I published a post recently about the 10 kinds of business models (What’s the Difference Between Brick-and-Mortar, Franchise, Direct Sales, and MLM). In it, you can find a lot of information, as well as some resources.
In this post, I want to focus on the Multi-Level Marking business model and why it is very predatory. MLMs can cause people to get sucked into a system over which they have no control, power, or decision-making ability. Someone who joins an MLM is a contractor (also called a “consultant” or “distributor”) who agree to sell products or services. She or he is totally at the mercy of the parent company; they don’t have any say if things change.
Watch my video here, or read on for a transcript and additional material.
There are many reasons why Multi-Level Marketing is dangerous as a business practice. For more info, check out 7 Reasons MLMs are So Attractive to Established Business Owners [Video].
Today, I want to share my experiences of how I got sucked into two different MLM companies. Even though I’m fairly cautious and a hard worker, I was attracted to an opportunity that would give me the chance to succeed. Instead, the outcome turned out to be much, much worse.
Here’s my story.
MLM Attempt Number 1
The first time, I was a poor college student and didn’t have much spending money. I had been working in different part-time jobs (as you do when you’re trying to get through school).
One of my jobs was in a parade as a mascot; I was the Tigger character from Winnie the Pooh show (and 2018 Disney movie called “Christopher Robin”).
I sold ice cream at a Chicago Cubs baseball game. I’d also done babysitting, catering, worked as a coffee barista, and a secretary in an office building.
One day, I met an off-campus student through some mutual friends. She mentioned that if I was looking to make some extra money, there was this great “opportunity” that would give me a chance to do that with a very low investment and no expectations of a sales minimum. She talked about all these great benefits that I could get.
And what I later found out is that, unlike normal businesses that advertise for a position where they have expected minimum requirements—like talents, abilities, and maybe even your strengths and a personality type that is a good fit for the job duties—Multi-Level Marketing companies do not have any weed-out process whatsoever.
MLMs will literally take anybody who is willing to sign on the dotted line as a contractor. They don’t put you through any interview process.
They don’t find out whether:
- your personality type is a good fit for meeting lots and lots of people
- you actually like throwing parties
- you can talk people into doing something and influence them to buy
- you are good at describing products accurately
- you get people excited to do something new
- you are extremely organized
I have since discovered, many years later, that direct selling is not a good fit for my personality type. I am a strategist and am very introverted. If I’d known that these qualities would hurt my chances of being a successful salesperson, it would have made me think twice.
But at the time, I was lonely. As a quiet bookworm, I really didn’t have a lot of friends on campus. This person was an older, married student.
- She was very friendly.
- She made me feel I could trust her, and I was drawn by her interest in me (which I later realized was only her interest in my money-making abilities).
- She took me under her wing and promised to help and mentor me.
- She told me how successful I would be, and how this was the right time to start a new business.
- She promised that I would earn a lot of money, more than what I made at the other part-time jobs.
- She talked about all the new friends I would make and how much I would be admired and seen as a leader.
- She did everything possible to make me to feel comfortable with this big decision.
I honestly didn’t understand that she was actually talking me into this using a cult-like mentality. This is another thing I talk about in my blog series. Multi-Level Marketing companies use cult-like tactics to lure people in and keep them trapped in a cycle that is very difficult to leave.
I had been in a cult-like religious program in high school, and that was still very fresh in my mind as a college student. So this felt very comfortable and familiar. I didn’t know how to question whether it was a good decision or not.
Over time, I was drawn into this like a new relationship, where everything is fresh and new and exciting. The MLM rep (it was a skin, beauty, and makeup company) promised me everything I was looking for at the time:
- something stable,
- a company that is extremely popular,
- an easy way to make money.
“All you do is talk your friends to try it!”
“You’re already using some of these products, so you know how they work!”
“You have access to an entire campus!”
“It will be so easy for you to sell!”
“All of your friends are perfect candidates to be your downlines!”
My MLM rep convinced me to attend a local event, where I was awed by the spectacle and excitement. People walked across a stage and received awards. Everyone clapped and congratulated them.
And, for that night only, they were offering a special discount to sign up.
The Allure and Promise
So against my better judgment (and without consulting my parents or anyone else for their advice), I decided to go for it.
I wrote a check for $125 and walked out with a Starter Kit, which included a big black case full of tons of makeup shades and skincare products. I tried everything out in the comfort of my dorm room. Some of the products actually caused a skin reaction, but I was riding an emotional high.
“This will be great!” I told myself. “I’ll be making a lot of money in no time! I can’t believe I’m a real business owner.” (I could not have been more wrong…)
The next day, I got a call from my upline (the lady who had signed me up). She told me that to be successful, I was also expected to buy additional products that had just been released. So I paid more money so I could get familiar with the products, in order to sell them. Because, she told me, “if you haven’t used them yourself, you can’t sell.”
The process of joining an MLM kind of snowballs. You start with an initial joining fee, but things never stop there. Pretty soon, you’re convinced to invest in business cards, and order forms, and catalogs, and new products.
You have to buy samples to give away.
Then you need to stock your shelves and closets full of inventory. When a customer makes an order, you’re told, it’s important to have products available to fill the order right away.
My life started to spiral out of control.
Consider my situation:
- I was a college student.
- I was trying to go to classes.
- I was living in a dorm room with another student. We had no space, so I was packing all this stuff under my bed, in my closet, under my desk. It became an overwhelming situation that took over my life.
- Instead of focusing on my studies and making friends, I spent a lot of time attending meetings and trying really hard to please my upline—the woman who had talked me into this.
Initially, my upline was very excited about convincing 5 new people (including me) to join her team. Every time I heard from her, she talked about the prizes and admiration she was getting from “leveling up”: a cash bonus, a new jacket, and eventually she was planning to get a new car.
For a while, I made it work. I was successfully selling products. At our monthly MLM meeting, I was featured as the rep with “highest sales of the month”… which wasn’t saying much, since most of my sales were to myself and a few college friends.
The Turning Point
But after just a couple of weeks, my upline lost interest in me. She was so focused on earning her dream car that she stopped paying any attention to those of us on her team.
She didn’t call or check in. When I had questions or problems juggling my class load and trying to make new sales, she didn’t return my messages.
Reality was hitting me. I got busy with school. I realized that having “parties” to introduce other students to the brand was not fun. I didn’t enjoy the pushy sales technique we were taught to use. I didn’t like the pressure of convincing people to try products I didn’t truly believe would help them.
And it turned out that there were 3 other people on my college floor whose mothers sold for the same MLM—and had massive inventories not far from our campus. They promised to deliver the products right away. That was something I couldn’t compete against.
Here I was, a 19-year-old with very little world experience, with no space to store the products and no money to order anything more.
So I was competing with people who had been in this business for many more years than me. They were just much better at it. I decided to only buy products for myself. Since you can only use so many MLM products for personal use, I eventually realized that staying “qualified” was not sustainable.
I finally gave up and sent the rest of my inventory back for a refund. Although I received some money back, I still had a net profit loss.
MLM Attempt Number 2
The second time was years later. I was at a conference for work, and one of the vendors was selling skin and beauty products. The hand lotions smelled amazing, and it felt so soft on my hands. I thought “this is incredible! I want to try every product they have!”
The rep was like “Cha-ching! Here’s a potential recruit.”
Pulled Into Another MLM
She talked to me, got to know me, and we talked throughout the conference. In fact, I was so interested in finding out more about the “opportunity” to get discounted products that I skipped the final session.
The friend who had driven me there had to clean my stuff up and get the heck out of the conference room, because they were cleaning it for an event that night. She couldn’t find me, so she was really upset when I finally showed up.
She asked, “Where the heck were you?”
And I answered, “Don’t worry, I just joined a great opportunity with this skincare company!”
Looking back, it’s really embarrassing to realize what I did. The magnetic pull of MLM companies can make people do crazy and horrifying things.
On the way home, I read all the material in my “New MLM Rep packet.” I had already decided to order a bunch of samples, because I thought:
“The products I tried were SO incredible that I’ll have no problem selling them to people.”
Even though my first MLM experience had not gone well, I convinced myself:
“I’m older and wiser. I have been in the work force for years now. Since we’re trying to start a family, it makes sense to supplement my income with this business opportunity.”
What I didn’t realize was that, during that trip, I was in the very early stages of pregnancy and was starting to feel sick. By the time I got home, the products I’d bought from this rep started to smell SO BAD to me (from being pregnant) that I felt ill when they were in the room.
The Turning Point
A week later when my first order arrived, I couldn’t even take the smell. It was so hard to be around them. So I quickly realized that I’d made a terrible decision by investing in this company. I was already a “consultant” (or distributor) by this point. I half-heartedly tried to make some sales, but nobody in my circle of friends wanted to buy.
The company name was kind of embarrassing. I don’t share the names of the companies I was with, because I’d like to protect their identities. But it was the type of name that you wouldn’t be proud to share with anyone. (They have since changed the name to something else.)
So with this second attempt at MLM success, I had invested significant time, money, and effort.
I did what I could to sell to my entire circle of friends, although I didn’t try as hard as I did with the initial MLM.
But it turned out to be a complete waste.
The products I’d bought made me feel nauseous. I couldn’t even give them away for free.
The product quality was absolutely terrible; they broke down quickly and became rancid. It would separate and start to smell after just a few weeks.
One of the most “luxurious” products was a basket of baby products, and I gave this to one of my relatives as a gift for her baby shower. I am sure once she opened it and smelled the awful fragrances, she threw everything in the trash bin.
What I’ve Learned
These experiences have given me some great life lessons.
I learned that just because you’re educated and intelligent, and have a knack for sales, these things won’t keep you from falling victim to an MLM scam.
I also learned that most MLMs promise to give you relief if you have work limitations, as often happens when you have children. I have worked from home for years, but we have moved several times; and with each move, we have to figure out a new setup for childcare and work hours. Eventually I became a consultant, and now because of my virtual services, I have more control over my schedule.
But I still have limitations. As a mother and as their primary caretaker, I have to consider their needs first. If they’re sick, I’m there; my schedule flexes to be with them. I have consciously chosen to limit my availability during the summers to be with my children. This brings its own set of problems; it’s really hard to operate a business when you have 3 distractions around (albeit wonderful distractions!).
MLM companies make the promise and guarantee of overcoming all these barriers. They have very, very creative ways of talking people into a decision by promising something that is not possible with a traditional job:
- “flexible hours”
- “work from home”
- “no commitment”
- “potential for unlimited income”
- “do as much or as little as you want”
- “no pressure to buy anything”
- “the products sell themselves”
- “your friends will love buying from you”
- “be your own boss”
- “own a business”
But the status of “being your own boss” is simply not true.
An MLM distributor is under contract to the parent company, which restricts them.
An MLM distributor doesn’t have the ability to
- Make strategic decisions
- Plan, monitor, or control the company (also known as Governance, which is one of the 5 Strategic Risks)
- Define and meet a company’s strategic objectives
- Choose the pricing
- Adjust inventory
MLM contractors are directly responsible to the company. And if that company goes under—as just happened with Jamberry and many other companies under investigation for fraud, making false claims, and not living up to consumers’ expectations—you will fail when the parent company fails.
A true business owner can just adjust their inventory or source it from another manufacturer. They are free to create and modify their company as they see fit. If you’re tied directly to a company (such as an MLM), however, whatever happens to them happens to you.
MLMs take away your control.
I just described a handful of reasons why MLMs are dysfunctional and predatory, but there are many more. I’ve written about it here:
You can find excellent resources, articles, videos, and studies at Helpful Info About MLMs.
I’ve also compiled a list of terms that are commonly used in these circles: MLM Definitions
To find out which MLM companies around the world are specifically in the healthcare and beauty field (which is the industry that I serve), check out my Complete List of MLM Companies Worldwide.
Since I work primarily with practitioners who are licensed and serve patients in a professional capacity, my goal in writing this is to warn current business owners to be very cautious about falling into the trap of a potentially damaging opportunity, whether with a Multi-Level Marketing company or otherwise.
If you’ve ever been in an MLM or are considering joining one, I hope you’ll check out the resources above to find out the truth about what is going on behind the scenes.
Do you have any comments or want to share your story about an MLM experience that did not go the way you wanted? Leave a comment below or share it with me.
I know that many MLM reps want to defend their decision; and I understand that if you have given your time, effort, and money into something like this, it can be hard to hear the truth. If you truly believe you’re doing the right thing, then that’s great.
But I honestly think the MLM model itself is flawed and unsustainable. From my own experience, and many thousands of people who are participating in anti-MLM groups and promoting the truth of what happens behind the scenes, it’s pretty obvious that this is a very dysfunctional system that takes advantage of people who are vulnerable.
I hope this has helped, and I’d love to hear your comment!
Grace LaConte is a Strategic Risk Expert who helps service business owners find and fix organizational vulnerabilities. Using her experience as a Risk Officer in the healthcare and technology fields, Grace shares a refreshingly honest approach to uncovering hidden risks and opportunities. Learn more at http://laconteconsulting.com, or connect with her on Twitter @lacontestrategy.