planet (manager, not CEO).
In a Network Marketing company, you are not in charge of anything.
You do not choose which products you sell, the ingredients that go into the products, the product packaging, branding and design, company name, logo, or aesthetic. You do not control how much commission you receive per sale, how much you sell the products for, or anything else related to the compensation plan. You get no say over who hosts ‘your’ website, which shipping company you use, and what the returns and refunds policy is.
Moreover, you have the corporate part of the company telling you what you can and can’t say when promoting products, dictating which rank you are in the company (yes, IN the company) and – newsflash – they are able to fire you at any time.
Does this sound remotely like owning a business to you?
2. Network Marketing is great opportunity to make money
The way that Network Marketers talk, you’d think that Network Marketing was a great way to make money, whether you want to make a million, or just have a lucrative side hustle.
However, after spending 15 years studying over 350 Network Marketing companies, Jon M. Taylor, MBA, Ph.D. found that when you take into consideration how much people spend in their MLMs, 99.6% of people in MLM companies lose money.
That’s right. It’s not just that they don’t make money. 99.6% of Network Marketers actually lose money.
When you think about the way that Network Marketing is designed, this makes total sense – when you have a business model that involves actively recruiting your own competitors, oversaturating the market, no base pay and fees to join and participate, the only money to be made in an MLM scheme is at the top, in that 0.4%.
Does that sound like financial freedom to you?
3. You get paid to recommend products to family and friends
The thing that separates a legal Network Marketing company from an illegal pyramid scheme is that Network Marketing companies have to make most of their money from selling products rather than from recruiting people.
To avoid getting in trouble with the FTC, MLM reps will tell you that they make money from recommending products to their social network.
Now, this is partly true, but it definitely doesn’t tell you the full story. While you can make money on product sales (yes selling the products, not just recommending them), the real money to be made in Network Marketing is from recruitment.
Network Marketers get huge bonuses and promotions from recruiting others into their downline, and the more people they recruit into the scheme, the more money they stand to make.
If you can get a one-time commission from someone buying a lipstick vs a lifetime of commission from another person’s sales and recruits, it’s a no-brainer – why would you even bother selling products when selling the ‘business opportunity’ is so much more lucrative?
This video by Emily Leah shows two Arbonne reps boasting about how their job isn’t to sell products.
‘People think we sell makeup,’ they say. ‘Have you guys ever seen us sell makeup? Has anyone ever bought any makeup from us? Probably hardly anyone. You guys CAN buy products, it is [sic] there as a second income stream […] but what we do is bring people in, share a business concept and mentor people in their business. We’re business mentors basically.’
The job that these girls are describing is the literal definition of a pyramid scheme.
4. You get a free car
You know the saying, ‘there’s no such thing as a free lunch?’
Well, there’s also no such thing as a free MLM car. The free MLM car deal is just another sneaky tactic to entice you into the scheme, and, as with most things Network Marketing, it isn’t quite what it seems.
So how does the ‘free car’ work, exactly?
Well, once you hit a certain rank within a Network Marketing company, you may qualify for a ‘free’ car. It should be noted at this point that you don’t actually get a free car, but payments towards the lease of a car. The car itself has to be taken out by you, in your name, and you must continue to hit your monthly targets in order to receive the car payment.
This means that if your rank in the company drops or you don’t make your qualifying sales for a month, you will no longer qualify for the car bonus, leaving you with a luxury car to pay for and nobody to help you.
Same goes for if you leave the company – you are stuck with a luxury car in your name (plastered with the company logo in some cases), and no way to pay for it.
5. The people who failed didn’t work hard enough
In a system that is stacked against you, where 99.6% of participants lose money and the vast majority of those that do make money not making the national minimum wage, people in Network Marketing companies are brainwashed into blaming you, the victim, for failing in a system that is statistically impossible for most people to succeed.
Your upline will tell you 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.’
If you decide to drop out of the company because you are losing too much money, your former team mates will be told that you simply didn’t have what it takes, and that some people just aren’t destined for greatness.
While hard work in any business is essential in order to succeed, hard work in Network Marketing is not enough. If you want any chance of success then you have to get in at the beginning (when the company has only just formed), tap into a totally unsaturated market, and be a pro at recruiting – and even then, your chances are slim.
Studies show that 80% of start-ups are still in business after 2 years, while 50% of people who join an MLM will quit within a year. If we fast-forward 5 years, 45% of small businesses are still in business, while a minimum of 90% of people in MLMs have dropped out. This is a huge discrepancy, and it can’t just be that Network Marketers are lazy.
6. You can work in pockets of time
A curious thing about Network Marketing is that before you sign up, they will tell you that you can ‘make money just by using social media and telling your friends about beauty products which are things you do anyway.’
They will say how Network Marketing is the perfect side hustle if you already have a full time job, and is easy to work if you’re a busy stay at home mom because you can just use ‘pockets of time’ in your day.
This sounds fantastic, and if it were true, then it would be fantastic.
However, after you sign up, your upline’s attitude will change. She will tell you that you ‘need to work hard,’ and ‘you get out what you put in’ and ‘not everyone is cut out for this business.’
They expect you to ‘hustle’ 24/7, and if you’re not able to, then you must just not want it badly enough.
You are expected to attend team calls, webinars, cold message hundreds of strangers every day, post multiple times on social media, mentor your recruits, check in with your upline, follow up on leads and ‘turn every interaction into an opportunity.’
This means that if you’re talking to somebody at the grocery store or the gym, you are expected to try and sell to them. If you have friends, a mum, a boyfriend, you’re expected to sell to them. You are expected to turn every social interaction into a sales pitch.
Even if all you were expected to do was build a large social media following, this takes time and is not something you can achieve in ‘pockets of time.’
Some MLMs even require their distributors to read self-help books every day!
7. You will make passive income
To anybody who earns by the hour or is on a salary, passive income sounds incredible, and it is.
But it is also widely misunderstood, and I know this because I have lived off nothing but ‘passive income’ for the last 6 years.
Let’s say you recruit somebody and then begin earning passive income when they make sales. You’re not doing nothing to get that money. First off, you’re training the person and being there for them to check in with whenever they have a question. Maybe you’re giving her word-for-word sales pitches, scripting her responses and hosting zoom calls to motivate and help her and the rest of your team.
Second, how much work did you put in to get that recruit in the first place? How much time did you spend, unpaid, talking to this woman and persuading her to join? Did you send her ‘free’ product samples that you paid for? Did you message 200 people before her who all ignored you or said no? Did you post daily highlights, reels, stories and TikToks just to catch her attention?
Let’s say this woman sells a bottle of shampoo and you make a 30% commission from that sale. That’s great, and if you have 1000 people in your downline all making sales, then sure, you’re making a healthy passive income.
However, at the early stages of any passive income job, it isn’t worth it. Back when I started my first e-commerce store, I would spend 3 days creating content to maybe make a dollar. I have worked for 12 hours straight and made nothing for that time.
When I did start making enough passive income to live on, I didn’t think ‘yay, I’m being paid for nothing.’ I thought ‘about time, I’m being back-paid for the work I put in all those years ago.’
Unless you’re at the very very top of the pyramid, you will not be making much (if anything) from TRUE passive income in an MLM. You will simply be making small commissions that equate to you earning far less than minimum wage for the amount of hours you’ve put in.
And if you think ‘hey, no worries, I’ll just make my way to the top so I can start earning real money,’ I suggest you refer back to point #2.
8. There is no risk
HOW? How is there no risk? A 99.6% chance of losing money sounds like a pretty big risk to me!
9. All jobs are pyramid schemes
Many Network Marketers like to throw around the false comparison that if an MLM company is structured like a pyramid scheme then so is a regular corporation because many businesses are triangular shaped, with the CEO at the top and making the most money, and the workforce at the bottom making the least.
However, in a regular business, the workforce are not paying to work, they are not losing money and they are getting paid a guaranteed income. They also enjoy benefits such as sick pay, paid holiday and health insurance and do not need to infinitely recruit people into the company.
10. You will become part of an amazing community
Okay, this one might be half true. You will indeed be introduced to a network of supportive and positive people who will become your friends.
Many Network Marketers cite this ‘sisterhood’ as being the best thing about their company, and I’m not going to sit here and tell you that it is a complete myth because it isn’t.
First off, your upline is your friend because she makes money if you make money, plain and simple. As for everyone else? Well, see how long they stick around for if you quiz the biz – some people do make friends for life in Network Marketing, but the majority of people find themselves blocked and deleted if they decide to leave, not unlike the way some cults and religious sects treat ex members (the link between cults and MLMs is a fascinating and broad topic that I will leave for a whooooole other blog post!).
What’s more, you may well make a bunch of new friends, but at what cost? As your only potential customers are the people already in your life, you have no choice but to bug your existing friends and family to buy your products and join your team, thus becoming annoying be default.
You may start to resent them for not ‘supporting’ you, and they may grow tired of constantly feeling as though you’re selling them something. Not only that, but MLM companies actively encourage people to cut ties with anybody that is a ‘hater’ (read: concerned or sceptical) because ‘you don’t need that energy in your life.’
11. The income disclosures are skewed because most people only sign up for discounts
Okay, this one really bugs me!
Many people who are in Network Marketing companies (Monat and Arbonne are the main offenders of this) like to say that the income disclosure forms (the ‘average earnings’ documents that show that most of the people in the companies are making little to no money) are not accurate because most people only sign up to the company to get discounted products.
This is because Monat (for example) will offer discounted shampoo to its Market Partners, and so if you loooove Monat and want to pay £99 to sign up, you will receive a 30% discount off Monat products for 12 months.
The problem with this though, is that the income disclosure statements only take into account ACTIVE distributors, meaning that the only people shown on the document are people who are generating a certain amount of sales/buying a certain amount of product every single month (this number varies but it usually equals 150 – 200 USD).
Is it POSSIBLE that THE MAJORITY of distributors spent $200 on hair products EVERY MONTH FOR A YEAR (thus remaining active but not making money)?
Yeah, it’s possible, but come on. Not likely, is it?
The more likely explanation is that the active distributors could not sell products or recruit people because they had poor training, it was a saturated market, and NETWORK MARKETING COMPANIES MAKE IT STATISTICALLY IMPOSSIBLE FOR MOST PEOPLE TO MAKE MONEY.
…my apologies. I promised myself I wouldn’t get heated in this article but damn.
So, that just about does it! As you can hopefully see, Network Marketing isn’t quite what the people in the biz make it seem.
Chances are, you won’t become rich if you join an MLM and the work will be a lot harder than you think, but hey – the purpose of this article was to let you know the facts before you dive right in, and if you still want to then be my guest!
*This term doesn’t accurately describe Network Marketing or MLM, but is often used as a way to make it appear more legitimate and closer to the way that bloggers and influencers make money. However, affiliate marketing is only about recommending products and gaining commission and does not involve multiple levels, or a downline.