Multi-Level Marketing - Opportunity or Scam?

Submitted by Guy Williams on May 21, 2019

Decades after Tupperware parties and Avon calling, multi-level marketing is back in style. Facebook feeds can become inundated with Rodan and Fields, Amway, Herbalife and LuLaRoe offers. Friends may host parties selling sheets, bags or jewelry or they may ask you to become a seller yourself. The allure of earning some extra cash while working from home on your own schedule can be hard to resist.

Do these companies provide the opportunity they promise to make sustainable income on a flexible schedule? On the other hand, are they another dubious get rich quick scheme luring in a trusting public?

The general idea behind any multi-level marketing company (MLM) is that a company sells its product directly to consumers through a network of sellers. The pitch seems to make sense, as the company saves on brick and mortar stores and advertising costs, while the sellers can set their own hours, buy the inventory they need and recruit more sellers, making money from their recruited sales as well as their own.

Some people make money – good money – from these companies, but they are the exception not the rule. Studies have shown that usually sellers come out with nothing or even lose money. These MLMs can also strain relationships, as they encourage participants to turn family and friends into customers or downstream sellers.

The first month is usually pretty easy, because friends and family are willing to come to your party once and buy your product once, just to be supportive. This early success can convince some sellers to stock up on inventory, realizing too late that they have very few repeat customers. Or, after they have recruited several sellers within their social circle, they find that a growing group of sellers are trying to capture a shrinking group of (increasingly reluctant) potential buyers.

As time goes on, MLMs can hurt relationships. If your friends feel like you are always trying to get them to buy something, they can become resentful. On the flip side, you can start to feel like loved ones aren’t supporting you enough in your new career.

If you are determined to work for an MLM despite my words of caution, keep two guidelines in mind. First, never “spend money to make money.” Buy only the inventory that you need, don’t let other sellers pressure you into stocking up on a lot of supply or investing in expensive training courses. Second, don’t become “that person” who friends and family start avoiding because every conversation turns into a sales pitch.

I remember being invited by a customer to hear about a great investment opportunity that they wanted my advice on before investing. It was an Amway sales meeting. They were already involved and hoped to get me to join. I remember resenting the false story that they used to entice me to attend the meeting. I also remember double-checking anything that they said from then on because I no longer trusted them.

Another time early in our marriage my wife and I were roped into hosting a party to sell the sort of household knick-knacks that you don’t really need but often see at the dollar store. We were unenthused about the products, but pleasantly surprised that the friend who asked us to host gave us a manger scene that we use to this day.

Remember, MLM involvement is usually temporary, but relationships are forever.