“Are you an empowered woman seeking a high-paying job where you can choose your own hours and be your own boss with very few qualifications and while doing very little work?”
Then you are exactly the kind of person who should stay the heck away from multilevel marketing companies (essentially pyramid schemes in disguise). They are trying their darndest to appeal to you but I’m sure you know by now that if an opportunity seems too good to be true, it usually is.
There’s only really about three ways to achieve financial success: hard work, luck, and/or a combination of both. MLMs defy these traditional rules and rely on business practices that are counterintuitive to the very concept of entrepreneurship.
Wait, Back Up. First of all, what is a pyramid scheme?
Good question—that’s exactly the kind of question that once answered, keeps people away from pyramid schemes.
You can either continue reading this article (good choice!) or watch this John Oliver video (admittedly a good choice) or do both (best choice!) The video is also available in Spanish, voiced by the incomparable Jaime Camil.
A pyramid scheme is an illegal form of investment based on a hierarchical setup structured like a pyramid. It starts with one person, the initial recruiter, who is on the top of the pyramid. That person recruits another who is required to “invest” a certain amount, paid to the initial recruiter. To make their money back, the recruit must recruit more people under them, who in turn will each have to invest. If the recruit gets, for example, 10 number of people to invest, they will have made a profit with a small investment.
This scheme cannot go on forever as there are a finite number of people who can join. If you keep multiplying by 10 for each level, you will inevitably run out of people to finance the cycle and the people at the “bottom” of the pyramid—later recruits—will lose money. It will be impossible to recruit as many people as it takes to earn back your money. It’s math.
Not all multilevel marketing companies are pyramid schemes, but they certainly operate in similar ways and are legal really only by technicality.
It seems easy at first—just selling a certain number of items before the end of the month, holding promotion parties at your home, messaging people on Facebook. The problem is that a lot of pyramid schemes operate at a loss for the sellers. MLMs offer better prices on items for sellers if they buy items in larger quantities, incentivizing you to buy more each month, meaning you have to sell more each month to your increasingly-annoyed neighbors and friends to maintain your status as a “top” seller who can buy at the wholesale prices. Oftentimes, you’ll end up with boxes of unsold products in your garage.
Another counterintuitive aspect about the MLM strategy is that you create your own competition by recruiting others. People in the same social circle or geographic location tend to sell to the same audiences. Your repeat customers are the ones most likely to be recruited because they’ve developed a loyalty to the brand, but by recruiting them, you are almost guaranteed to make fewer sales because they would just buy the product from themselves. However, people don’t make money by shilling wares, but rather by earning a commission from the goods sold by the people you’ve “recruited” and the people your recruits have recruited.
Most people don’t buy from MLMs either because a) they know it’s from an MLM and they don’t want to support a company with shady ethics or b) their products are shoddy because the company feels no real accountability for their actions.
The company gets money either way because people are buying the products in order to sell, but the further down the pyramid someone is, the harder it is to sell simply because they’re running out of people.
What do I do if someone I know tries to sell me something? Or tries to recruit me?
Here are some names to watch out for: Mary Kay, Herbalife, Amway, Avon, It Works! (LOL. It doesn’t.), Rodan + Fields, LuLaRoe, and really anything related to “slimming” or “weight loss.”
Not to worry—much like Nancy Reagan’s method to combat drugs—“just say no.” Most decent people, even the persistent ones, know how to take “no” for an answer.
Still, you can’t throw your money away and people will understand your plight if you say “I’m trying to save money these days,“ which is not a lie. You should always be trying to save money!
If someone is truly persistent, don’t be afraid to be a wet blanket; it’s nothing personal. It’s just business. If “no thanks” doesn’t work, don’t sweat it. There’s always a perfectly reasonable explanation as to why you don’t want their products.
Weight loss supplements/corsets/wraps/anything purported to make you feel “skinnier” or “less bloated”: I’m really not comfortable with methods that aren’t FDA-approved or scientifically proven. I’m not sure what sort of unintended effects they could have.
Clothing: Sorry. I know you’re trying to make a commission off these, but there’s really nothing here that I am dying to have and I’m trying to cut down on unnecessary purchases. You know, that Marie Kondo thing about only owning things that “spark joy,” right?
Cosmetics: I have super sensitive skin, so I don’t really want to take a risk with a new product. It’s such a pain in the butt sometimes. I’ve already taken a look at the ingredients list and it seems kind of dicey.
-You know how much I love makeup, but I’ve read a lot of reviews and it doesn’t seem quite right for me. I’m sure it could be the HG product for some people, but I’m not feeling it, personally.
I’m not an expert on MLMs.
So I would suggest you consider this article to be just a start in learning more about them and their crooked business practices. There are many other reputable publications with good sources that have reported on MLMs. Though I tried my best to highlight the negative sides of MLMs, and although almost every single person who has been a seller for an MLM has lost money from the endeavor, there are people (a very small number) who have made crazy money from them. This article is not for those people. They lucked out by getting in early.
You, dear reader, will not be entrapped by deceptive recruiting (borderline culty) methods of MLMs. And please, if you see someone with a burgeoning interest in a multilevel marketing company, discourage them from joining before it’s too late and they have 700 tons of rapidly-expiring laxative tea in their basement with no one to sell it to.
Also published on Medium.