Women talk to Moneyish about their struggles as MLM sales consultants
Lyn, 42, was just hoping to earn a little money — and score some discounted products — when she signed on to be a sales consultant for skincare company Rodan and Fields in 2015.
The South Carolina native had seen one woman in her town purchase a beach house from her Rodan and Fields income and another win a Lexus for top sales — so she was pretty sure there was plenty of money to be made. But after forking over $600 in fees to sign on as a Rodan and Fields consultant, and spending almost $100 a month for a year on required products and website fees, Lyn realized the money wasn’t going to come through for her.
Multilevel marketing companies, also known as direct sales companies, like Rodan and Fields rely heavily on recruited members to sell their products. New consultants are invited by another consultant to sell products to consumers. When a new consultant signs with the company, she becomes part of her recruiter’s “downline” and helps generate not only sales for the company but also for her recruiter’s team. Start up fees can range anywhere from $250 to $6,000, depending on the company and their sales strategy. New consultants earn money by not only selling products but also recruiting others to sell as well.
“I was losing money every month and it was hard to sell expensive skin care products to my friends on tight budgets,” Lyn tells Moneyish. She left the company after a year, having made just two sales; she did not even recoup her $600 initial investment. Rodan and Fields tells Moneyish that their consultants are not paid for recruiting, adding that “we exceed direct-sales industry ethical guidelines” and even puts its income disclosure statement online.
Twenty million people were involved in direct selling in the U.S. in 2015, hawking an estimated $36.12 billion dollars in goodies — a record, and up nearly 5% from a year prior, according to the Direct Selling Association. Many of them sell through multi-level marketing companies like Rodan and Fields; 74% of MLM salespeople are women ages 35-45, the DSA reports.
And many of these women become quickly disillusioned with those same companies. Jon M. Taylor, a leading research expert on MLM companies reports in “The Case (For And) Against Multilevel Marketing” that in the first year of operation, “a minimum of 50% of representatives drop-out. After five years of operation, a minimum of 90% of representatives have left the company. By year 10, only those at or near the top have not dropped out – making it safe to say at least 95% of representatives have dropped out.” Conversely, only 64% of traditionally run small businesses are out of business in five years.
For many of these women, like Lyn, the reason for quitting is simple: They just aren’t making the money they thought they would. Jennifer, who worked as a salesperson for LuLaRoe from March to December 2016, discovered this the hard way. LuLaRoe, a popular leggings MLM retailer, charges new consultants an initial onboarding fee of $6000 and then encourages them to reinvest profits into purchasing more inventory. While Jennifer made $90,000 in gross sales for LulaRoe, she says that — after leggings expenses, tax liability and self-employment taxes — she left the company with a mere $2,000 in her pocket.
According to Art McCracken, the chief performance officer for LuLaroe, “Like all enterprises, people move on for all sorts of reasons – life changes, new opportunities, or because it wasn’t what they expected.” He adds that, most of their salespeople “are happy with their experiences building a LuLaRoe business.”
For others, the amount of work required isn’t worth it. When Rebecca, 39, signed on as a sales consultant at food company Tastefully Simple in 2012, she was just hoping to work part-time to make a little extra spending money. When the mother of two initially joined the multi-level marketing company, she was told she’d have no trouble convincing her friends to stock their pantries with everything from their $7 beer bread mixes to $20 summer fruit drink concoctions.
And she didn’t: After building a team of almost 60 consultants, who sold products that Rebecca got a cut of, Rebecca became one of the top 1% of TS consultants. She was making, on average, $3000 a month, after monthly sales and her downline commissions. But what Rebecca hadn’t banked on was that managing her team of consultants would became a full time job — and a difficult one at that.
“The stress of it was constant,” she stated. “Because you were always relying on other people to do what they said they were going to do. If one piece of the puzzle didn’t fall into place you could lose up to $2000 that month.” Tastefully Simple did not reply to Moneyish’s request for comment.
Of course, plenty of women have success at MLM companies and love the work-life balance and few barriers to entry that the companies offer. And, some claim that MLM companies allow women to more easily smash the glass ceiling because the field is dominated by women.
Still, to make good money, working for these companies can turn into a full-time job. McCracken of LuLaRoe notes that the key to success is training and hard work. “While the LuLaRoe business is a simple one, it isn’t easy,” he says.
But those success stories can be the exception, not the rule. As former LulaRoe consultant Jennifer put it: “If I had it to do over, I would never have put my family’s money into a MLM marketing company. It’s a private shame,” she says.
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