MLM stands for multi-level marketing. You probably have a cousin/aunt/sister-in-law/friend who has tried to hit you up. The pitch at first might be subtle (and, frankly, seducing).
First it’s just: “Hey, want to come over for a gathering with some friends?”
You think: “Yea, sure, I haven’t seen you in forever!” You go, then realize the gathering is actually a sales pitch for this new amazing, can’t-live-without-it product they have. Your friend might get one or two people in the group interested in her product, but, for the most part, it’s pretty awkward and everyone leaves feeling a bit duped.
Just wait — there’s more! Maybe you didn’t purchase the product, but, hey — you could still be interested in selling it, right? So you get contacted again about going to a meeting to become a “consultant.” All you have to do is pay money to start selling the product. You probably get where I’m going with this...
So, which companies are MLMs?
...any of these names look familiar?
Beauty Counter | Mary Kay | Rodan + Fields | Nu Skin | Amway | Herbalife Nutrition | doTerra | Younique | LuLaRoe (was recently accused of being a pyramid scheme, with a $1 billion lawsuit filed against it)
BUT WHAT ARE THEY, REALLY?
If you haven’t seen it yet, John Oliver has an amazing bit on the MLM industry as a whole, and it actually played a role in inspiring me to write this post. So watch that to get a really clear (and entertaining) report, then come back here. I’ll be referencing it a ton.
The thing is, MLMs are actually pyramid schemes. All of them. MLMs don’t like to be called pyramid schemes, but that’s exactly what they are.
You get clowns like this (President of Direct Selling Association) commenting about the — eh, I don't buy it.
Here’s a favorite quote I came across from the New York Times: “It is a kind of chain letter with a product attached to give it the sheen of legitimacy.”
Pyramid schemes can only go 13 rounds (skip to 15:22) before they cover the entire planet. (That’s why the companies fold so quickly.)
WHY I CARE
Maybe it’s my Mormon roots?
Per capita, Utah has more MLMs than any other state. Jana Riess gives 10 reasons Mormons dominate multi-level marketing companies, explaining why, culturally, Mormons are drawn to MLMs more than the average person. I couldn’t agree more. More on Utah and MLM’s here and here.
I went to college at Brigham Young University. A lot of the missionary boys would come home at age 21 and take their conversion to Mormonism skills [see the subscribed missionary manual Chapter 11 please] and go on another mission: conversion to at-home security systems. Why? Because your quiet neighborhood and your house that has never been broken into is extremely unsafe according to companies like APX (Vivint today). Or, these boys would get involved with another multi-level marketing company that causes them to go door to door (satellite dishes and pest control were other options).
Maybe it’s because MLMs sell you this lifestyle, like you can run your own business. And, really, you're doing a lot of work like you are running your own business. But at the end of the day, you have zero control and aren’t actually running your own business. Here are some examples:
PRODUCT - Your consumers think that cream is too oily? You can’t go change the formula.
PROFIT MARGINS - Your consumers think the cream is a little expensive? Want to see how you can lower the cost? You can’t - you don’t own it.
BRANDING - Feel like the branding is a little dated? Or the voice isn’t quite reaching the intended audience? Sorry, you get whatever is handed to you.
Maybe it’s because my job primarily is to empower women through business, and I see the massive manipulation and disempowerment going on in MLMs and how it’s primarily women. And it fills me with rage.
WHY DO PEOPLE JOIN MLMs IF IT'S A PYRAMID SCHEME?
MONEY: According to this NuSkin pdf, I could be making as much as $38,217 a month or a half million dollars a year. Or, at LulaRoe, $2.5 million. This clip from John Oliver’s segment featuring a Youngevity conference is too good. Yes, I’ll take a Mercedes, thank you!
FREEDOM: In that same clip from John Oliver’s segment, she so compellingly talks about quitting your job and walking out of your boss’s office. Who hasn’t thought about giving the middle finger to their boss?
LIFESTYLE: Lots of promises… whether it’s getting after those stay-at-home moms (holy crap this article is terrible) with “You can make money and be an amazing mother!” or women who want to start a business, but don’t want to take on the risk with “You can be a badass #girlboss!”
RELATIONSHIPS/COMMUNITY: Your family might be into it already, or maybe everyone at your church is doing it (read this amazingly well done ESPN article)... “You can be a millionaire - it just takes faith!”
WHY YOU SHOULD CARE
People are not only not making money, they are also LOSING money.
At Kyani, only 37.8% of the consultants make $10 a year or more. Ten dollars!!!!! At NU SKIN, 93% receive $0 commision. ZERO (according to John Oliver). Not only are most of the consultants not making money...most of the consultants are losing money.
“There was a point in time where I had $8,000 worth of inventory sitting in my home while I was running up to food banks to feed my family,” a LulaRoe consultant says. “I really feel like I failed my family.” - Quartz
People aren’t liking who they become.
“Kamel, who runs a youth basketball school in Plano, was terminated in 2014 after he clashed with a member above him, who sent him a racist text, he says…. Before he was kicked out, Kamel had built a sizable downline. "I got my friends into it [AdvoCare], and all the while I hated myself," he says. "I felt like a con artist."” - ESPN
People are being shamed.
Former AdvoCare member Lori Crossan says loyalty keeps distributors silent — but so does shame. Because people who struggle are told over and over that they simply aren't trying hard enough. "If you can't make money, they blame you," Crossan says. She remembers one of the mantras that was drilled into her: "They said, 'You can't do the minimum and expect the maximum.'" - ESPN
IF THEY ARE SO BAD, HOW ARE THEY LEGAL?
Great question. I don’t know. But guns are legal, right? (Oh, I can hear the can of worms opening now...)
But here are some reasons:
It’s extremely hard for the FTC to take them down.
There’s a lobby group just for them: Direct Selling Caucus.
Politicians are involved: Jason Chavitz (UT) - worked at Nu Skin for more than a decade.
Herbalife recruited two former FTC officials to work for them.
And it’s not looking up in the Trump Era.
WE CAN TAKE PYRAMID SCHEMES DOWN TOGETHER BY...
If you’re in one, QUIT.
If you've already quit, tell all the people you recruited why you quit.
If you’re thinking of joining one, DON’T.
If you have someone in your life that wants you to buy from them, send them this article and say “No, thanks.”
Share this post to your feed with maybe a note saying “Just leaving this here.”
Write your congress representative who supports MLMs, and tell them what’s up.
Other resources I came across:
Documentary Betting on Zero
Guys — I’m pretty sure this is an SNL skit — but it’s not. This couple is filled with clickbait.
The Oprah of MLMs is an Asian man, apparently.
I freaking love this PDF, and I don't quite understand how it's a part of the official FTC website with the graphics it has included, but it's pretty compelling.
Facebook group for those fleeing MLMs