MLMs, Small Businesses, Pyramid Schemes, and Me

A few days ago, my blogger friend V wrote up her opinions of multi-level marketing companies (MLMs). I thought she made some great points, and her viewpoint helped me solidify my own thinking about these businesses. I also read the many comments on her post (how do you get people to comment? I have no clue!) and learned a lot from them.

These are “the” pyramids, and have nothing to do with any marketing scheme other than their shape. Photo by @HazemElEtre via Twenty20.

Definitions

First, since I posted something about this on Facebook recently, I know some of you want to know what an MLM is.

My Facebook post, which is still getting comments after two weeks.

So, here’s what the US government says:

MLM companies sell their products or services through person-to-person sales. That means you’re selling directly to other people, maybe from your home, a customer’s home, or online.

If you join an MLM program, the company may refer to you as an independent “distributor,” “participant,” or “contractor.” Most MLMs say you can make money two ways:

  • by selling the MLM’s products yourself to “retail” customers who are not involved in the MLM, and
  • by recruiting new distributors and earning commissions based on what they buy and their sales to retail customers.

Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.

A pyramid scheme is an illegal and really bad version of an MLM.

Examples

You have heard of many MLMs, though you may not know it, since most people who participate call them small businesses. They started out a LONG time ago, too. I remember our 1960s “Avon Lady” very well (she gave me tiny lipsticks, which made me feel grown up). And my grandmother had a friend who pushed Amway detergent at her.

MLM examples you may know of include: Amway, Avon, Color Street, doTerra,* LuLaRoe, Mary Kay, Nu Skin, Onehope Wine, Pampered Chef, PartyLite, Perfectly Posh, Rodan + Fields, Scentsy, Tastefully Simple, Thirty-One, and Young Living. Who hasn’t bought some of these products? And many of them are pretty good quality, fun, and only a bit over-priced.

A product sold through an MLM (one I have never bought from). Photo by @jeswfromtexas via Twenty20.

My History with MLMs

I cannot come across Holier Than Thou and say that I’ve never been involved in MLMs because I have so many ethics and know how much money they take away from friends, etc. I’ve bought a LOT. I also can’t say I don’t know people who have made a reasonable supplemental income off them, because I DO.

To be honest, I always felt good about helping friends out with making a little extra money on good quality items that I can actually use. I even had a few “parties” back in the good old days. We used to have a blast with PartyLite, quickly getting past ordering some candles and into chatting, eating, and drinking. When my friend Gina was doing Tastefully Simple, too, there was a lot of fun to be had.

I just LOVE these products, though. Sniff.

The online events they have now aren’t as much fun for me, but I appreciate how much work people go to so that their events are engaging and fun for people who like guessing games and the community-building questions.

Most of the people I know who’ve done MLMs have been sincere people who needed to make some money from home. The sales pitches from consultants who recruit new ones are also very good. It’s easy to see how the prospect of recruiting someone else and making money from that would be enticing, especially if you have few other options. Building up a “team” is the “multi-level” part and what makes me uncomfortable.

Random sampling of MLM lotions I happen to have within arms’ reach.

That’s where I always drew the line. I don’t care HOW much I liked something, I was NOT going to sell it to others or recruit friends. I didn’t mind spending my own money on something “frivolous,” but didn’t like trying to get my friends to spend their money. I can’t tell you how many times I’ve been begged to sell products I like and use myself.

*One Time I Did Join Something

Confession time. I like essential oils. The chemistry is really interesting to me. I like diffusing them, smelling them, and in some cases, ingesting them (I am also familiar with caveats about them, so no need for lectures). When I started buying lots of them from my friend Sara, who also really likes them, she said I really needed to become a consultant, or whatever they call them, so I can get the products at the lower cost. As I tend to go through them pretty fast, that made sense.

I’ve got hundreds of these kinds of things. Oops.

I’ve been a doTerra consultant for at least 4 years now. I have sold two items at retail. I have recruited no one. I get stuff for me, my family, and my friends. And, I guess I will have to stop soon, for reasons I’ll eventually get to, as I ramble along.

I Gotta Live My Principles

Back to the beginning, reading what V was saying about her friends going into deep debt, and knowing the debt some of my own friends have gotten into, it became clear that when I was “helping” friends by buying things, I really wasn’t helping, just encouraging them to get deeper into the MLM world, getting them more and more pushy, insistent about you buying their wares, and becoming “assholes,” as V put it. I’d say acting like assholes, since these are people I like.

The online MLM pressure is really getting out of hand, and I don’t think it’s healthy at this point, if it ever was. These are NOT small businesses, they are people making money for other people, up and up a pyramid. I can’t do it anymore, so I will have to go cold turkey on some things I really like (I don’t know if I can give up my R+F skin care stuff though; it really works).

So, friends, if you really start up a new business, I’ll buy something. And if you are one of my few friends who does really well with MLM, I salute you. I just know how hard it is when you are stuck with hundreds or thousands of dollars of inventory with no one to sell it to, because you’ve alienated everyone you know. I don’t want to encourage that to happen to more people I care about.

If you’re thinking about going into one of these things to pay for gifts, or whatever, remember what V says in her blog post:

If a business exists solely on social media, that is a red flag.

If a business relies on your initial investment to be a legitimate ‘boss’ that is a red flag.

If a business is teaching you how to get rich quick on social media, that is a red flag.

If a business relies on teaching someone how to teach someone how to teach someone, that’s a pyramid scheme.

https://millenniallifecrisis.org/2020/12/11/blogmas-day-11/

(True story, while typing this I got a message from someone trying to sell off their inventory to cut their losses.)

Author: Sue Ann (Suna) Kendall

The person behind The Hermits' Rest blog and many others. I'm a certified Texas Master Naturalist and love the nature of Milam County. I manage technical writers in Austin, help with Hearts Homes and Hands, a personal assistance service, in Cameron, and serve on three nonprofit boards. You may know me from La Leche League, knitting, iNaturalist, or Facebook. I'm interested in ALL of you!

10 thoughts on “MLMs, Small Businesses, Pyramid Schemes, and Me”

  1. Great post and great point! I would add that 99 percent of the people manipulated into joining an MLM lose money. And 100 percent of them lie about it. (Maybe your friends aren’t making what they say they’re making.) Listen to The Dream podcast for more info on MLMs.

    Liked by 2 people

  2. An excellent point and thanks for putting this up there. 99 percent of people who get manipulated into MLMs lose money. And 100 percent lie about it. (Could be your friends aren’t making what they say they’re making.)

    Liked by 1 person

  3. Dang, thank you for sharing this. I really appreciated reading your take on the matter.
    Do you have a lot of Doterra inventory on hand?
    When you mentioned skincare in the comments of my blog, I wondered if it was Rodan and Fields you might be using. Have you ever done any research on the company? A friend of mine used to sell them (before she came to and realized it was a pyramid scheme). One of the things that she used to have to try and hide was that R&F are actually banned in the EU and Australia due to containing an ingredient that is a known carcinogen (potentially cancer causing ingredient).

    Liked by 1 person

      1. Well, that’s good that you can make use out of it! My friend now has several thousand dollars worth of eyeshadow palletes and mascaras in her storage room of her apartment.

        Liked by 1 person

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