Lockdown has spawned a boom in MLM selling schemes – but at what cost?

‘Hey hun! Long time no see, I wanted to tell you about an amazing opportunity that I think you’d be fab for… ‘

Chances are you’ve had more than one message that starts like this over the last few months. 

Maybe it’s from a woman you went to school with, or perhaps someone you worked alongside five years ago or have only spoken to once or twice online. 

It starts off pretty friendly – a lockdown check-in, perhaps – then quickly morphs into what feels like a bit of a sales pitch, offering you an amazing opportunity to start your own business, just like them, selling vitamins, makeup, scented candles or beauty products.

At a time when women are more likely to have been furloughed than men – and the number of people claiming out-of-work benefits has more than doubled over the last three months – being offered the chance to be your own boss and earn money on your own terms sounds like an ideal solution. 

Indeed, recent statistics from the Direct Selling Association (DSA), whose members include beauty and wellbeing brands such as Arbonne, The Body Shop at Home, Scentsy and Avon, revealed growth across many of their members figures as a result of lockdown.

‘The closure of retail stores in March led to our members reporting early increases in sales via direct-to-consumer channels as shoppers turned to alternative forms of retail,’ explained DSA director general Susannah Schofield earlier this year.

But while many of these direct selling companies offer incentives such as the opportunity to launch a business for less than £50 and ‘the freedom to master the work-life balance’, the truth is this is an industry where research has found that around 99.6% of all sellers lose money instead of earning it. 

Often referred to as Multi-Level Marketing schemes, the real cash comes from recruiting others. Once you get someone to sign up as a seller, you become their ‘upline’ and take a portion of their earnings. If they sign up people beneath them, you also take a cut of those profits.

‘The bulk of the MLMs I’ve come across as being specifically problematic are the makeup and perfume brands,’ says Lucinda Borrell, an investigative journalist who specialises in personal finance and current affairs. ‘The basic promise is that you purchase a starter kit for as little as £30 and you’ll start making not just money, but also friends. 

‘Knowing you’re grouped with a lot of other women with a similar aspiration and family situation to you is a huge pull for people. But it’s what also makes it really hard for people to leave – even when they get to a point they know they are potentially being scammed. If they leave, they lose that friendship group.’

Through her research into the MLM phenomenon, Lucinda says that she’s found there’s a limit in what a person can achieve in sales alone.

‘I think straight away it’s quite simple to make a little bit of cash, particularly if family and friends purchase from you – but the bank of your loved ones only runs so deep,’ she explains. ‘After that it is about recruitment and being pushy in terms of sales, and from what I’ve seen this can take over your life. 

‘Often companies have a minimum monthly spend as well so even if you have made no sales, you have to purchase products and you get into a huge debt spiral. It’s a clever way to ensure repeat orders – but they aren’t looking out for their representatives, they are looking out for their products.’

 Carrie* was recruited by FM Fragrances via a Facebook advert during the early days of the pandemic lockdown. She was offered the chance to earn £200-plus a month from home. As a cash strapped student Carrie saw it as an easy way to make money. 

‘Within a day I was being encouraged to recruit people onto my “team”,’ she remembers. ‘I felt confused and couldn’t understand why as I had only just started and wasn’t experienced enough to be advising other new starters. I only realised after that the person who’d signed me up was being pressured by the girl above her and it was a massive chain that always benefitted the person above you more.’ 

Carrie also discovered that instead of gaining commission as a percentage of the sale, she would earn points per item meaning that although she sold over £300 worth of products in her first week to friends and family, she only made £3.59. 

‘After two months I hadn’t even made £10 in commission,’ she admits. ‘It was free to join, however I was heavily encouraged to purchase a starter kit, which is £59.99 and includes 150 tiny samples in a faux leather zip wallet and catalogues. I couldn’t afford it and looking back I’m glad I didn’t get it, as it would probably have been money down the drain. 

‘Unless you’re willing to constantly pester people and sit on social media all day I can’t see you even making minimum wage. 

‘I think it was so easy for me to be targeted as I’m a student who desperately needed money,’ Carrie adds. ‘But it felt absolutely awful to bother friends and family, it felt like I was breaking their trust and using them when I didn’t expect to have to do that just to sell perfume. I think a lot of it is also extortionately priced, which was another reason it was so hard for me to sell. I’m glad I gave up before I ruined any of my relationships.’

What’s the difference between MLM and a pyramid scheme?

‘Multi level marketing distributors earn money by promoting and selling products and recruiting other distributors to do the same,’ explains Claire Roach from Money Saving Central. ‘Whereas pyramid schemes just recruit people to pay into it until its inevitable end, when no new individuals can be recruited and the scheme fails. Only those who started the scheme end up making money.’

One of the most popular MLM companies in the UK is Arbonne, the natural beauty site that offers women the chance to ‘make money, make a difference and have fun all on your terms’ and runs training tutorials or motivational talks.

But their own Independent Consultant Earnings Statement from 2019 shows otherwise. The average annual income for independent consultants was just £519, while their 2018 Independent Consultant Compensation Summary revealed that out of 21,000 independent consultants in the UK, only 12% – that’s 2,600 – made money every month. 18,400 made nothing.

Meanwhile, Herbalife, which sells nutritional supplements, has seen themselves the subject of a damning 2017 documentary and several court cases. If you type Scentsy into your search bar, along with a promoted link to their website you’ll also find the common question: is it a scam? 

Jane* became concerned for her friend Emily, a stay at home mum who has started selling with Scentsy, a home and personal fragrance company, after her pre-Covid money troubles got even worse.

‘It worries me as she relies on her partner’s wage plus their Universal Credit to pay their rent and bills,’ explains Jane. ‘She’s admitted to me that they’ve been struggling to pay their rent. So I can’t believe that she’s spent £85 to join this company and only gets 20% commission.

‘I feel like she’s trying to earn some extra money to pay their bills but I don’t understand how she thinks doing this will help. She’s a smart woman so I was surprised to see her do this but I don’t feel like I can say anything to her as it would damage our friendship.’ 

With Emily posting about her products daily, Jane admits she feels relieved she hasn’t been asked to buy any – yet. ‘She’s my friend and I’ve combed her catalogue looking for something cheap and that doesn’t need replacing when I run out (such as wax melts) but I can’t justify the cost, even for a one-off purchase,’ she says.

Claire Roach knows exactly how this feels. ‘I was involved in a few MLM schemes, including Herbalife, in a bid to make money when my children were smaller,’ she says. ‘But I hadn’t really considered how I would be seen in the eyes of the people I was approaching. 

‘You are mainly targeting your friends and family. You initially get some sympathy purchases but are soon seen as a pest. People start to avoid you and they won’t pick up the phone or answer your inboxes in case you’re wanting them to sell them something.’

Now a financial blogger at Money Saving Central, Claire says that these organisations actively encourage you to target friends and family when they take you through the start-up procedures.  

‘I honestly didn’t realise how annoying I must have been until this year when MLM schemes seemed to pop up all over Facebook,’ she admits. ‘People were constantly spamming groups and their profiles, I blocked so many friends and left so many groups. This is when it dawned on me that I must have been that relentless when I was selling the products. 

‘Thankfully, at the time I didn’t lose any friends and no one said anything to me,’ she adds. ‘But then again, I wouldn’t outwardly say it to anyone either. It’s quite embarrassing now to think that they were only buying products out of sympathy as they clearly could have got them somewhere cheaper online.’

Elizabeth Riley Chiechi is a moderator of Sounds Like MLM But OK, a Facebook group with nearly 175,000 members across the globe, which was founded in 2017 and borne from the frustration of receiving constant cold messages from long lost friends who suddenly wanted to share a ‘life changing opportunity’. 

It was in 2018 that Elizabeth joined the group, after someone, who was aware of her history of anorexia, tried to pressure her into joining her BeachBody diet program. 

‘MLM companies are very smart,’ explains Elizabeth. ‘They use the trust that women have built with each other to recruit new representatives. Their customers are not general consumers though, their reps are their customers.

‘They save millions on advertising by having their representatives advertise for them for free in hopes of making a few sales,’ she adds. ‘Furthermore, they’ve convinced their reps to recruit their own competition with the promise of a paltry commission on the sales made by reps they recruit. It’s quite genius, and also quite heartless.’

As the Facebook group has grown over the last four years, the team behind it have begun publishing resources that help explain how MLMs can be problematic regardless of their purpose. 

‘We maintain an exhaustive list of known companies that members can reference,’ says Elizabeth. ‘We also get submissions every day about friendships and even families destroyed by pushy consultants, as well as truly devastating stories of financial ruin.’ 

However, not everyone feels this way. For Anna Watson, a business improvement consultant, it was a great way to build her confidence and make money. 

‘I joined Scentsy after seeing my cousin – who became my upline – being successful with it,’ she explains. ‘I paid £94 for my kit, which gave me a good start in terms of product but I did invest another £200 so I could really get it up and going.’ 

Anna explains that as with any business she expected to take a loss at the start – as many do – but then began to generate money. 

‘I made a profit in my second and third year of selling,’ she says. ‘Admittedly, I lost money in the last year again, but over the four years I made about £4000 once all expenses had been taken out.’

She adds, ‘At the start I absolutely loved it and could tell that my confidence was really growing. I loved being out and meeting people again – building relationships and doing coaching and training with team members. I would honestly say that I could see the opportunity to rise through the ranks. However, in November 2018 my dad died after a long illness and after doing a lot of thinking I realised I’d outgrown networking marketing, so gave up.’

Anna admits that her success was probably down to her previous employment background in recruitment and business development. 

‘I’ll always be thankful I gave MLM a go,’ she says. ‘I have done so much personal development in the last four years, which has helped me get to where I am today and I made some fantastic friends through it.

‘I know it doesn’t always work for everyone, but these sort of companies can be a great place to learn how to run your own business and – through some – build a solid business.’ 

According to Susannah Schofield from the DSA,  the only recognised UK trade body for the sector, there has been a lot of changes within the industry over the last few years.

‘Five to 10 years ago complaints were more common, but significant strides have been made by many companies in recognising the importance of committing to the DSA’s Codes of Conduct and industry best practice, as well as to improving training amongst independent representatives,’ she explains. ‘There are 563,000 people working in direct selling in the UK, and the vast majority have positive experiences. Direct selling is an industry powered by women – brands such as Avon were enabling women to earn independently 34 years before they had the right to vote in the US.’

Susannah adds that research undertaken by Ipsos MORI showed that the average amount earned by direct sellers in the UK is £372 per month. 

‘Many run their direct selling business part time or alongside another job and there are also instances of people developing very significant businesses this way – sadly these are often overlooked,’ she says. ‘But if anyone has had a bad experience, we always encourage them to get in touch with us, so we get the opportunity to try and resolve these for them.’

However, Lucinda Borrell holds a different view. ‘Over the years I’ve done a lot of research into MLMs and my advice to anybody is to stay clear – particularly if there are minimum orders, or “starter kits” you are advised to buy,’ she says.

‘The most “successful” MLMs (successful being the ones that pull people in) is that they understand the aspirations of the people they are trying to enlist,’ adds Lucinda. ‘Often these individuals have families to feed and care for and want a way of earning money while spending time with their loved ones. It’s something we all want. But at what cost?’

*Names have been changed

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