The truth about MLMs

a sales associate gestures to the left

Everyday, thousands of people are asked to sign up for a new “sales opportunity.” Chances are at some point in your life someone has tried to rope you into one. But how can you tell an actual opportunity from a scam? Is it right for you?

Continue scrolling to have your questions answered, or use the navigation on the left to find what you’re looking for.

What is Direct Selling?

Direct Selling is simply the marketing and selling of products directly to consumers away from a fixed retail location. The most common form of Direct Sales is that of the Party Plan, or selling products by hosting what is presented as a social event. Companies that operate under the Party Plan include Tupperware, Mary Kay, and Chloe + Isabel Jewelry.

a table with products on display

History

While the term “Direct Selling” is a recent development, the concept of selling directly to the consumer has been around for much longer.

1200s

A Peddler hawking his wares

Peddlars, the earliest “Direct Sales” agents, would travel from town to town and door to door hawking goods. Peddlars were suspicious characters due to their association with travelling.

1855

briefcase

Door-to-door salesmen are the more modern take on peddling. They were generally male and regarded with mistrust for their lack of association with the home. The first door-to-door sales company was Southwestern Company in 1855, but by far the most well-known company was the Fuller Brush Company.

1905

Madam Walker

makeup Women break into the sales force as Madam C. J. Walker hires women to sell her beauty products door-to-door.

1951

tupperware cups tupperware bowl

Tupperware becomes the first company to switch to an entirely home show based model. Previously, the company had struggled with getting people to buy their products, but at-home demonstrations and sales proved extremely successful for their plastic products. Being a Tupperware Consultant satisfied the desire for women to continue in the workforce once WWII was over. They could set their own hours and work while fulfilling the role of homemaker popular in the 1950s.

Portrait of Brownie Wise

A key player in this shift was Brownie Wise, a pioneering saleswoman who began selling Tupperware through the party plan in Florida. When her Tupperware sales surpassed those of the local stores, Tupperware's CEO began working with her and designated Brownie the Vice President of Tupperware Home Parties in 1951.

tupperware bowl tupperware bowl tupperware bowl tupperware bowl

1910

DSA logo

The Direct Selling Association is founded in order to unite and protect Direct Selling companies and their consumers. The organization sought to educate sellers and consumers about Direct Selling and members of the Association must adhere to a strict code of ethics. The DSA is still a voice today for sellers and consumers.

MLM vs Pyramid Scheme

Home shows operate under MLMs, or Multi-Level Marketing companies. An MLM works like this:

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A pyramid scheme looks similar, and often will pretend to be an MLM but with a few noticeable differences:

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sales
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Warning Signs

That you are being recruited into a scam

contract no
red flag

Don’t sign a thing until you’ve done your research on the company. This is a sure sign they have something - like the fact that they are a scam - to hide.

No product no
red flag

You can't legitimately make money without selling something, whether it is a product or a service. If that product or service does not exist or if it is outrageously priced, you won't be making money from selling it. If you don't think it can sell, it probably won't!

income from recruits no
red flag

A real sales opportunity will place an emphasis on selling a product. If a majority of the money coming in is from recruitment and not actual sales, it may be a Pyramid Scheme. It might sound great, but it will not be sustainable or legal.

speech bubble no
red flag

Reputable companies don't usually do this. The very fact that they feel the need to reassure you points to the fact that they are not a legitimate company.

What They Don't Tell You

A sales associate

You pick your own hours, you can work from home, and you decide how much effort to put in. Sounds perfect, right?

So you’ve found an MLM you trust. This can be a great opportunity to start and run your own personal business. But behind the promise of easy work and money that that consultant is declaring, there are some truths she probably isn't telling you.

Home Shows are a lot of work!

Outside of that 2-3 hour show, A DSC will need to make multiple phone calls, spend time preparing for the show, and sending orders to the company. This can add anywhere from 1-6 hours to your work week as a sales rep.

You will probably alienate your friends

All DSCs begin with their “warm market” – that’s family, friends, and acquaintences. All are invited to a launching party, where they are asked to host a show themselves. Some people are very uncomfortable being put on the spot and asked to host a show or buy something. A DSC can strain her friendships by trying to use them as business relationships, and she will if she can’t expand beyond them.

The cost will add up

Many Direct Sales Companies have a start-up fee and package that can cost as much as $750. While some companies don’t require that you keep an inventory, it is very hard to sell a product without having it on hand for demonstrations. On top of that, many DSCs find themselves purchasing products for themselves, and in some cases will sign up just to have the Direct Seller Discount.

What are you experiences with the Party Plan, Home Shows, or hostessing?
Leave a comment and see what others have to say.

sales associate

I'm a sales associate for Mary Kay and I've got to say that it's true, you can make lots of $$$ selling but be careful because if you sell to your warm market too much you'll alienate your friends so try to build professional relationships beyond friends and family if you want to win that pink cadillac!

other

I was invited to a home show and I was really dissapointed. My friend advertised it as dinner but the whole time there was an associate there trying to sell Pampered Chef cookware! Very misleading. If you're going to host a show, be honest with your guests!

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Glossary

Direct Sales: the marketing and selling of products directly to consumers away from a fixed retail location.

Downline: within an MLM, this is the people a sales associate recruits

MLM: short for "Multi-level marketing", an MLM is a marketing strategy where sales associates are compensated for selling products and the sales of their recruits

Home Show: An event where a sales associate shows and sells products in someone's home, usually under the guise of a party.

Party plan: a method of marketing products by hosting what is presented as a social event (sometimes a home show) where products are for sale.

Product: an article or substance that is manufactured or refined for sale.

Pyramid Scheme: an illegal investment scheme in which there is no product and participants earn money only by recruiting new participants. Pyramid schemes are often disguised as legal businesses.