We all have at least one Facebook friend who is “taking control of their financial future” by becoming involved in “direct sales.” Whether it’s through LuLaRoe, doTerra, Le-Vel/Thrive, Rodan + Fields, Herbalife, or any of the other dozens of companies that utilize Multi-Level Marketing (MLM) strategies, none of us can hide from the friends and acquaintances who suddenly have a garage full of product to push.
It’s not difficult to recognize the copy-and-paste Facebook posts and messages touting the “unbelievable results!” that they have seen from whichever weight loss shakes, eye creams, or vitamin patches that this particular person has (literally and figuratively) bought into.
But, although I find these marketing strategies to be particularly annoying, I don’t think that the majority of the blame should fall on these low-level salespeople. Most of these consultants (or representatives, or whatever language their particular company uses) are looking to gain what virtually all of these companies promise: financial freedom, independence, stability, and flexible work hours. These companies identify, target, and tailor their sell for potential recruits (rather than potential consumers), when they know full well that 99 percent of MLM sellers actually end up losing money and 95 percent quit within 10 years, according to a report by the Federal Trade Commission.
Luckily, there are a few tell-tale signs that we can all look out for when considering whether or not to join XYZ’s company “team” to make a little extra money each month.
1. Prioritizing recruitment over selling product.
While MLM companies actually do sell products and “true” Pyramid Schemes do not, both focus much more heavily on recruitment of new reps than on sales. Most MLM companies offer discount on product to new sellers, so if you plan on regularly buying a product it only makes sense to sign on. Much more importantly though is that whoever recruited you will now get a cut of all of your sales profit. Obviously with this kind of set-up, the further down the line you are, the more difficult it is to make any money at all.
2. Requiring upfront payment for things like “start-up kits.”
Most of these companies require sellers to stock inventory before they actually begin to sell it, rather than ordering it as-needed. For example, the LuLaRoe start-up cost is around $6,000. Sellers then have trouble even getting rid of their stocked product in order to break even, and many end up stuck with these excess products and the debt that bought them.
3. Claims that are just too good to be true.
This applies to the products that consultants are peddling (“lose 40 lbs in just 15 days!”) as well as promises of magnificent riches and perks galore for successful sellers. As my mom always told me: if it seems too good to be true, it probably is.
4. Deception and company opaqueness.
If you can’t get straight answers from company representatives, there is a reason why. Whether you’re asking about how the products work (or whether they do), how much money someone can expect to make by selling the product, or any other question that a potential employee would ask, you shouldn’t feel like you’re getting the runaround or made to feel like you’re being unreasonable.
MLM companies may just be pesky social media posts to many of us, but for some people they represent hope and potential financial independence. In reality, if you’re trying to sell face creams to Facebook friends that you haven’t seen since high school, you’re much more likely to accrue major debt, stress, and a closet full of unused product than any type of riches.
If you’re one of the successful pushers, congrats. You’re in the 1 percent. But by promoting these companies to friends and family members who trust you, by making insincere claims about how so-and-so company has changed your life for the better, you’re actively exploiting your relationships and putting other people’s well-being at risk. I guess if you’re okay with that, you’re in the right business.