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'Exciting business opportunity' or pyramid scheme?

By Tegan McN

‘I know this is a little bit random and out of the blue, but I came across your profile and wanted to message you regarding an opportunity. I know there are plenty of people looking for additional income streams and more flexibility around working at the moment. That’s why I absolutely love sharing this exciting business opportunity with people and I wondered whether you were open to hearing more about it.’

The above message recently found itself into my LinkedIn inbox. It’s eerily similar to another I had received on Facebook a few weeks ago. I was all too aware of the nature of this ‘exciting business opportunity’ ; these girls were asking me to join their MLM.

Over the past year, many of my friends have been approached by women recruiting for their multi-level marketing (MLM) companies. You’ve likely heard of at least a couple; Amway, Avon, Body Shop at Home, FM Fragrances, Herbalife. While many MLMs are well-established in the US and the structure of the company is well-known, their presence in the UK also appears to be on the rise.

Social media has always been a tool for MLM companies, but I find the infiltration onto LinkedIn particularly concerning. These women present MLM as a viable income stream – a ‘business opportunity’ in their words. The reality is quite the opposite; according to research by the FTC, over 99% of MLM participants lose money. In 2016, Herbalife, one of the largest MLMs in the US, was forced to pay a $200 million fine and restructure its operations to settle charges for ‘misleading consumers about potential earnings’. In 2020, the FTC sent warning letters to ten MLMs regarding false earnings claims, or false health claims in relation to coronavirus, or both.

Theoretically, MLM offers two potential revenue streams. Members, who may call themselves distributors, consultants or representatives, sell products directly to their network. They might buy these products wholesale or earn commission on sales. Historically, these sales might take place door-to-door or at so-called ‘parties’, but they are currently more likely to be made via social media. Regardless of the method, it’s important to note that sales are primarily made to the distributors’ friends and family; their existing ‘network’.

Distributors can also make money by recruiting new members to act as their ‘downline’. They will then be paid a percentage of their recruits’ sales. Additionally, commissions can be made through the wholesale purchases made by the downline to sell to their own network. Through this structure, an MLM’s own distributors can become their own primary customers. The company can also make money off things like consultant conventions, alongside training events and materials, which promise to increase sales and success within the business.

At this point, MLM sounds awfully similar to a straight-up pyramid scheme. Essentially, MLMs are legal because they have products associated with them. It’s technically possible to make some money simply through product sales. However, in practice, it’s often much more lucrative to recruit others than to rely solely on making sales.

There are plenty of issues inherent in this business structure. When a distributor joins a downline, they usually buy a ‘starter kit’. This may include company products to sell, but can also include things like testers, catalogues or access to a personalised sales website. This leads to high start-up costs, often advertised as an ‘investment’. This investment is why companies push members to see themselves as ‘small business owners’, despite the fact they don’t actually produce the product or have any influence over how the business is run. Furthermore, the member who recruited this distributor into their downline will likely receive some kind of commission on the sale of this starter kit.

In this way, MLM creates a predatory business model which relies on exploitation. Members have a vested interest in recruiting people for their downline in order to make money off them. This can encourage misrepresentation of the financial benefits of the company, exaggerating its profitability to encourage new recruits. MLMs sell the dream that anyone can be successful if they just work hard enough, preying on those struggling with promises of additional income or on single parents with talk of ‘flexible working’. The truth is that with no fixed hourly wage, only a very small percentage of people who join will make a liveable income. This can lead to a loss of self-confidence; ‘if you’re not earning enough, you’re not working enough’ becomes the company line.

But that’s simply not the case. The market might already be saturated with consultants, leaving no customers for new distributors. Products are often over-priced or bad quality, and can even be dangerous in the case of Monat and Herbalife. This will prevent repeat customers, meaning more work to gain continuous sales, and potentially damaging the consultant’s reputation. In some companies, you might have to meet sales targets every month to keep consultant status, or even to earn commission at all. This pressures people to force sales, or face making up the difference by buying their own products themselves.

At best, this pressure can lead consultants to make outlandish claims about the products’ capabilities in order to garner customer interest. But it can also have more lasting effects on the consultant’s relationships. If consultants view every social interaction as a chance to make a sale or to recruit for their downline, they come to be seen as predatory or harassing.

There are plenty of examples of shockingly insensitive MLM consultants. As part of the Facebook group ‘sounds like MLM’ (formerly ‘sounds like MLM but okay’), I’ve been horrified by the stories shared. As previously mentioned, uplines often target people who might be struggling financially, claiming that joining their team will relieve their debts. Others target stay-at-home mums or those feeling socially isolated with the promise of making new friends through so-called ‘social selling’. Once recruited, members might be harassed by their upline to make sales during difficult periods, such as periods of bereavement or mental health difficulties.

Other distributors capitalise on tragedy in an attempt to make sales. Throughout the pandemic, for example, an increasing number of consultants have asked for cash donations so they can give their products to charity, for example donating to healthcare workers. Of course, these beneficiaries would benefit far more from the direct cash donations, not the products bought with it which instead benefit the consultant’s commission figures. Awfully, some MLM companies produce things like ‘pregnancy and infant loss awareness nails’, which the consultants then use to target women in times of heartbreak.

It’s clear that MLMs are far from the ‘exciting business opportunity’ of the LinkedIn message I recently received. Luckily for me, I found it fairly obvious from the message what the nature of this opportunity was. To start, there’s no mention of the company name, no reference to what kind of ‘business’ this might be. This is likely to avoid the recipient turning to Google for more information; you would undoubtedly come across the expanse of articles just like this one, or the forums truthfully answering the question, ‘is this a scam?’ Any mention of an ‘exciting business opportunity’ should raise a red flag; the mention of ‘additional income streams’ is designed to appeal directly to those concerned with finances. Alongside the whole message sounding painfully scripted, likely given to the distributor by her upline, it was recorded and sent as a voice note. I like to believe that not typing the message is an attempt to avoid screenshots being shared on one of the numerous anti-MLM forums that have popped up across social media platforms. Truthfully, I have no idea why this is, but it does seem to be the go-to method of communication for consultants at the moment.

If still in doubt, this website offers a complete list of all the known MLMs. As ever, the most important thing to remember is that if something sounds too good to be true, unfortunately it probably is.

Aside from the more exploitative members, the truth is that some consultants might genuinely believe in the benefits of products they advertise. They might not have been involved long enough to realise the predatory nature of the business model, or they may simply not recognise it at all. MLM companies are legal, but whether they should be is a separate question altogether. The final line is that, if you’re considering MLM, there are far more reliable ways to make money. And if you have the skills and the network to make money through MLM, you likely have the influence and entrepreneurial drive to thrive in any other business capacity. There are plenty of other ‘exciting business opportunities’ that don’t rely on the exploitation of those who join after you, and this seemingly inviting business opportunity is more predatory than it first appears.


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