Nov 1, 2018

Multilevel marketing companies say they can make you rich. Here's how much 7 sellers actually earned.

Multilevel marketing can be stressful and yield little reward. Getty Images/Caiaimage
A new study says most MLM sellers make less than 70 cents per hour. Some people make even less than that.

Gaby Del Valle

VOX
October 22, 2018


I recently received a Facebook message from a high school acquaintance I hadn’t seen or spoken to in years. She had been thinking of me, she said, and she was wondering if I was looking to make extra money on the side. Apparently I’d be perfect at selling body wraps and weight-loss products — she could sign me up to do so, and then we’d both make money!

This was my first time getting a sales pitch for a multilevel marketing company, but it wasn’t the first time I had heard about this kind of recruitment tactic. I had seen her posts on Facebook, where she bragged about the flexibility and financial freedom her burgeoning business venture had allowed her. I had seen other Facebook friends hawking leggings, lipsticks, and the opportunity to hawk leggings and lipsticks under them. According to the Direct Selling Association, the multilevel marketing (MLM) industry’s lobbying arm, one in six American households is involved in the industry.

Most MLM salespeople don’t make a ton of money — a 2017 report by the Consumer Awareness Institute found that 99 percent of MLM sellers actually lose money. The website Magnifymoney recently polled 1,049 MLM sellers across various companies and found that most sellers make less than the equivalent of 70 cents an hour. Nearly 20 percent of those polled never made a sale, and nearly 60 percent earned less than $500 in sales over the past five years.

This is a far cry from the success stories promoted by most multilevel marketing companies. To see how accurate the survey was, I talked to seven current and former MLM sellers about their experiences. They worked for 10 companies in total, including LuLaRoe, Amway, and Mary Kay. Some made thousands of dollars a month, a few managed to break even, and some ended up losing money. Some gave up on MLMs entirely after one experience; others hopped from one company to the next.

Kylee, former LuLaRoe fashion consultant

Signed up by: A friend

What she put into her business: 25 to 30 hours of work each week; $5,000 on clothing, approximately $2,000 on clothing racks, promotional materials, and packaging

What she got out of it: Nothing

It was easy [to sell] when I first started. That summer, I had really high hopes that it was going to be really successful, because a lot of stuff I had was selling right away. Every sale I had, I was selling between 20 and 50 pieces. As the fall started to come around, there started to be a lot of quality issues with the clothes. Customers didn’t seem to be buying anything anymore — it was a lot harder, and you had to work a lot more for those sales.

I never actually took a paycheck, because one of LuLaRoe’s philosophies is that to be able to sell a lot of clothes, you have to have a lot of inventory. They really push new consultants to put everything they make back into the business right away. I didn’t actually make any money doing it because I just reordered with all the profits I made.

Shannon, current LipSense distributor

Signed up by: The woman who does her nails

What she put into her business: 30 to 40 hours per week; $700 on an initial inventory order

What she got out of it: 42 women on her downline; an undisclosed amount of money she reports is on par with what she made at her full-time job

It’s actually my third multilevel marketing endeavor. I had previously worked with Monavie, which is a nutritional beverage, as well as Beach Body, which is a fitness program. I spent a significant amount of time, money, investment into those businesses with no luck. I had a real bad taste in my mouth about multilevel marketing in general, and I had kind of sworn it off forever. But once I looked into SeneGence, which is LipSense’s main company, it was very different than what I was used to, and I decided to give it a go.

We’re legally not allowed to disclose specific numbers about our income — it’s part of our compliance. It’s just been a very positive experience for me.
Shania, former ItWorks! distributor

Signed up by: Her father’s co-worker

What she put into her business: Approximately 11 hours per week; $99 initial inventory purchase

What she got out of it: $30 to $40 per month

[My mom] was like, “Hey look, this is what so-and-so is doing, and she said it’s out-earning her paycheck.” Knowing what this lady does and her educational background, she was probably pulling in $50,000 to $60,000 a year through her regular job. So I was like, “Whoa, holy crap, she’s earning $6,000 a month off ItWorks!”

They tell you things like, “If your business isn’t succeeding, it’s because you aren’t working hard enough,” and, “You have to be a product of the product.”

They encouraged us to demonstrate the wraps on people, or on ourselves. They give you tricks that make the product sound like it works, but when you do research on how your stomach and digestive system work, that science doesn’t work at all.
Lexi, former LipSense distributor, current Maskcara artist

Signed up by: A friend (LipSense); that same friend (Maskcara)

What she put into her businesses: 20 hours per week with SeneGence, LipSense’s parent company; 10 hours per week with Maskcara

What she got out of them: $3,000 per month from downlines’ commissions with LipSense; $1,700 in September with Maskcara

I [left LipSense because] didn’t like the way things were run. It was very cutthroat. The biggest thing I had an issue with is that they made you purchase your products upfront. You had to check a box saying you have sold your previous inventory [in order to buy more, but] nobody has done that.

I had a great team, and I didn’t spend a crap-ton of time doing it, but I know women that are just making nothing — and they spend hours and hours and hours. But then you find women that are making, like, 100 grand a month and maybe spend the same amount of time [working that] I was. It’s a game of luck — it’s when you get into it.

When I was with SeneGence, there were about 80,000 distributors. When I joined Maskcara, I was one of the first 2,000.
Carmen, former Arbonne consultant, Avon representative, American Income Life 
Insurance agent, and Young Living distributor

Signed up by: A friend (Arbonne); through the website (Avon); a friend (Young Living)

What she put into her businesses: $750 on inventory with Arbonne; $10 to sign up for Avon, plus expenses; $450 with American Income Life Insurance Company; $150 for the Young Living premium starter kit

What she got out of them: Nothing; she lost money with Arbonne and went into debt with Avon

I’ve actually been involved with a few MLMs. I got involved with Arbonne because I posted on my Facebook page that I needed to work from home because I couldn’t afford child care. So naturally, my friend who was involved with Arbonne messaged me like, “Oh, I have this opportunity.” I met her for coffee with her upline. At the time, I didn’t really understand MLMs or most of what they were — I thought it was legit.

When I went to interview with the American Income Life Insurance Company, I was like, “This kind of reminds me a little bit of the Arbonne meetings,” but it didn’t hit me that that was what it was. It wasn’t until Young Living essential oils that I really understood. In the business-building classes, I asked them, “What’s the best way to get long-term retail customers?” [because] I was doing research with the [Federal Trade Commission] and found out that we need to have retail customers if we want to be legitimate.

My upline said she doesn’t worry about retail customers; she just worries about getting wholesale customers — i.e., distributors — and selling to them. That’s when I really began to understand what an MLM was.
Suzannah, former Mary Kay beauty consultant

Signed up by: Her boss at her full-time job

What she put into her business: 10 to 20 hours per week; a $3,000 initial inventory purchase, plus additional orders since then

What she got out of it: Nothing; she lost money

When you’re getting started, everyone encourages you to invest everything [you make] back into it and buy more product. So instead of keeping that [money], you just keep buying more and more, because there are constantly new things coming out.

One of the options they tell you you could pursue is to get a loan. I’m glad that when I signed up, I had money saved away that I used. Not that I’m happy about having thousands of dollars’ worth of makeup sitting in my house that I can’t seem to get rid of, but there are actually people out there who are getting loans to start selling.

[The woman who signed me up] makes 13 percent of Mary Kay’s portion of every consultant underneath her that places an order. I think our group has 110 people in it. And she did over $120,000 in sales just by herself this past year — she has about 400 different customers. The town she lives in has 75 people, so it’s like, oh she’s from this itty-bitty town and she’s doing great. She’s driving this brand new pink Cadillac. If she can do it, why can’t I? But it does not work that way.

You’re not allowed to sell stuff to other people’s customers. We lived in this small area of North Dakota, and she had 400 customers. She had a monopoly on the area.
Conrad, former Amway distributor

Signed up by: A personal training client at the gym

What he put into his business: 10 to 15 hours per week; $885.79 in initial registration fees

What he got out of it: $2,500 to $3,500 CAD per month; more than 100 people on his downline

I was 20 years old [when I signed up]. I was working as a personal trainer, and I had recently dropped out of school because my dad was a gambling addict and my family had declared bankruptcy at the time. I was in a vulnerable state, just wanting to make more money.

The way we were taught was just to hit whatever threshold in terms of client sales that allowed us to make commission off of our downline. In terms of sales, we didn’t do a lot — we had one or two clients that just liked our products, and they would buy a couple hundred dollars of product every month. That really only translated to $100, $200 of profit, which is not a lot. The majority of the income came from making commissions off your downline.

After a while, I started to realize that a lot of the things I was doing were very unethical. Not necessarily illegal, because a lot of these MLM companies have certain loopholes in terms of legal stuff that allows them to be in business. But a lot of the stuff that we were doing just didn’t sit right with me. I bought up a lot of issues that should be changed — for things to be run a little bit better, for us not to screw people over or lie to people or mislead people. That didn’t really sit well with the leaders.

Correction: A previous version of this piece attributed a 2017 report on multilevel marketing companies to the Federal Trade Commission. The report was by the Consumer Awareness Institute and published on the FTC’s website.

https://www.vox.com/the-goods/2018/10/15/17971410/lularoe-lipsense-amway-itworks-mary-kay-mlm-multilevel-marketing
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