If you are on Facebook, chances are you’ve gotten a private message from someone you know that reads something like this… “Hi friend, I’m reaching out to share something that changed my life for the better. Are you interested in financial freedom? I can help you find it with…”
Perhaps that Facebook friend is associated with LulaRoe, Arbonne, or YoungLiving, which are just a few of the direct sales companies that populate social media. Independent representatives from companies like these boast of the benefits that can be had if you get on board with what they are selling.
And many do get on board.
According to the Direct Selling Association, a trade organization for direct sales companies, one in every six households in the United States participates in a direct sales or network marketing company in some fashion.
Direct sales, which has a distribution approach that is different from traditional retail, sells products and services via a network of independent representatives, rather than conventional online or brick and mortar stores.
Many of these independent representatives are indeed someone you know, perhaps your next door neighbor, your co-worker or your old college roommate. As part of a multi- level marketing approach, these friends are encouraged to recruit you to sign up and sell, too.
Multi-level marketing, or MLM, is common in direct sales. With MLM, existing representatives are paid a percentage of their new recruits’ sales. These new recruits are called the “downstream,” and the recruiter is the “upstream” or “upline.”
In other words, your old college roommate Jen, who is selling ACME jewelry (a fictional company), might convince her neighbor Amy to sell ACME, too. Jen then receives a portion of whatever profits Amy makes on what she sells. And if Amy then recruits her friend Jamillah to sell ACME, Jen is making a profit off of both Amy and Jamillah.
Amy is Jen’s upline and Jamillah is Jen’s downstream.
Women, in particular, seem to be attracted to MLM companies, drawn in by the offers of a way to have it all; a lucrative career with flexibility, new friends and the option to work from home.
In fact, a 2016 study by the Direct Selling Association found that 74 percent of MLM representatives are women.
Despite the seeming explosion of MLM representatives advertising their successes on social media, the reality is that the majority of people who sign on to one of these network marketing companies do not make money, according to a 2018 study by the AARP, the national advocacy organization for people over 5o. According to the study, nearly half (47 %) lose money and a quarter (27 5) make no money.
A pyramid scheme is one in which only a few top level members make money, at the expense of those lower down in the chain.
Criticisms like these are based on surveys by websites such as MagnifyMoney.com, that compare financial products. Most people involved in MLMs make less than 70 cents an hour in sales, and that is before deducting their business expenses, according to the site.
As controversial as direct sales MLM companies may be, the reality is that while there are plenty of people who fail, there are also those who succeed.
LVB talked to a few of those success stories, to hear another side to the story.
“This was life changing for my family.”
Rosemarie Bencivenni Hulbert is a personal trainer and wife and mom of three living in Allentown. She is also a top level consultant with Rodin + Fields, earning $80,000 a year. Rodin + Fields is an MLM headquartered in San Francisco that specializes in skin care products.
“I was thinking, what career can I start in my 40s?” Hulbert said. “My neighbor sold Rodin + Fields, and I took a look at the business and the product’s reputation.”
Intrigued by what she saw, Hulbert made an initial investment of $900, which allowed her to get started selling the popular line of anti-aging skin care.
“I was in it to get my 900 dollars back,” she said, “that was my initial goal. Since then it’s become real income. It’s paid for vacations. It’s been life changing for my family.”
Hulbert estimates that she puts in about 10 to 15 hours a week with her Rodin + Fields business. However, she is quick to add that her success required a heavy time investment in the beginning. And Hulbert is well aware that some consider her a part of a pyramid scheme.
“It’s not another pyramid scheme,” she said. “Everybody out there in the business world is part of making money for the people above them. And I don’t just make money off of my team, I profit from selling the products.”
Hulbert was drawn to Rodin + Fields because she didn’t need to have in-home parties and she felt that anti-aging skin care products will never go out of style. “People are obsessed with skin care,” she said.
Networking is critical when it comes to making money through MLMs, she said. “You’ve got to be a good salesperson to be a success.”
Hulbert has 110 people in her downstream, but must hit her own sales quotas to make money off of the team below her.
MLMs aren’t for everyone, she said. “It’s important for people to do their research and think about what’s involved. Have an open mind and a strong work ethic. This business is a natural for me, but it may not be so natural for others.”
“Direct selling is the future.”
Not all of those involved in MLMs are women. Westley Morris says he is thriving in network marketing. Morris operates a popular massage therapy business in Hellertown. He says he made roughly $50,000 dollars last year as an independent associate with Kynect, also known as Stream, an energy company that uses MLM as its primary sales channel.
Morris describes what he does as “helping people save money on electric and wireless bills.”
He doesn’t ask anyone for money, he just pitches that he can save them money, he says
He’s been with Connect for two years and encountered opposition from friends and family when he approached them about Connect services.
“People were skeptical,” he said. “’Oh, here comes Wes. He is going to try and sell me electricity.’ But mindset is the key to handling rejection. I had to let go of the value that other people’s opinions had on me.”
Morris put up $199 to get started with Stream, and pays a monthly $24.95 fee that covers marketing tools he uses for the business. He says that he makes about 60 percent of his profit from customers who use the electric service he sells and the other 40 percent from the 75 people in his downstream.
Like Hulbert, Morris doesn’t consider MLMs to be a pyramid scheme. “If you are working for someone, you are in a pyramid business,” he said, “just not the right end of the pyramid. Every business has an owner and under that are supervisors or a board and so on…there is a hierarchy to capitalism.”
Morris also sees MLMs as the model that more and more traditional retailers will begin to emulate. With brick and mortar stores closing and online business skyrocketing, he sees MLMs as a perfect fit for e-commerce today.
“Companies are realizing that instead of paying out millions of dollars on advertising,” he said, “we can pay it out to regular people for the best form of advertising on the planet, which is word of mouth. Companies can save money by going directly to the consumer with their business, with no retail outlet in the middle. Direct selling is the future.”
“You build a culture.”
Elaine Zelker and Krista Kasper are friends and busy moms who are both involved in MLM businesses.
“If you want to get something done, ask a busy person,” is their motto. They have learned from each other over the years, offering up support and advice when needed. Zelker, a well-known photographer in the Lehigh Valley, is frequently called upon to travel across the country for corporate clients. She sometimes shoots as many as 500 headshots in one day. In addition, she is a top level Color Street saleswoman.
Color Street is a direct sales company that sells nail polish strips at prices ranging from $11 to $14 dollars a set. In less than two years with the company, she has amassed 240 people in her downstream and earns between $1,500 and $2,000 dollars a month from Color Street.
Kasper has been with Younique, a naturally based skincare and cosmetics company for almost five years. She has 1,200 people in her downstream. While she could not disclose her income with Younique, she said it is close to six figures.
Both Kasper and Zelker assert that they have been able to make real income with MLMs because they have treated the business like a real job.
“The misconception is that it will be easy,” said Kasper. “And there are reps who will say that it is because they just want to build a downstream. That’s false.”
“I knew I was treating it like a business so I could be rewarded as a business,” added Zelker. “Do you want to be in it just to get free nails and extra product? Or do you want to make extra money for bills? Or do you want freedom money? If you are making freedom money you are going to be reaching out to 30 people a day minimum.”
While 30 people a day may seem like a lot, a traditional business would require the same amount of effort to get started, Zelker said.
Zelker and Kasper have grown accustomed to the skepticism and agree that a positive attitude and thick skin are requirements to succeed.
When asked if the business practices of MLMs can be cult-like, both said that while that can be true in any business, neither believe that to be the case with the companies that they are involved in.
“Cult?” said Kasper. “No. Sisterhood? Yes. It’s like anything else. When you join a gym, you become a part of that ‘family.’ You build a culture.”
“The culture is important,” agreed Zelker. “My hard work is not just for me. In everything I do, I truly believe in helping women learn the skills they need to rise and soar.”e