It’s not uncommon in 2019 to know a number of people who claim to run their own business selling makeup, essential oils or protein supplements.
Many popular brands, such as Arbonne, doTERRA, Avon, Scentsy and Herbalife, are masters of multi-level marketing (MLM), network marketing or ‘direct selling’.
In these direct sales business models, representatives earn money by promoting, peddling and selling products and receiving a cut by recruiting others to sell products.
In a two-part special investigation, The Project is unearthing the less-than-glamorous truth behind the social media, small business and selling incentives.
Two years after moving to New Zealand, Vanessa Baxter had her catering business up and running. She’d found a support network in a group of other women trying to build careers.
“We’d get together, share our ideas about running a small business, how to be successful,” said Baxter, a former friend of doTERRA sellers.
Some of her friends then started a side hustle, selling essential oils.
“They were really passionate about these oils they were selling. They were trying to sell them to me as though they were something amazing and new. I was trying to explain to them that I knew about essential oils… and they were like, ‘oh no, these are different, these are pure’,” she explained.
With all that pressure, she gave in and purchased a kit.
“It was really expensive, just under $500 as a starter kit,” Baxter said.
“I was told that I’d use them all the time.”
But she didn’t use them – and she didn’t sell them, either.
The kit was from doTERRA, a USA-based company that utilises the MLM model.
Another woman, identified only as Claire, has first-hand experience in multi-level marketing as a former Arbonne seller.
“If you just signed up as a consultant because you loved the products and you wanted to share those products with your friends until they purchased them through your business – you wouldn’t make much money. You wouldn’t grow your business, at all,” she told The Project.
“In order to create a massive business, you need to build a big team – and encourage them to build big teams.”
In doTERRA, they call this ‘The Power of Three.’
“This structure of business looks like a triangle,” revealed Baxter.
“The people at the top of the triangle are the ones who are earning – and they can earn a lot of money.”
Yet it’s not a pyramid scheme – it’s all completely legal.
MLMs make money by selling products, while pyramid schemes profit by getting money from people “investing” in the scheme. However, just because it’s legal doesn’t necessarily mean it’s harmless.
In both cases, there’s a constant pressure from people further up the triangle to recruit people below – meaning all friends become potential clients.
“So they’re either trying to encourage me to jump on the bandwagon and sell them too, or they can’t help but try to upsell on the oils that I already have here at home,” said Baxter.
Yet more and more people are getting hooked into MLM companies. Hannah Horton, for example, claims she reached doTERRA ‘Diamond’ level in 18 months. The average income at that level is $16,000 per month.
Level up to Blue Diamond and monthly earning can increase to $36,000 – reach Presidential Diamond, and sellers can make an average income of $106,000 a month.
“I was a stay-at-home mum and I was really lost. I met someone online and I was quite taken by her life,” said Claire.
More than a quarter of sellers involved in MLM companies make no income. Nearly 50 percent of all sellers will lose money.
Only seven percent make more than US$10,000 annually – less than one percent actually make six figures.
That one percent of sellers bank on the work of all the people below them on the “pyramid”. If those recruits can’t sell enough, they will often end up digging into their own pockets.
“At the end of the month, you could always rely on the fact that most of your team – who are doing exactly what you’re doing – are going to be putting in their own orders to maintain their level. So you can guarantee that what you need to maintain your level is probably going to be okay,” said Claire.
She estimates she lost $15,000 with Arbonne.
“It makes me feel sick and so embarrassed, the financial position I put my family in… when I did this to put us in a better position,” she revealed.
By design, these businesses can’t work for everyone.
A seller can recruit three people, then each of the recruits will get their three. Yet in a country as small as New Zealand, sellers will eventually run out of people to convince to join the team – let alone people to sell to.
Former sellers such as Claire say there is a predatory, cult-like aspect to MLMs.
“I remember my friend said to me, ‘It’s a cult, what are you doing’. I was like, ‘No, you don’t get it, it’s such a community. Now that I’m out… it is so cult-like,” said Claire.
Just like cults, MLMs can wreak havoc in your life.
“I was left with thousands and thousands of dollars of debt, I’ve lost some of my best friends… it’s not worth it at all.”
The Project reached out to MLM company doTERRA, who responded in a statement: “We proudly operate a direct sales business model that is legally recognised in New Zealand and we follow relevant laws and regulations.”
Hannah Horton told The Project MLMs are not “get rich quick” schemes – but have the potential to be incredibly rewarding.
Arbonne didn’t respond to The Project’s request for comment.
This content was originally published here.