Is Scentsy a Pyramid Scheme? A Deep Dive Into the Scentsy MLM

Chances are you’re here because you’re considering signing up as a Scentsy Independent Consultant.

Perhaps you’ve bought some Scentsy products or been to your friend’s Scentsy party and you’ve decided to take the next step and become a Scentsy Consultant so that you can make some extra cash by recommending products you love to your friends and family.

However, you’re hesitant.

You’ve heard rumours that Scentsy is a pyramid scheme and that becoming a Scentsy Consultant isn’t the best business move, and you want to know the full story before you join Scentsy. 

That’s where I come in.

I am going to put the Scentsy MLM under the microscope and take a look at just how good the Scentsy business opportunity really is, whether you can make money selling Scentsy, and whether Scentsy is operating as a pyramid scheme in disguise.

So, without further ado, pour yourself a coffee and let’s get into it!

Is Scentsy a Pyramid Scheme? A Deep Dive Into the Scentsy MLM

The Basics

What is Scentsy?

Scentsy was founded by Kara Egan and her sister-in-law Colette Gunnell in Salt Lake City, Utah 2003. Kara had a dream of creating scented products that were both safe and sustainable, and so the flagship Scentsy product was born – an electric candle warmer.

Electric candle warmers are a safer alternative to traditional candles as there is no naked flame involved, and they also don’t release harmful pollutants into the atmosphere (and into your lungs!). 

In addition to electric candle warmers and wax melts, Scentsy also produce a range of fragranced items, including diffusers, air fresheners, room sprays and even laundry detergent!

Some of their current scents include apple cherry strudel, blackberry cider and fresh cut daisies (I’m a sucker for nice scents so the Scentsy wax bars definitely appeal to me!). 

However, Scentsy was not destined to be a regular fragrance company for long.

To anybody wondering, is Scentsy an MLM, yes. Scentsy is an MLM.

In 2004, a struggling entrepreneur with several failed business attempts under his belt bought Scentsy. His name was Orville Thompson, and today Scentsy is owned by Orville and his wife, Heidi.

They moved the business to Idaho and almost immediately changed the business model to an MLM structure, with an emphasis on the ‘party plan’ sales technique, and today there are around 100,000 Scentsy Consultants in the US alone!

What is MLM?

MLM stands for multi-level marketing, and MLM companies are also known as network marketing or direct sales companies.

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 because they are all in your direct downline. 

All you had to do was recruit 10 people and you made money from 1100.

While you can always make money from selling products, 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 Scentsy 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 a pyramid scheme?

Pyramid schemes are very similar to MLMs, but the main difference is that in an MLM, it is possible to make money from selling products rather than just recruiting others into the business.

A traditional pyramid scheme 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.’

However, as members increase, recruiting quickly becomes impossible and so most members are unable to profit 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 appear like a legit multi-level marketing company, it could still be exploiting loopholes in order to function as a pyramid scheme in disguise.

Basically, if the only real money to be made is from recruitment, a company may well be a pyramid scheme disguised as an MLM business.

Inside the Scentsy MLM business opportunity

How do you make money if you become a Scentsy Consultant?

I took a look at the Scentsy compensation plan to see how to make money as a Scentsy Consultant.

As with most MLM compensation plans, it was pretty difficult to understand (although it was only 1 page long which was a nice surprise!).  

Anyway, there are 10 ways that you can make money with Scentsy, in the forms of commissions and bonuses:

• Commission from product sales (20-25% per sale)
• Bonus from wholesale volume
• Frontline bonus TWV (team wholesale volume)
• Frontline consultant bonus TWV
• Frontline star consultant bonus TWV
• Frontline superstar consultant bonus TWV
• Frontline director bonus TWV
• First generation direction TWV bonus
• Second generation direction TWV bonus
• Third generation direction TWV bonus

Now honestly, this all just looks ridiculous to me, and despite a lot of long-winded titles, there isn’t a lot of information here.

However, what we can gather is that the vast majority of ways to make money with Scentsy (9 out of 10) involve recruitment in some way.  This is usually in the form of ‘rewards’ for how much your team sells, as well as how big your team grows etc.

While not explicitly handing out bonuses for recruiting people, 9 out of 10 ways to make money with Scentsy involve having a ‘team’ underneath you, and so there is a clear incentive to grow your team.

In fact, in the Scentsy Consultant Guide, Scentsy themselves say ‘There’s no better way to grow your income than through building a team,’ and ‘when you bring more consultants to the Scentsy team, you get paid more.’

They further emphasise how important recruitment as a Scentsy Consultant is when they say ‘We regularly develop promotions and incentives to help you recruit new consultants.’ 

Considering a legitimate Party Plan company (what Scentsy claim to be) would focus more on product sales rather than recruitment, it seems a little off that Scentsy is pushing the recruitment side of things so hard, doesn’t it?

How much money can you make as a Scentsy Consultant?

To see whether it is likely that you will ever make money as a Scentsy Consultant, I took a look at their UK 2020 Income Disclosure Statement (IDS). 

An Income Disclosure Statement is a document which outlines exactly how many people are registered as Scentsy Consultants and how much money they are making.

Scentsy’s Income Disclosure Statement is split into two columns. 

The first column shows the average earnings of Scentsy Consultants who were working with Scentsy for the entire year, and the second column shows the earnings of those who did not stay in the business for the full 12 months.

Of all Scentsy Consultants, only about 25% were selling Scentsy for the entire year, and this is because multi-level marketing in general has a high dropout rate.

I will only be looking at the 25.5% of Consultants who worked for Scentsy for the entire year in 2020. 

So, let’s take a look at the numbers:

• There were 4253 active Scentsy Consultants in the UK in 2020
• The minimum annual commissions were £127
• The maximum annual commissions were £268,654
• The mean average in annual commissions was £3131
• The median average in annual commissions was £1106

It is unfortunate that these percentages aren’t narrowed down even further, but MLM companies do tend to be vague with these things.

The median average is the most representative here because the highest commission earned by a Scentsy Consultant (£268,654) has likely skewed the mean average massively, whereas the median average is slap bang in the middle of what Scentsy Consultants earned, with 50% of them earning more, and 50% earning less.

So, if we divide the median average by 12, we see that the median monthly earnings for active Scentsy Consultants was £92.16.

That’s less than £3 a day, which is less than people working in Chinese sweatshops.

Because the median is the middle number, this means that 50% of Scentsy distributors earned less than this amount. 

We should also remember that these figures do not take into account EXPENSES accrued by Scentsy Consultants while building and promoting their business.

How much does it cost to be a Scentsy Consultant?

The numbers on the Scentsy Income Disclosure Statement do not take into account the costs of becoming a Scentsy Consultant.

In order to start selling Scentsy, you must pay $99 (or 85 GBP) plus tax and shipping, for a Starter Kit, and then a further $10 per month for your own personal website (the first 3 months are free).

If you don’t build a downline, then you must also sell $200 worth of products in 1 month out of every 12 to avoid having your account deleted. If you do build a downline then this increases to 1 in every 4 months.

If you don’t manage to reach this number by selling products, you can buy products yourself to make up this number.

A Scentsy Consultant will rack up other expenses such as:

• Refreshments & other supplies for Scentsy Parties
• Phone/internet bills
• Buying products for personal use
• Food, gas, travel and accommodation when travelling to Scentsy events and conferences
• Costs of running your own blog or promotional channel such as YouTube

You then have to take into account the time spent working on selling Scentsy and whether the money made justifies the hours spent.

All of these costs must be subtracted from the ‘average earnings’ we talked about earlier in order to see just how much money Scentsy MLM Consultants are really taking home at the end of the day (most of them will likely end up losing money). This can help to explain why MLMs are notoriously toxic companies to work for.

Is Scentsy a pyramid scheme?

I am not the FTC. 

I cannot say, without a shadow of a doubt, whether or not Scentsy is a pyramid scheme.

HOWEVER.

What I will say is that from the compensation plan and Consultant Guide, Scentsy definitely seems to focus on recruiting people into the Scentsy ‘opportunity’ rather than selling products, which is definitely a warning sign of a product-based pyramid scheme. 

In order to determine whether Scentsy is a pyramid scheme in disguise, we must try and answer 3 questions.

1. Are most people unable to profit?

When we looked at the Scentsy Income Disclosure Statement, we saw that the vast majority of Consultants were not making anything close to a full-time wage, and many of them are likely losing money.

The Income Disclosure Statement is also very vague and doesn’t contain nearly enough information to establish what exactly people in the company are earning.

All in all, we can see that a handful of people at the very top are making a significant amount of money, while most people are unable to make even close to a minimum wage.

2. Do you have to ‘pay to play?’

While joining Scentsy is not as expensive as other MLM companies out there, you still have to spend money if you want to become a Scentsy Consultant, and you will likely end up spending hundreds of dollars on Scentsy products as the months go on. 

Let’s not forget that you have to sell $200 worth of products in a month to remain active, for 1-3 months of the year. 

That might not seem like a lot, but when the average wax melt is about $9, and the average person’s social network is not that big, it really is. 

Like with most MLMs, if a distributor is struggling to hit their $200 target, it makes sense that they would buy some Scentsy products for themselves in order to hit that target and stay ‘active.’

So, to answer our question – do you have to pay to play with Scentsy?

Yes you do.

3. Is there a heavy focus on recruitment?

As with most MLM companies, the only real way to make money with Scentsy is by having a team underneath you.

Scentsy themselves say that ‘there’s no better way to grow your income than through building a team,’ meaning that the entire compensation plan is built on the premise of recruiting others into the business (or ‘building a team’ as they like to say).

Of course, 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 because it allows Scentsy to skirt around the lines of being an illegal pyramid scheme.

It is also interesting to note that there are 8 levels within Scentsy, and according to Jon Taylor, once there are more than 5 levels in a compensation plan, it becomes very difficult for new recruits to turn a profit. 

He believes that when a compensation plan becomes more than 5 levels deep, it becomes ‘an exploitative money transfer scheme, or product-based pyramid scheme.’

So, is there a big focus on recruitment?

Yes, there is.

Is Scentsy a Pyramid Scheme? | Final Thoughts

As much as I love scented products and think that some of the Scentsy wax melts sound like they smell divine, I do believe that the Scentsy MLM is a pyramid scheme in disguise.

While Scentsy has relatively low start-up costs, meaning you may not end up with thousands of dollars worth of debts, becoming a Scentsy Consultant is just not a good way to make money.

What’s more, if you recruit people into the company, you are playing a part in those people ending up out of pocket.

Even if you don’t care too much about your own profitable side hustle, you should probably think twice before encouraging anybody to sign up to an MLM like Scentsy!

That’s all for now folks, don’t forget to let me know your thoughts in the comments section below.

Until next time!

XOXO

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