What is Multi-Level Marketing?
Have you ever received a DM from a former high school classmate telling you about this “amazing opportunity” to earn some cash on your own time? Did this opportunity include the selling of a product that they swore “works wonders”? Chances are they were trying to get you into a multi-level marketing scheme, or an MLM for short.
An MLM is a company that not only gives the seller a commission based on how much they sell, but they receive a commission based on the selling of their recruits. The focus in MLMs, though, is not so much how much a person sells, but rather their downline, the people they recruited and the people their recruits recruit. The larger a person’s downline, the more profit they make, because of the commission received from each recruit.
After being roped into an MLM the sellers, then, have to market and sell their products to their own personal network, attempting to make a profit off of friends and family. The minuscule difference between a pyramid scheme and a multilevel marketing scheme is that in an MLM a product is being sold. This product makes the business legal, barely legal, but still legal.
For example, Mary Kay, one of the most well-known MLMs, hires “beauty consultants” who then sell products to their close circle of family and friends. Along with selling these products, they try to recruit these family and friends to be “beauty consultants” as well. After recruiting, the initial seller receives a profit based on how much their recruited “beauty consultants”, or their downline, sell.
(Photo by Tara Winstead)
MLM’s get you in the door by promising you cash on your own time, but what they do not tell you is the chances of you making this cash are slim to none. The MLM industry made over 40 billion dollars in 2020, which paints it as an amazing opportunity, but the spread of this cash is peek capitalism. According to the Consumer Awareness Institute, only 1% of participants in an MLM actually make a profit due to the investment one must make to start. Start-up costs to join an MLM can be anywhere from $50 to over $900. The majority of participants never see a return of investment, therefore putting them at a loss. Participants then desperately try to make up for their losses by recruiting, thus making the cycle neverending and the top even richer. The ease in which one can feel trapped in an MLM makes the business structure extremely toxic.
Along with promising results that may never happen, MLMs falsely use feminist diction to aid them in their recruitment. Phrases like “girl boss” and “boss babe nation” lure participants by presenting them with an opportunity to not only make money but “further the feminist movement” as well. MLMs hide behind the feminist movement as a way to cover up the damage they are doing to the women they say they are empowering and what is most frustrating about this is that the majority of CEOs and executive boards for these “feminist” companies are men. So in the end, men are primarily profiting from the abundance of women joining these companies.
How MLM’s Take Advantage of Vulnerable Women
75% of participants in an MLM are women and 45% of women who join an MLM are between the ages of 20-29. According to an AARP study, the average MLM participant is married or living with a partner and going through a moment in life where they are busy and uncertain about their future, for example in college, having a baby or getting fired. MLM’s prey on mothers, college students, minorities and other vulnerable groups of women because they realize the stress these women are under in this day and age.
For mothers and college students, the opportunity to make money on your own time and being your own boss is enticing. MLMs are also known to take advantage of women who have recently immigrated to a new country, preying on their need for money and desire for success in their new home country. According to the National Consumers League website, between 60-83% of participants in Herbalife are Latino. There is also the unrealistic promise of making a lot of money, which is a driving factor for women in a time in their life when there seemingly always is a need for some extra cash.
MLMs also recognize how tight-knit these groups of women can be and see these as an easy way to expand their direct sellers. The amount of potential that these groups have for recruitment makes them the ideal sellers for MLMs.
In 2020 Rodan & Fields received a warning letter from the Federal Trade Commission stating that they were falsely advertising working for the company. In posts on social media in 2020, as a response to the newly emerging COVID-19 pandemic, the company promised an additional income, at no risk, and profits that come immediately, which the FTC found to be misleading and deceptive. The company outlined minimal risk as a way to lure women into the scheme. Rodan & Fields is not the only company to falsely advertise working for them. In 2020, 16 MLMs received letters from the FTC, telling them that their members were falsely advertising work for the company.
The Awful Products They Peddle
The most common MLM’s are products wanting to “better” their customer, with over 50% of all MLM’s being either wellness or personal care products.
In 2018, Monat, a popular hair care MLM, was faced with a class-action lawsuit from women stating that the hair product severely damaged their scalp and caused hair loss. Products from Herbalife, a dietary supplements company, have Herbalife has been involved in multiple court cases alleging a connection between the supplement and liver disease. These MLM products were not made to better the consumer, they were made with the intention of making a profit.
Companies also rely heavily on the use of before and after pictures, regardless of the accuracy of said photos. In a Good Housekeeping article, one former MLM participant stated that the last straw for her was when other employees for Arbonne, a company that sells nutrition and skincare products, used photos of her weight loss to promote their product. She went on to say that her weight loss was not the result of Arbonne products and she was uncomfortable participating in a scheme as dangerous as this. These companies recognize the effects before-and-after photos have on women who are self-conscious about their weight or skin and take advantage of these insecurities.
How Not to Get Caught Up
Education is key to putting a stop to the harmful MLM cycle that so many vulnerable women find themselves trapped in. Talk to your friends about the dangers of MLMs and recognize the warning signs. Take note of the language being used. If a company is using salesy buzzwords like “be your own boss” or promises the potential to make extreme profits “on your own time,” be wary. Do you have to make a pricy initial investment in stock or inventory? If so, this might not be the life-changing opportunity you are looking for. Finally, are there no real qualifications to get in on this once-in-a-lifetime business opportunity? You might be messing around with an MLM. If it seems too good to be true, it probably is, and it will more than likely cost you.
Top Photo by Polina Zimmerman from Pexels
Payton Toomey is an editorial intern at BUST and a student at the University of Arizona studying Journalism and Information Sciences and eSociety. She loves writing about mental health, feminism and pop culture. You can follow her on Twitter @PaytonToomey.