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What is the meaning of MLM?

The MLM meaning is Multi Level Marketing and unless you live under a rock, you are probably being exposed to it in loads of ways, you just might not realise that is what it is. In short it is nothing more than a type of pyramid scheme, just with a different name. The difference between this and the traditional pyramid scheme model is that a product or service is involved, instead of just being about a membership, investments or recruitment fees. The people at the top receive commissions and income for anyone joining or making sales below them, so unless you manage to recruit a massive amount of people below you, you are unlikely to make any real money out of it, particularly with the amount of programmes that involve a joining fee or kit purchase up front. The more people you recruit, the higher commission rate you can earn, and the more money you can earn.

The problem with pyramid and MLM schemes is that they are not sustainable. Only the people at the very top, and who get involved early will actually make money. The more people who join, the more people below them will need to join to ensure that everyone makes their money, but eventually they will run out of a pool of recruits and most people will make a loss.

Why do they have a bad name?

The problem with MLM programmes is that so many of them have allowed people to get burnt because the vast amount of people end up spending more than they can ever make. A lot of the ads on social media prey on the kinds of people who could do with the extra cash (like stay at home mums or single parents). Preying on this vulnerability is in my opinion inexcusable.

They are actively promoted, particularly on social media platforms, as quick and easy money making opportunities, and yet that really couldn’t be further from the truth. Like most things in life – if it seems too good to be true, it usually is.

Here’s a couple of ads that I’ve seen recently in local Facebook selling groups:

The first one is directly telling you what you would be signing up for, but they are acting as though this is a limited time offer and how joining now will benefit you so that you don’t miss out and will  get a half price joining fee. They use this “urgency” to rush people into signing up.

mlm meaning features on this ad trying to recruit

This second one is about as vague as it can be. They are selling this great opportunity on the fact that you will be working with a great team, you can be a hairdresser, lawyer, stay at home mum etc. There is no way this is not something which is too good to be true – and I would recommend you run fast in the other direction before replying to any such ads.

mlm meaning is vague and not advertised up front

What about well known companies?

Even well known companies like Avon, The Body Shop and Ann Summers (in fact anything that refers to it’s “recruits” as distributors, promoters or consultants etc) are some form of MLM.

Ann Summers parties have been really popular in the past, and have been a fun way of having a girls night in, with the representative going to the host’s home or other venue, and running adult themed party games and encouraging the guests to place an order, with the host earning a discount on their order. Programmes where you can run such events can be good ways of getting groups together to get bigger orders placed, but they by no means guarantee you success.

New brands and companies are cropping up all the time, and some of these are making the MLM name even worse than it was. In particular Tropic has become really popular, and I am regularly seeing friends and acquaintances on Facebook becoming a rep. Tropic do sell themselves as different to other MLM programmes, and in fact call themselves a “direct selling” company rather than MLM, but ultimately, the business model is the same, people earn commissions from recruiting other people and making those sales.

Unfortunately, MLM types programmes are becoming more and more popular, particularly in times when people have a lot of financial issues and worries. People are sold false promises, and have their hopes played on.

  • Younique
  • Forever Living
  • Arbonne
  • Essens
  • Kleeneze
  • FM Cosmetics (FM World)
  • Herbalife
  • Phoenix Trading which is now known as Flamingo Paperie
  • Usbourne
  • Partylife
  • Oriflame
  • Scentsy
  • Juice Plus
  • Le-Vel
  • Doterra
  • Body by VI
  • Mary Kay
  • Utility Warehouse
  • WIkaniko
  • Kirby
  • Simply Naturals
  • Oola
  • Young Living

Years ago I joined Stampin Up as I was really into crafts and things like that. It was a set price and you could choose up to a certain value of products for a reduced price and as there was more than that amount of stuff in the catalogue that I wanted, I joined up. I had no real intention of making money from it, apart from maybe sharing a catalogue with a friend or two, but once I joined I saw that there was so much more to it. You weren’t forced to make sales but the person who signed you up would encourage you to do so. Also as a “demonstrator” you could aim for rewards and even holidays for the top sales person. You also could earn more benefits and rewards if you recruited other people. I didn’t want to become a pushy sales person, and I wasn’t interested in signing other people up, so I just kept my kit and let me “membership” lapse.

What should I know?

Clare from My Money Cottage tried out being an Avon rep and has written about it for her site. She explains it far better than I ever could – after all, she has tried it, but here are my key takeaways from her experience and those of other people who have tried MLM.

  • The list above is not exhaustive, and more MLM programmes and schemes are popping up all the time (just check any local Facebook selling group for the latest).
  • Anything that involves a signup or joining fee should be avoided. You are out of pocket before you begin and it will be nigh on impossible to make that money back.
  • Some programmes require you to pay for your catalogues or books too, another expense before you can even start making any money.
  • Even well known brands can sometimes be hard to sell – and you usually need to sell a lot before you can make any money, which means with less well known brands it is nigh on impossible to make money. An example of this is The Body Shop is really popular, but as it is so well known, you will struggle to find people who don’t already know a rep.
  • Another problem with MLM is that people seem to get sucked in, convinced that if they make one more sale or get one more recruit that they will soon be turning a profit. I do believe that some people are trying to recruit people as they believe they can help these people, it’s almost like they are brainwashed. Then there are others who are signing people up just to make a profit out of them. Either way, the motives aren’t usually great at the heart of it.
  • The real money to be made is usually in signing up recruits, but you have to be a certain kind of person to encourage others to sign up to something that you are perhaps already getting disillusioned with and as Clare explains in her post – quite often she would make losses on these new recruits as she would cover the costs of the catalogues or books and some would never be seen again!

Conclusion

It is incredibly unlikely you will make any decent money (if any) from any MLM programme – no matter what you are promised on sign up. They are advertised to sound amazing, quick and easy, but there are far better ways of making money! Use your discretion and perhaps look for a side hustle which relies less on the recruiting of other people or promises which seem too good to be true.

As a side note, popular website Mumsnet has even banned MLM programmes from advertising on the site, and that says it all.

3 Replies to “What is the meaning of MLM and why is it so bad?”

  • I was with SU multiple times, never made a single cent but I spent a ton! Then was left with crap I didn’t want. I sold it all on Ebay and finally made some actual cash! SU will tell you until they are blue in the face that they are not a pyramid scheme because they have an actual product. Well yes, they do. But, their products are overpriced and sometimes cheaply made (the stamps are made in China, they will tell you otherwise but they are made in China. They are “assembled” in the US. Most of everything they sell comes from China. The emphasis, no matter what SU tells you, is and always has been on recruiting and building a team, a downline. In the training by Ronda Wade, in the actual video webinars, she states quite clearly, that your main objective as a consultant is to turn all of your customers into your downline. So if that’s not a “pyramid” scheme, I don’t know what is! You can find better products online, for better prices, nicer made and made in America for real.

    • I’m sorry to hear about your experience – but unfortunately it is a common one I hear. I only joined as I liked the products, but because I didn’t want to “recruit” people, I didn’t fit in and wasn’t very popular – fine by me though!

  • I 100% agree with most of what you have said in your article but without doubt for some people it does work.

    MLM has got a bad name because of people promoting it badly and making promises that could not possibly have been kept and people do fall for that, but there are some genuine companies out there where you can make decent money.

    I was with Avon for 17 years and yes there is a small joining fee and you do have the ongoing cost of buying brochures but I made money. In fact, I made a lot of money and most of it through sales. I did have a small team of 10 people but the majority of my earnings came from my own sales not my team. However, I worked hard to build a customer base. Treated it like a process and never took rejection personally. It takes a certain type of person to make it big with Avon and you have to have tenacity and determination.

    I then went on to join Essens who I am currently with and earning a lot more than I did with Avon. I do recruit with Essens because I truly believe that it’s a really good opportunity to make money. The top-level of earnings on sales is just over £100 in sales. There is no joining fee but it is recommended to purchase a starter kit as you do need to be able to demo the products but at less than £30 it’s not hard to recoup that cost and there are no ongoing costs for people who join solely to sell. People who want to build a team do need to order a minimum amount which is roughly £30 per month but that can be your own sales or personal purchases. We do encourage people to introduce others because it does benefit them to do so but at earnings on sales starting at £4.30 per bottle and going up to £7.20 per bottle once 5 have been sold it is by no means necessary to recruit to earn a decent amount of money.

    The drawbacks are that the cost of shipping an order is £6 (although does become cheaper or even free if the order is of a certain value) but if you have someone local you can order on behalf of one another and your total order value can reduce your costs or even mean you don’t pay any at all. The other drawback is that the products are so long-lasting it takes around a year in some cases to get repeat business but then you have to find new customers. Once you have a customer base it becomes much easier.

    So not all MLM’s are bad and some of us are more transparent than others. It’s not for everyone that’s for sure.

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