Ragged Riches

Selling a dream doesn’t work in this economy.

If you are in your mid-30s, chances are you had a moment in your teenage years which ended with you signing up for an MLM. I got signed up with AIL and Primerica at one point. 

My roommate from my early 20s got duped by Melaleuca, and actually missed rent because of it. Another friend of mine sold Cutco knives until he realized he was only making $2 an hour or so. 

It’s weird to think about, but in a strange way, signing up as someone’s downline is almost a rite of passage in America. I mean, are you even American if you didn’t fall for a capitalist cult that preys on desperation?

That’s like, super American. 

And yet, I get the nagging feeling that America fell out of love with its MLMs.

For the past century or so, Multi-Level Marketing companies were a major slice of Americana.

Multi-level Marketing, or MLM, is pretty close to a pyramid scheme. Why? Well, it’s the way companies work, hire, and pay people. The products of the MLM aren’t the main driver of profits — though they often do have their fans.

MLM marketing is a type of legal pyramid scheme. Sellers make money by recruiting others to sell under them. The more people they recruit to sell products, the better they do. All they have to do to get this “opportunity” is pay to join. 

Almost no one makes money from MLMs outside of people at the top. After all, the top players are the ones who have all the downlines. The amount you have to sell as a top player gets spread out under your downlines. 

Hence, the scam part of MLMs. They’re selling the dream, not the goods.

Even if you’re not from America, chances are you’ve heard of one of these companies. 

MLMs were actually not that bad once upon a time. Back in the middle of last century, MLMs were often the only way for housewives to get a job that didn’t involve secretarial work, teaching, babysitting, or nursing. 

Mary Kay, in particular, was once a trailblazer for women. It was the first (or one of the first) large-scale MLM companies with a female CEO and head marketer. 

For many women who wanted extra money at home, a Tupperware party or a visit from the Avon Lady was the difference between eating steak and eating leftovers. 

Many of these major names have become pop culture references for retro movies, the topic of documentaries, or the topic of major court cases. You might have heard of:

• Mary Kay
• Avon
• Cutco
• Herbalife
• It Works!
• The Body Shop
• Rodan + Fields
• LuLaRoe
• Monat

In many parts of the country, being part of an MLM is also a bit of a status symbol. Why? It means you have a husband supporting you, and it also tends to mean you have friends. You join not for the money but for the inclusion. 

In recent years, MLM companies have been closing their doors or “re-shaping their commissions.”

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Take a look online, and you’re going to see a major shift in the way MLMs work. More specifically, MLMs are not working. They’re crumpling and scrapping the MLM method altogether. 

In recent years:

• LuLaRoe, one of the largest leggings MLM companies in history, shuttered. The entire debacle was covered in the smash hit documentary LuLaRich.
• Monat, a major haircare company, has all but collapsed. The company has started to fire people in its top ranks amidst major lawsuits. While the company has not declared bankruptcy, people are fleeing it left and right. 
• Rodan + Fields, a major skincare company in the circuit, has ended its famous MLM side. They have switched to commission-only.
• The Body Shop shuttered its MLM-based “Home Service” this year. The company is still holding onto its mall stores, primarily because it remains its most profitable aspect. 
• Seint, a makeup company, has gone belly-up. They are redoing their commissions so that the MLM aspect of it will no longer be in service. 
• Amway, often considered to be the King of MLMs, has posted a loss in profit. The 5 percent drop made earnings drop below $8 billion for the first time in 10 years. 

This is a massive shift in the MLM industry. This is a massive message that is changing the way companies choose to do business. No matter how you look at it, the headlines make it clear. MLM is out.

But what about those statistics? The numbers also agree. MLM sale shares declined about 40 percent in the past 20 years compared to US retail sales.

What’s making MLM companies die out?

MLMs have historically relied on selling a dream, not a product. In order to sell for an MLM, you have to buy their products and sign a contract with them. You become their storefront — and you basically agree to work for less than minimum wage with the hope that you’ll become a top earner.

Fun fact: you can’t become a top earner without recruiting others with the same dream, who will be recruiting just as hard as you. In order to become a top earner, you have to enter an MLM early and also have a ton of social influence.

This business model worked well for the past 70 years. So, you might be wondering what changed. Four major things changed that made MLMs deeply unprofitable…

Talk, Talk, Talk On The Net

Back in the early 2000s, everyone knew someone who got burned by an MLM. However, we also all knew someone who was really good at faking their earnings. So, there was a certain level of plausible believability. 

The internet changed that. 

Content creators quickly found a way to warn others about pyramid schemes like MLMs. There’s now a very active anti-MLM movement on YouTube, Reddit, and TikTok. 

If you search up any of these companies, you will be flooded with warnings about both product quality and low commissions. It’s hard to keep ignorant when there are so many warnings on the net. 

People now hear “MLM,” and immediately assume the product is bad, the person is exploited, and that it’s a bad idea to get wrapped up in it. These assumptions generally are correct, which means MLMs have a rotten reputation. 

I know many people who will openly refuse to buy MLM products because of the way they exploit their workers. This trend is likely to continue and grow. 

A Need For Stability

I’ll be honest: MLMs have a strange paradox about them. On one hand, they are incredibly attractive to people who are down on their luck. They offer this (often false) glimmer of hope in dark times. 

This is precisely why they also tend to be repulsive to people who lack money. More and more people simply can’t afford the entry fees for these — even if it’s just a pack of makeup. 

Those who can squeak by with the purchase often get very leery of working on commission or working without a guaranteed income. The reason why is simple: they don’t have time to muck around with a company that won’t pay the bills. 

The word is out. MLMs don’t pay. And since it can take years (and sketchy connects) to turn a profit with MLMs, a lot of people just don’t have the time and money to invest in a business model that likely won’t work. 

There’s already a fire under our collective’s butts. Why would anyone waste time on a company that may not give them a guaranteed monthly income above $0 when they could get a higher paycheck from McDonald’s?

In recent years, the spate of MLMs suddenly dropping commissions also made major MLM “boss babes” rethink their businesses. As a result, many of the women who made a lot of money no longer do so via MLM.

In-Store Competitors

For many MLM companies, a main reason why they didn’t choose to sell in stores deals with shelving fees. In the past, this was a genuine gripe — especially in the makeup and skincare industries. 

During the middle of last century, getting high quality skincare at a low price was nearly impossible unless you went to department stores. Drug stores didn’t have good, or even halfway decent, makeup. 

Avon and Mary Kay had almost as good makeup as department stores, minus the department store prices. Today, most drugstore makeup outdoes the goods you’ll get from an MLM. 

Lonely America

MLMs are meant for people who have parties, social connections, and lots of friends to sell to. If you don’t have a big network, an MLM makes little to no sense to join.

Considering that we’re in the middle of a loneliness epidemic, that’s not a good sign for people who want to join. After all, you don’t want to lose the few friends you have by enrolling them in a program you joined under a guilt trip, do you?

MLM companies are struggling because they aren’t compatible with modern America.

America’s economy is at a breaking point. We’re at a point where minimum wage is not enough — not even close — for a single person to survive. In fact, if you’re not making $30 per hour, you’re likely sharing a room for rent with others. 

Most of us are alone and fed up of being preyed upon because of our loneliness. Most of us want the convenience of a store where we can pick and choose what we buy without pleading salespeople. Most of us want a steady payout. 

The idea of working on commission payouts of $5, $10, or $15 per product is not compatible for most of us. The idea of trading friendships for cash is not feasible for most of us. 

People are growing wise to the way that franchises exploit owners by removing their ability to make major business decisions. They’re also aware of how many people got burned by the MLM model. 

We no longer live in a country where the average person believes that hard work will make you rich. We’re cynical now. And, America is pissed at how many corporations exploit labor and innocent people for gain.

At a time when people are starting to say “enough is enough” to flat wages, MLMs couldn’t be more hated.

The easiest way to get a bad reputation in America is to exploit low-paid workers. It’s why so many people started to walk away from Wal-Mart and fast food. It’s why more people buy from mom n’ pop shops these days. 

It’s also the main reason why MLM companies are not compatible with mainstream American values. America is fed up with grifters. And if you ask me? MLMs earned every bit of that hate, penny for penny.