With people losing their jobs and having trouble finding new jobs, you’ll see various MLM or multi-level marketing companies (sometimes called network marketing) trying to recruit the desperate to sell their wares. Many of these companies are targeting women desperate to bring in some extra cash to their household. COVID has not slowed these companies down at all, and in fact, the uncertainty has them stepping up their efforts. What’s worse is that they often prey on women looking to bring in some extra cash while still having time to balance childcare and household duties, which fall more on women than men. People often “invest” thousands of dollars into these businesses by running up credit cards or borrowing from friends. There’s a variety of reasons never to get involved in one of these. 

Big MLM

No one quite knows when the MLM company started. The origins of network marketing stretch back to the 1920s and 1930s. Makeup was one of the first products to be sold this way. Avon is one of the oldest companies. Avon’s strategy was simple: recruit homemakers to sell to their friends and relatives. Avon started with perfume but quickly expanded to a wide range of makeup products that were becoming more common at the time. After World War II, more companies popped up, including the eponymous Tupperware. Tupperware parties became a fixture in homes across America in the 1950s as the popular plastics company introduced their products to help keep food for longer. MLMs are not a new concept, and companies continue to use the system to get hundreds of people selling their products for free. Because people in the network are independent distributors, they aren’t employees and only get paid on commission. It’s the perfect way to get people selling a product with almost no overhead. However, product sales aren’t the focus; it’s getting people to spend money on starting up their new “business.” Multi-level marketing is called that because not only do people make money from the sales they make, but they get a small cut of any sales from people that they recruit. The more people who are selling, the more money is made. And this is why they are often called “pyramid schemes” because the only people who really make any money are at the top. After all, they are getting a small cut of all the sales from all their recruits. 

MLM Companies

There are a variety of products and services that are sold using the network market system but the most common are vitamin supplements and personal products. Although there are companies that also sell everything from vacations to coffee. One of the more modern incarnations of network marketing is in clothing retail. Women buy most of the clothes in America and because women have always been the targets of MLMs, clothing is a perfect fit. Most likely you’ve already been approached by someone in your friend group trying to sell you some leggings or other clothing. 

Your Friends Will HATE You

Most people have gotten that call or that message from their friend who has started selling LuLaRoe or some other company. They promise you great products and a chance to start your own business if you want to. It’s the latter part that is the real sell. Most MLM companies don’t make much money on selling products. Retail margins are notoriously thin. However, getting a recruit to buy thousands of dollars in product to resell is far more profitable. When someone contacts all their friends via social media offering their new products, they are really working their contacts for recruits. Selling the product becomes secondary to recruiting because they are only successful when new people buy into the business. Constantly pestering your friends with these “business opportunities,” and these products will have most of your friends hate you in no time. More than one social group has been destroyed by the incessant selling of MLMs. Now that social media is apart of our lives, many of these people will constantly be posting about “being an entrepreneur” and “building their business” their social media feeds will be filled with information about their product and too many prosperity memes to count. All in all, most people get tired of hearing about it, and it’s the fastest way to get defriended and unfollowed. 

Most People Never Make Any Money

The world of the multi-level market can get real weird, real fast. The terminology is odd. Anyone you recruit is in your “down line,” and you are in the “down line” of whoever recruited you. When you’re involved in an MLM, you’ll hear these terms a lot. Ostensibly, your “upline” that is the person that recruited you should help you make sales, provide leads, and so on. The whole thing gets very Glen Garry Glen Ross very quickly. The sad thing is that most people never make any money because the money is not in actually selling the product; the money is simply recruiting more people. That’s when the high-pressure tactics come into play. That’s where people become the biggest victims of these companies and the people who pressure anyone in their “downline” to recruit more people. It starts as something fun and friendly and quickly becomes a nightmare of high-pressure tactics to get more people involved in the business. The company can continue to make way the only way it really makes money: recruiting new salespeople. This is the chief reason why most people don’t make any money. Once they have burnt through their friends and family, they have no idea how to generate new leads, and they usually quit the business after thousands of dollars lost and debt incurred. 

The Products are Often Poor

Because these companies are working to keep overhead low, the products that they are selling are often of poor quality. It bears repeating but selling products is not the focus of these companies. It’s about recruitment and recruitment only. Although people often swear by Mary Kay or Avon makeup products, better products can be gotten a drugstore, often for less. Clothing MLMs are notorious for selling terrible clothing at high prices. Vitamin companies will get people on pricey subscription plans that are hard to cancel, especially when their customers find out that the product does not work as advertised. Many of these vitamin companies make dubious and untested claims about their products. People desperate for relief from chronic pain, disease, or general malaise will spend a fortune trying anything, and these companies are experts at separating them from their cash. 

Why do MLMs Stay Around?

Pyramid schemes are illegal. It seems like the government could come in and shut all these companies down. However, these companies have plenty of clever ways of getting around government regulations (a sure sign of dishonesty afoot) and structuring themselves in a way that skirts by government regulation. The sad fact is that MLMs stay around because people are economically desperate to get ahead in an environment of low wage work and high childcare costs. On the product side, vitamin companies capitalize on the lack of access to healthcare in America. People get desperate to try anything to help them survive, and they will spend plenty of money on the latest so-called breakthrough that these companies peddle. Much like the snake oil salesman of yesteryear, these companies sell things that aren’t proven to work and are often untested in any lab. Someone somewhere finds out that some root or plant might affect a condition or disease, and they package it in a pill and start selling it as a miracle cure. Clothing companies, at least, aren’t doing damage to people’s health or capitalizing on their vulnerability. They sell crap that doesn’t last. MLMs stay in business because of American desperation. Sadly, it is really just that simple.