How To Identify An MLM (And How to Avoid Joining One)

It’s 3 p.m. on a Wednesday and you’re wildly bored at work. You log into Facebook, maybe to take a peek at what’s happening in the She Spends group. A chat pops up. It’s a woman you tangentially knew in high school that you haven’t cared to ax from your friends list. The calming playlist you curated for work breaks like these suddenly gives way to horror movie music. You open the message.

“Hey girl!! So… long time no talk, but I wanted to reach out because I know you have a passion for working out like me! I just became a Beachbody consultant and I wanted to share their AMAZING product with you!”

The three little dots continue to blink. She’s still typing. You know the pitch for Shakeology is coming, but you don’t know how to escape. You dash off a message: “Hey girl! Sorry, I’m not interested in diets. But thanks!” You close the browser, pull out your earbuds and take a deep breath. There’s sage in your desk drawer. Is it insane to light it at work?

This isn’t a Halloween horror movie playing out, but it sounds like one, right?

Programs like Beachbody, Herbalife, LipSense, LuLaRoe and other multi-level marketing companies are preying on women’s relationships to sell products, while sending their own employees - ahem, consultants - deep into debt.

From a marketing perspective, it makes sense. Women rely on their peers’ advice on products. Get the women to sell the product to their friends and suddenly you’ve got a beauty empire like Avon or Mary Kay.

Here’s the catch, though. These companies require that their consultants buy product before ever selling it, and most make it extremely difficult for their consultants to recuperate the initial cash they put into the business.

For most of these companies, profit margins on sales go up for consultants when they sign up “downlines” -- a group of women who are managed by one consultant and sell products. Part of a downline’s profits go to the person who signed them up to sell the product, hence the “multi-level” part of the name.

Sometimes when our friends pitch us these products, though, the spooky horror music doesn’t play through our headphones. There are other red flags you can watch out for to avoid getting sucked into an MLM.

Here are a few:

  1. Make sure the company is selling an actual product, rather than simply focusing on finding more “downlines.” 
  2. Research whether the company has been sued for deceptive business practices.
  3. Look at the compensation structure. Do you get more money as you take in downlines?
  4. Evaluate the cost of buying the product and project how much time it will take to make back that initial investment (and then to profit). Be realistic!
  5. Ask yourself if it’s an opportunity that sounds too good to be true. MLMs often promise ample free time, huge returns on investment and incredible extra rewards.

Want to learn more? This John Oliver piece on multi-level marketing at Herbalife is awesome. I also recommend this blog from a former Younique consultant.

- Alicia McElhaney / She Spends Issue #26

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