You’re probably here because you’ve been pitched to join an MLM.
Maybe a girl from your high school has reached out to you to tell you about this incredible business opportunity that she just knows you would be perfect for, or maybe somebody you follow on Instagram has started uploading pictures and videos about how she has finally achieved financial freedom and you can too, if you want to join her team.
She probably uses phrases like ‘time freedom,’ ‘boss babe’ and ‘money mindset,’ and her feed depicts a perfect life full of financial abundance, glamour and happiness.
However, is the business opportunity you’re seeing legit, or is it a scam?
Can you really make passive income by selling shampoo/fizz sticks/nutrition shakes, or is it all a bit too good to be true?
In this article we’ll uncover just how good the network marketing ‘opportunity’ really is, and whether you can really make money in an MLM business.
We’ll discover exactly what MLM is and why it is so bad, the similarities between MLM and pyramid schemes, how the worst network marketing companies actually oppress women, and how some of the worst MLMs operate as cults.
So, grab yourself a coffee and get comfy, because we’re about to get into it.
What is Multi-Level Marketing? 6 Reasons Not to Join an MLM
What is the meaning of MLM?
Well, MLM stands for multi-level marketing, and MLM companies are also known as network marketing, direct sales or occasionally party plan companies.
Multi-level marketing has been around for years, and popular MLMs include Amway, Avon, Herbalife and even Tupperware!
As of November 2018, more than 18 million Americans were involved in an MLM, and with the multi-level marketing industry generating a staggering $192 billion in 2018 alone, network marketing is showing no signs of slowing down.
People in MLMs do not receive a salary, instead earning money from selling products to people they know, as well as receiving bonuses for recruiting people into the company.
They also make commission from the sales of each person that they recruit, and this continues down in multiple levels (hence multi-level).
The ultimate aim of somebody in an MLM therefore, is to have as many people in their ‘downline’ as possible, enabling them to make large amounts of passive income for little work. The people at the top of the company can basically sit back and do nothing while the commissions from their downlines roll in, allowing them to live the lavish lifestyles that they’ve always dreamed of.
However, as with most things in life, somebody always has to lose, and in MLM companies, the vast majority of people end up making little to no money, which is why many people compare MLMs to illegal pyramid schemes.
Before we get into the specifics of why MLM is so dangerous, let’s take a look at some of the worst MLM companies out there today.
The worst MLM companies
Because most people in network marketing lose money, we believe that all MLMs are bad, but some are worse than others.
Below is a list of MLMs that have either faced lawsuits, are notorious for making people lose money, or that have been accused of operating as pyramid schemes.
The worst multi-level marketing companies include:
- LuLaRoe – sellers pay up to $6000 dollars to join this women’s leisure-wear company and receive bad quality clothes in prints they cannot choose. LuLaRoe is currently facing over a dozen lawsuits. A recent documentary called LuLaRich on Amazon Prime outlined some of the controversies of the company.
- Herbalife – the FTC mailed cheques to 350,000 people who lost money selling Herbalife products and ordered it to significantly restructure itself. Herbalife has been accused of operating as an illegal pyramid scheme and taking advantage of vulnerable migrant communities. The Netflix documentary Betting on Zero takes a closer look at Herbalife as a company.
- Monat – Monat is a haircare company that has been plagued by lawsuits that allege its products make people’s hair fall out.
- Jeunesse – skincare MLM facing a billion dollar lawsuit for operating as a pyramid scheme.
- doTerra – essential oils company claiming its oils can cure almost anything. Sellers have been known to suggest that people turn away medical treatment in favour of using oils instead. Unwell on Netflix touches on this.
- Amway – Amway is one of the oldest MLM companies and it has been investigated multiple times in many countries for pyramid scheme allegations.
- Younique – bad quality makeup sold by ‘makeup artists’ who have not had any training.
- Arbonne – with overpriced makeup and little chance of making money, this MLM scheme preys on women, with 75% of its consultants being female.
6 Reasons Why You Shouldn’t Join an MLM
1. 1. Over 99% of people in multi-level marketing lose money
Yes, you read that right. Despite what network marketers will tell you on social media, 99.6% of people who join multi-level marketing companies either make no money or actually lose money.
This statistic is the result of an in-depth study by Jon M. Taylor, who studied 350 different multi-level marketing businesses over several years.
The statistics that some of the top network marketing companies release don’t do much to contradict this, showing that most MLM reps make an average of $0, not including the money that they spent in the business.
In the fitness MLM It Works!, the people in the first rank of the company (83.2% of all distributors) made an average of just $47 a month, which is not even enough to cover the costs of buying and promoting the It Works! products.
It Works! is by no means unique with these numbers, nor is it even one of the worst MLM companies. The numbers remain shockingly low across the board.
This is partly due to the fact that the entire MLM business model is centred around recruiting your own competitors, not receiving any base pay and fees to join and participate.
2. MLMs alienate women from their family and friends
The network marketing industry is dominated by women, with many women joining MLM companies because they are stay at home moms or military wives in need of a flexible job that lets them choose their own hours and work from home.
However, one negative side effect of becoming a network marketer is that, by default, you begin to push away your friends and family.
When you start looking at your best friends and family members as potential recruits or customers, you may accidentally find yourself constantly pushing them to join your team, or making them feel guilty for not buying products from you.
When you join an MLM, your upline (the person who recruited you) will tell you to view every single interaction as a sales opportunity.
If somebody likes one of your photos on Instagram, you will be told to reach out to them and invite them to sign up under you. If a cashier in the grocery store comments on your hair/skin/nails, you are expected to use that compliment as a gateway to potentially selling that cashier shampoo/moisturiser/press-on nails.
As if all that isn’t enough to alienate you from your nearest and dearest, people in MLMs encourage their distributors to cut ties with anybody that isn’t supportive, saying that everybody who disagrees with them is ‘jealous’ or a ‘hater’ and that you don’t need to surround yourself with people who don’t support you.
You will find yourself convinced that anybody who questions your decision to join an MLM is just ‘brainwashed’ by their 9 – 5, and before you know it, your only friends will be the people above you in your MLM.
3. MLM blames you for not succeeding
Even though the MLM business model makes it mathematically impossible for most people to earn money, people in MLM companies are trained to blame themselves if they don’t make any money. Their upline will tell them that they ‘just didn’t have what it takes,’ and they ‘didn’t work hard enough,’ despite the initial promises of ‘getting paid to post on Facebook,’ and ‘making money just by recommending products you love.’
They will be told that they have a ‘negative money mindset,’ and that they need to ‘spend money to make money,’ resulting in them investing more and more of their money into the MLM, despite the fact that they are probably never going to make it back.
4. Network marketers are unpaid sales reps
One of the biggest lies in network marketing is that people in MLMs will tell you that you will be a ‘business owner’ if you join the company.
While you will need to register as self-employed and file your own taxes, this doesn’t mean that you own your own business. All it means is that you are an independent contractor of the company.
Real business owners get to have total control over the products they sell, the prices they charge, the commission they receive and so much more.
Independent contractors in MLM companies can choose when/where they work, but that’s pretty much the only executive decision that they get to make.
MLM companies can also fire you at any time, and they don’t have to give you a reason.
The idea that joining an MLM company makes you a business owner is a big fat lie. After all, if you really were your own boss then why would you be moving up the ‘ranking’ system?
The lie of ‘being your own boss’ is just a manipulation tactic designed to take advantage of people’s desires to work remotely and call the shots in their own lives.
5. MLMs prey on vulnerable people
A big reason to be anti-MLM is that MLMs prey on people who they see as being desperate.
Stay-at-home moms, college students and military wives are often prime targets for network marketers because they are bored, eager to make money from home, and usually looking for new friends and a ‘sisterhood.’
Stay-at-home moms are especially vulnerable because people recruiting in MLMs know that new moms are often isolated and craving adult company, and so they promise to connect them with an entire community of supportive new ‘friends’ who understand exactly what they’re going through and will be there for them. Network marketers also tend to guilt-trip moms, saying things like ‘don’t you want to be able to take care of your family?’ and ‘don’t you want a job that allows you to stay at home with your children?’
You only have to go to the anti-MLM subreddit to see countless examples of network marketers exploiting people’s vulnerabilities in order to sign them up, and it’s really sad to see.
6. MLMs are pyramid schemes in disguise
If you still need more convincing that MLMs are not bad companies to join, let’s get into the legal stuff.
9 times out of 10, MLM companies are nothing more than pyramid schemes in disguise, and network marketing companies are getting shut down all the time for this very reason.
The technicalities are very complicated, and even the FTC hasn’t fully grasped them yet, but in a nutshell, MLM companies use clever loopholes to allow them to operate as a pyramid scheme while seeming to be a legitimate direct sales company.
Quick Recap FAQ
MLM stands for ‘multi-level marketing’ and it describes a business model where the participants earn money by selling products to people they know and making commissions on sales generated from people they recruit into the company. MLM companies are often compared to pyramid schemes.
MLMs are not pyramid schemes because participants don’t get paid directly for recruiting others into the company. They get paid when those people make sales. However, many believe that this is just a loophole and that MLMs and pyramid schemes are one and the same.
Yes, MLM and network marketing are the same thing. Many people in MLMs prefer to refer to themselves as ‘network marketers’ due to the negative stigma attached to MLMs, but they describe the same thing.
No, direct sales is not the same as MLM because it doesn’t depend on a multi-level, hierarchical structure and can just describe the practice of selling directly to people you know. However, most direct selling companies also use an MLM business model.
While it is possible to make money in MLM, most people in multi-level marketing make no money or lose money.
Although it might seem like it at first, joining an MLM is not a good idea. Multi-level marketing companies are designed to make you lose money, with only a tiny fraction of people at the very top getting to enjoy the financial and time freedom that everybody in the lower ranks wants.
If you do one thing this week, don’t waste your money in an MLM!
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