Multi-level Meltdown
Staff writer Dani Molloy busts the myths on multi-level marketing and how it often ends in ruined friendships and financial disrepair.
Crippled by student debt and desperate to make new friends, university students make the perfect targets for predatory multi-level marketing companies that feed off vulnerable people.
Multi-level marketing companies use a direct selling strategy that requires individual salespeople to take ownership of the company’s products, which can be anything from scented candles to multivitamins, and sell these products to the public.
While it’s possible to earn a bit of money from selling the products alone, the real aim of multilevel marketing is to start earning ‘residual income’. Residual income is earned by recruiting others to be a part of your ‘team’ because when you recruit other people into the company, you earn a percentage of what they make.
This pyramid-shaped business structure encourages employees to exploit their personal relationships for business. MLM participants are expected to use their friends and family to support their newfound business venture. This places strain on the participant’s personal relationships and encourages them to view their friends as potential profit.
MLM companies habitually seek out vulnerable people. This includes stay-at-home-parents or military spouses; people who would like to make a bit of extra income and interact with others their age but whose lifestyle could prevent them from doing so.
University students are another demographic that can fall prey to MLM scams because usually, students are financially unstable and may not have the time to work a part-time job. Some young students, particularly students that started university straight after high school, may struggle to make new friends in an unfamiliar environment. MLM companies and their sales staff promise students financial freedom, flexible working hours and a ‘team’ to support you – provided you keep making them money.
“When you’re at university and young, money is a real issue and MLMs seem appealing because it looks like fast money and a quick fix,” said one student, who had witnessed various girls in her class signing on with the MLM company, Arbonne, during her first-year at Massey.
“People also like the idea of working from the comfort of their homes and being able to fit their work around study.”
She explained how Arbonne salespeople would present the social side of the company in a favourable light yet would only display a particular type of person as their ideal consultant.
“There is always an ideal look or mould (when working for MLMs) and if you don’t fit it you’re never going to move anywhere,” she said. “With Arbonne, the successful people are all young, skinny, popular and attractive.”
When asked about the products themselves, most MLM sellers will focus on buzzwords without providing specifics and usually the products sold by MLM companies are no better than what is already available in stores.
“The products were priced on the higher side and often they were products I already used, like shampoo, where I found that the other cheaper brands I used were good enough and more environmentally sustainable,” the 20-year-old explained.
Arbonne sellers would also try to rope potential participants into signing on with the company by using exclusive offers that usually didn’t create that much of a discount and would lock you into the company for an extended period of time.
“When they had their promotional nights, they would bring products to promote and sell what they felt best suits their audience. Then, they’d offer you ‘special one-off deals and discounts’ to try and trap you in. From there you’d be committed for another 12 months minimum!”
Arbonne’s social events often focus on presenting an unrealistic lifestyle that can be achieved by buying a surplus of Arbonne products or being an ‘Independent Consultant’ yourself.
“MLMs always show you the people at the top when they’re trying to get you to join; the few that are doing well and getting the company cars. They give the ideal facts and information that you want to hear about people doing great – they don’t tell you about the ones that are lower down.”
Another student explained her experiences with Arbonne, and how social media played a huge part in pulling her into the company.
“One of the girls in my class posted on Instagram that she’d started her own business with Arbonne. I didn’t know what Arbonne was so I commented on her post, congratulating her – I thought she’d just started a new job.”
The student continued, “But then she started messaging me and saying that I would be perfect for her company because I was ‘so pretty’ and ‘very active and healthy’ and she told me I could do it while working from home.”
“It sounded legit, until I looked into it further and realised I had to pay just to sign up,” she said. “Of course, the friend kept saying it’s an investment and I’ll make the money back, but I hated having to sell things to all my friends and having them get annoyed at me because they didn’t have any money either.”
To become an Independent Distributor for Arbonne, individuals have to pay a registration fee of $30 and need to purchase their own products to sell. The cheapest welcome pack is $75.
In 2019, a typical Arbonne Consultant in Australia (the New Zealand figures are not yet released due to the freshness of the NZ branch) earnt between $124-$525 in earnings and commissions, according to Arbonne’s Independent Consultants Earning Statement. Even as a side hustle, this is not a lot of extra income.
The New Zealand branch of Arbonne, which opened in 2016, offers a newer market with more opportunity to move up. However, even if you get in early, your success relies on the exploitation of friends and family and even more people below them. There’s no security in MLM and, once you stop making money, any friendships made within the company can go sour.
When reached out for a comment, the Arbonne Communications team assured their contention that Arbonne is still profitable, and reminded potential sellers that income is not guaranteed.
“Yes, we do believe that Arbonne is profitable for newcomers. We have a lot of very successful Independent Consultants in New Zealand who have been with the business for varying amounts of time. We never guarantee income and our brand communications do not make these claims. Instead, we let people know the earning potential, including numbers that are factual and based on real people within our business in Australia. NZ specific data is expected in 2020,” said an Arbonne spokesperson.
The Arbonne Communications team also explained that they have strict procedures put in place to ensure the physical and financial safety of Independent Consultants.
“Each Arbonne Independent Consultant must sign a comprehensive business agreement with the company, which confirms that they are over the age of 18 years old. While credit or financial checks are not required to sign up, outside of the joining fee of $75 and annual renewal fee of $45, Independent Consultants do not incur any other fees and are not required to purchase products. Also, if an Independent Consultant decides not to continue with an Arbonne business, they can return any re-saleable products purchased by them within one year for a full refund. We are transparent regarding the income opportunity for Independent Consultants and annually publish an Independent Consultant Compensation Summary online at arbonne.com and also at Earnings.Arbonne.com.”
“For 40 years, Arbonne has been a proud social selling company. We provide a time-tested compensation plan, clinically tested products, ongoing training opportunities, a nurturing support system, committed leadership and a fun, effective selling and distribution model. Arbonne offers an opportunity for individuals to own an entrepreneurial business without the significant investment in operations, distribution, marketing and product development faced by traditional small business owners. As Independent Consultants, each individual can earn an income outside the confines of a 9-to-5 office job by selling Arbonne’s products to their clients.”