You Might Be Surprised Which Companies Are Actually MLM Schemes
Does it seem like your inbox is bombarded with offers for essential oils, detox shakes, leggings and other products? Are you regularly presented with exciting job opportunities that are light on details?
If you answered “yes,” you’re the target of multi-level marketing. And if you know better than to get involved with an MLM, you probably decline these types of offers. But these days, it can be tough to tell the difference between a regular retail business and an MLM. So the next time you’re pitched on a product or sales position, here’s how to check.
A Quick Refresher On MLMs
Multi-level marketing, also known as direct selling or network marketing, is a business model that involves making sales directly to your own network of friends, family and acquaintances. You are a contractor for the company and earn income from commissions on sales of inventory (that you’re usually required to buy upfront).
However, one of the hallmarks of MLMs is that you also earn money by recruiting a downline of salespeople and taking a cut of their earnings, too. In fact, recruiting is often as important ― if not more important ― than selling products when it comes to your bottom line.
Popular sales methods include giving presentations to potential buyers/recruits, hosting parties where attendees are encouraged to buy products and join the company, and pitching people over social media.
Though on the surface, it might seem like a harmless way to make extra money, MLMs are notorious for their predatory business practices. Many have caught the attention of the Federal Trade Commission, which has issued warnings, levied fines and even shut a few down for operating as pyramid schemes.
It’s estimated that 75% to 99% of participants make no money selling for MLMs, and many actually lose money. They are also encouraged to make questionable claims about the products in order to make sales, as well as relentlessly pursue customers at the expense of their personal relationships. Three-quarters of MLM consultants are women, and these businesses target single mothers, military wives and religious communities specifically.
Which Companies Are MLMs?
You probably know about mega-MLMs like Herbalife, Amway and LuLaRoe. But the number of actual MLMs out there is huge and growing by the day. You might be surprised to learn which companies are actually MLMs ― here are a few you may have heard of:
Beach Body: The popular fitness company known for workouts such as P90X and Insanity also has an MLM division. The company recruits “coaches” to sell products such as its Shakeology meal replacements and other supplements.
Color Street: An MLM that’s popular among young moms, this company sells nail polish strips in a wide variety of colors and patterns. “Stylists” can move up the ranks by selling a certain volume per month, which lets them earn bonuses and rewards.
Cutco: An MLM for kitchen knives? You bet. Cutco salespeople earn commissions for every appointment they book, which involves presenting an in-person demonstration of the products and, hopefully, making a sale on which they earn an additional commission.
Enagic: If someone you know has recently tried getting you hooked on Kangen reverse-osmosis water, they’re a part of Enagic. This MLM produces alkaline ionizers and water filtration machines which distributors then sell for commission.
HempWorx: CBD ― there’s an MLM for that. HempWorx is one of the more well-known CBD MLMs, and sells oils, creams and even pet products. Recruits who buy a starter kit and pay a $20 affiliate fee become official salespeople for the company.
Monat: This wellness MLM is known for its skin and hair products (the latter which have been alleged to cause hair loss). Those who sell products for the company can earn up to a 30% commission.
Primerica: You might assume that the financial services industry wouldn’t allow MLMs to infiltrate, but that’s unfortunately not the case. Primerica is a major MLM that sells life insurance policies.
Pure Romance: Not even sex toys are safe from MLM. Pure Romance consultants are encouraged to host parties where friends and family can try out vibrators, lube and more, and, hopefully, become customers.
The Body Shop at Home: Popular in the U.K. and Australia, The Body Shop you know from the mall created an MLM division for independent consultants to sell its products from home. It costs £49 to join and receive a starter Beauty Kit.
Tupperware: That’s right, the maker of those ubiquitous plastic food storage containers is the O.G. of MLMs. Some consider Tupperware to be one of the least egregious MLMs, especially in terms of product quality, but it employs many of the same questionable business practices.
If a family member or friend wants you to buy a product or even join their company, and you have a sneaking suspicion that it may be an MLM, there are a few places where you can check.
Start by searching the company in the Direct Selling Association’s directory. This trade organization for multi-level marketing, direct sales and network sales companies has about 130 members.
Another good place to check is Reddit’s anti-MLM mega-thread, which tracks MLM companies and is regularly updated by the community.
Finally, MLM Truth’s master list of MLMs is another great resource that’s regularly updated with new MLMs, as well as which ones have been shut down.
4 Signs That A Business Is Probably An MLM
Because MLMs are popping up all the time, certain companies are too new to have made these lists. In this case, if your gut tells you that a job opportunity or product is part of an MLM, here are a few signs it probably is.
1. The pitch comes from someone you know: The strategy behind MLMs is for consultants to make sales directly to people they know, rather than through a traditional store or e-commerce site. So if Becky from high school comes to you with a sales pitch or unique job opportunity, you can almost be certain that she’s working for an MLM.
2. It has a pyramid structure: Pyramid schemes may be illegal, but that doesn’t mean they don’t exist. And MLMs operate in a curiously triangular manner. If the person pitching you a product also encourages you to join the company as a consultant, it’s because they stand to earn a portion of your sales. Typically, it’s only a handful of consultants at the top of the MLM that earn the most money thanks to the giant downlines they’ve amassed.
3. There are no qualifications to join: Wondering why your Aunt Sally, who’s been an administrative assistant for the past 20 years, is suddenly selling health products? It’s probably because she joined an MLM, which doesn’t require any type of job interview, relevant experience or professional references to become a consultant. As long as members have a credit card to continually buy inventory, they’re in.
4. Consultants are the biggest customers: Does that salesperson seem just a bit desperate to make a sale? It may be because they’ve already invested thousands of dollars in inventory and now need to unload it. Though some MLM participants earn more than others, the truth is that they are often their own biggest customers. Inventory is needed to host parties and showcase the newest arrivals, and some MLMs even require consultants to sell a certain amount each month — otherwise it comes out of their own wallets.