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Cruises, GirlBosses and crippling debt: should we be frightened of MLMs?

21/01/2020

Millions of people around the world are seduced by the bright lights of multi-level marketing companies. But what’s the reality for most people? How do MLMs differ from pyramid schemes? And what does the future look like?

Cruises, GirlBosses and crippling debt: should we be frightened of MLMs?

The first thing a direct seller will tell you about their multi-level marketing company (MLM) is that it’s not a pyramid scheme. The second thing they will tell you is to buy their make-up, essential oil or colourful leggings. Or that they’re living the dream and making thousands every month, and that you too can benefit from this high-profit, low-effort lifestyle. It will change your outlook, your perspective, your bank balance. 

In an MLM—sometimes called a direct sales company, or a network marketing company—a company produces wholesale items that are not available online or in shops. Instead, it sells them to direct sellers, who in turn sell the stock on with a slight mark-up to neighbours, family members, Facebook friends, colleagues or whoever else is in the market for dietary supplements or wickless candles. 

But that’s not the only way to make money in an MLM. A direct seller can make money by recruiting other direct sellers on a “level” beneath them. Once they have a certain number of recruits—called “downlines”—they can earn a commission of whatever sales those downlines make. If the downlines, in turn, recruit sellers into the MLM, they too are eligible for commission—and the original recruiter earns a cut off the sales of those people. 

Still with me? Good. There’s more. There are some uplines who make enough money from their recruits’ sales so they don’t have to sell themselves. This is called “passive income”. This is the MLM dream—to recruit enough people to stop selling entirely.

Similarly to MLMs, pyramid schemes have a recruitment focus—but unlike MLMs, there are no products or services for sale. People will pay a “fee” to enter a pyramid scheme, which will be filtered upwards, with the recruiter, and their recruiter, and their recruiter each taking a cut of the fee. But nobody is actually buying anything. They are illegal in a lot of countries, including the UK. 

It’s understandable, then, that MLMs are quick to disassociate themselves with pyramid schemes—despite adopting a similar multi-level structure. A dedicated MLM recruiter will be quick to highlight that MLMs have two streams of income—while one of these is recruitment, the other is the profits made by the tangible items being sold. MLMs are legal because of the scented candles, the colourful leggings, the diet pills: the stock. But the stock wouldn’t move without sellers.

As of 2017, the MLM sector was worth $189bn, with companies such as Avon, Amway and Mary Kay netting way beyond $3bn apiece. But the billionaire, mascara-peddling juggernauts of today owe at least some of their success to the marginalised women of 1960s America. Rural women who didn’t have local department stores were demonstrating fashion and beauty products, while housewives sold Tupperware door-to-door, children in tow, to supplement their husbands’ incomes.

It’s a trend that has continued. As of 2018, 75% of those who sell and buy MLM products are women. But the stay-at-home mothers and opportunistic rural churchgoers have been joined by a new sub-sector of direct sellers: millennials, already seasoned in the nuances of the gig economy, looking to make a quick buck. 

How to monetise your friend list

“Welcome to my Facebook Live! If you’re watching please say hi!” A smiling woman proceeds to apply make-up products, breezily reeling off their names and prices, all while a peppy dance tune plays in the background. The video doesn’t just make the products look good. It sells the art of selling—as something fun and creative, flexible and attainable.

Fifty years ago, you might have watched this sales pitch from an enthusiastic neighbour on your doorstep, but now you’re more likely to have it land in your Facebook inbox, peppered with emojis and terms of endearment from someone you haven't spoken to in years. This practice of over-personal, unrequested messaging has earned the nickname “hunzoning”—due to the MLM seller’s tendency to adopt the term “hun” when addressing potential recruits. 

Nowadays, sellers are actively encouraged by uplines to galvanise their Facebook friends into buying from them, all while purging their profiles of negativity to sell the lifestyle of direct sales, too. A term that crops up in forums and YouTube comment sections is the “Hundred List”—a list of 100 people who, however vaguely, might be interested in buying your products, joining your sales team, or both. If you’ve ever got a strangely overfamiliar message from an acquaintance asking if you’d like to get involved in an “incredible opportunity”, you’ve probably made someone’s Hundred List. 

Ever since Mark Zuckerberg and co-founders put the first ads on Facebook two months after launching it, social media sites grew into bountiful money-making opportunities. From Facebook Marketplace to retargeted adverts, we've accepted (some of us more reluctantly than others) that we're going to be sold to. The problem with MLMs is that the selling isn't being done by a faceless corporate account. Direct sales has a face, and it could be your auntie, your primary-school best friend or an old uni mate. These people can end up isolated by their own persistence, as they act on instruction and message sales pitches to everyone they've ever known. Buying these products will improve your life, your distant cousin will tell you, but selling them will change it.

"You have to be ok with messaging people and getting rejected,'' says Jamie Parker via her video, Why Arbonne didn’t work for me. Parker started selling Arbonne because she wanted to work from home, and called Arbonne the "perfect opportunity" for that, but said it just didn't work for her because she "wasn't a salesy person". She found it embarrassing or awkward messaging people in her social network that she didn’t know well, trying to sell beauty products. 

There are scores of videos and blog posts from people such as Parker—ex-sellers who didn’t get any sales or couldn’t recruit anyone else. A lot of them—Parker included—have cut their losses, accepted that it wasn’t for them, and have no hard feelings towards the companies themselves. But for others, the relentless rhetoric of MLMs can have greater consequences. 

“Mindset is everything, you guys, everything.” 

Even the most seasoned uplines make no secret of the fact that direct sales is hard. Sellers can lose money, or friends, or both. So how do these companies and their network of representatives convince people it’s worth the risk?

Direct seller and upline Laurenda Eddy claims that she recruited 112 sellers to her network marketing team in 30 days. In one of many MLM-focused YouTube videos, she talks of “becoming coachable” and “doing what the leaders have already done”. “Don’t create your brand,” she urges, “just be yourself.”  It’s hard to grasp exactly what she means.

There’s a deeply psychological element to how people in MLMs talk about them. Get involved with one, and you have the capacity to “change your life” and benefit your “family and community”, all under the guidance of uplines recast as “mentors” or “BFFs”. Annual holidays and cruises for the most successful within MLM circles incentivise sellers to hit sales and recruitment targets. One interviewee in a Vice documentary said she saw the figurehead of her MLM as a “second mother”. 

Delve deeper, and these female-focused MLMs appear to have co-opted feminism into their branding. There is talk of sisterhood and empowerment, of being a “girl boss”. Upon agreeing to sell for an MLM, it’s typical to be added into a WhatsApp group or receive daily phone calls from a mentor looking to check in. Many women report having found friendships in their fellow MLM sellers—only to have the illusion shattered when they leave or crash out of the MLM and find themselves blocked and ignored by their former "sisters". 

And people do crash out. “It’s always something to do with the mentality,” explains Tori Torres, a YouTuber who was briefly involved in an MLM. “They always say the reason you can’t succeed is because of the way you think.”

Failure to succeed in direct sales is directly conflated with personal failure, a sensation felt most strongly when everyone around you seems to be doing so well. But are they? An anonymous former MLM seller spoke to Vice about how her upline encouraged her to keep up the façade of doing well with sales, even when she wasn't. “Finding myself pretending to try and make a sale or trick someone into signing up under me was really difficult. I was doing crap, and so were a lot of the other girls on my team, but we were told to lie.”

There’s a tragic irony to the positive, girl-boss messaging that attracts women to MLMs. “You sell these products for this company that […] belongs to someone else the entire time […] but they make you feel like it’s your company,” said Tori Torres in her YouTube video. 

 In episode 8 of The Dream podcast, a producer reports hearing the testimony of sellers and their motivations for selling. One woman is involved in the MLM because she wants to earn enough money to buy a headstone for her father's grave. Other testimonies come from women trying to ward off debt or inject some extra cash into a strained family budget. The narrative of a stay-at-home mum looking for companionship as well as earnings comes up all too regularly. Rather than cruises and empowerment seminars, these women need a steady income. 

The backlash 

“I just feel like I’ve failed. I am embarrassed. And now I’m just trying to fix my mistakes”. Jill Domme, a former MLM seller, is talking to Vice about her experience selling for US-headquartered MLM LulaRoe. Domme recalls how one month she earned in excess of $30,000 selling Lularoe’s colourful, modest clothing. But gradually, her sales started to fall and she started to take out more loans to purchase more inventory. As her sales fell, so did Lularoe’s reputation—it faced multiple lawsuits (dismissed as “meritless” by the company) and attracted negative media scrutiny. Domme found herself fending off criticisms from customers. Now, she has more than $30,000 in tax debt and is going through bankruptcy. 

It’s a fraught journey that is difficult to understand if you’ve never joined an MLM. Firstly, you have to pay to start selling. “I don’t think I ever made enough [selling Airbonne] to cover the sign-up fee,'' says Parker. GoFundMe does not allow people to start campaigns to fund MLMs, but there are still a handful of hopefuls who appear to have slipped through the cracks. 

Once you enter an MLM, the costs don’t go away. Everything you sell, you first have to buy yourself. Many ex-sellers report being told to buy more stock by their uplines, even if they weren’t selling. On the flipside, top sellers report having to buy a certain amount of stock in order to get a bonus—or have people in the chain who are doing so. So it makes sense that the mentor in a team would encourage their downlines to buy more inventory—to collect their own bonuses. 

The business model of the MLM also makes it unsustainable for those at the bottom of the chain. With dual purposes of selling and recruiting, geographical areas can quickly become oversaturated with sellers—particularly in rural areas as sellers recruit their friends, family and neighbours, increasing their competition while simultaneously decreasing their consumer base. 

At the bottom, the picture is bleak. Women such as Domme have piles upon piles of unsold inventory and nothing but debt to show for it. At the top, CEOs often cast themselves—or are cast—as gurus, inspirational business leaders and business mentors. Expert cult deprogrammer Rick Alan Ross told Vice that MLMs and cults share three defining characteristics: a “charismatic leader”, a “culture of coercive persuasion” where members are taught to “isolate themselves from anyone who questions their devotion”, and forms of exploitation at the hands of leaders that can include “economic exploitation”. 

Often, MLMs turn over billions per year. But people at the bottom of the chain don’t share in the profits: according to the FTC, 99% of people who join them lose money. For the people at the mid-level—neither gurus nor new recruits—there’s a direct incentive to encourage downlines to recruit as much as possible, to create new levels beneath them and generate bonuses. 

The people who end up losing money are among the most vulnerable: living in parts of the US or UK that are rural and slower to recover from economic crises. Or they are young people who trust their friends or family when they promise them a life-changing opportunity. “Most things I do end up like this,'' one young YouTube blogger says, somewhat despairingly,

There have been numerous lawsuits brought against MLMs over the years—not just for their business practices, but also for things such as faulty products and unpaid suppliers. The FTC in the US has put time and resources into investigating MLMs, cracking down on any that appear to have a greater focus on recruitment rather than on sales. Crowdfunding for an MLM starter pack on GoFundMe is banned, and forum users on parent site Mumsnet cannot post content that relates to direct sales.

On the other side of the court, MLMs spend a lot of time trying to prove—via their spokespeople and prominent sellers, and sometimes via lawsuits—that they are not pyramid schemes. They spend a lot of time, also, trying to refute accusations that they operate like cults. 

But like cults, like pyramid schemes, MLMs are secretive. "They won’t talk to us,'' says The Dream podcast creator Jane Marie, in an interview with Vox. "That has been really frustrating. We’ve barely heard a peep from the MLM industry… I think they’re trying to stay quiet and ride it out and hope that it goes away, because they know. They know that they’re on the wrong side of this."

 

Becky Kells

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