This post was originally featured on ThriveGlobal
Reasons why MLM could be a pitfall for professional women on their way to the top
Pyramids are some of the world’s most recognizable structures—from Egypt to Chichén Itzá, you know one when you see one. It should be no surprise, then, that the pyramid shape also represents one of the world’s most notorious schemes and sale structures.
Pyramid schemes operate and turn profit via top-down recruitment—essentially built opposite the way a physical pyramid would be— and are illegal for a simple reason: they make money off the sale of distributorship rather than products and services. While the top of that pyramid reaps many rewards, mathematically as many as 99% of distributors end up losing money as it funnels ever-upward, making the structure unsustainable (another area where the parallel to ancient Egypt ends).
MLM businesses aren’t illegal, at least not technically—so long as there are legitimate products bought and sold, they can skirt the label. And who are we to deny the women that do feel empowered by the ability to make extra money while, often, doing the brunt of housework and child-rearing unpaid?
It’s a complicated topic. As a female entrepreneur myself, I try to support all women and whatever their version of success may be, because I know first-hand how harrowing it can be to prove yourself in a world that’s very eager to box you in. While it’s any woman’s choice to get involved in MLM, and business integrity is best judged on a case-by-case basis, overall MLM may be taking advantage of more women than it empowers.
A false promise of entrepreneurship
One way MLM businesses recruit is on one level an issue of semantics, and on another an issue of bombast. By calling independent sales consultants entrepreneurs, these businesses promote a false idea of entrepreneurship. In reality, those involved are salespeople with no control over the product or its prices. Like any other salesperson, they have a goal to hit and earn commission dependent on how well they do. That’s okay, but call it what it is, not entrepreneurship.
Unfortunately, women targeted and too often exploited by these kinds of businesses are sold on an idea of empowerment and entrepreneurship that is, at best, a smokescreen. It may not be likely an entrepreneur will make it big, but if she succeeds she can go from zero to 100 on her merit and hard work. The same isn’t true of the “entrepreneurs” in MLM businesses. Many put their savings and social lives at stake just to break even.
These women want what we all want. Financial independence. Flexibility. Credibility. Success. And if they fail to get there, it’s less their own failure than a failure by design. Ambition can only get you so far if you’re dozens of tiers down in a pyramid where cuts of your earnings flow to those higher up, and you rely on those below you to to sell and stay loyal (often by pressuring family and friends).
Women who could otherwise put their skills to use and find success starting up a small business may have their dreams warped by predatory MLM companies. And for those that do succeed, or enjoy it enough to ignore the small paycheck? It seems a shame to channel positive energy into a system that is likely to harm more women than it benefits.
A spectrum of severity
The appeal of the modern MLM business model is no mystery. With less of a startup cost than a traditional business and a built-in network of support, many independent consultants have found happiness with these opportunities.
But it’s important to note that not all MLM are created equal after all. I won’t paint them all with the same stroke because, while the model has its flaws, so do many models including capitalism. Like anything, there is a spectrum of severity. While the crimes of one shouldn’t indict the whole, they should caution them at least.
As one example, popular MLM business LuLaRoe has a billion dollar lawsuit on its hands after a number of consultants, who paid a hefty $6K startup fee, found themselves in mountains of debt trying to sell sometimes-damaged clothes of declining quality.
If that sounds bad, on the far end of the spectrum are groups like NXIVM, an MLM organization that purports to offer professional development and mentorship for women–in addition to referring to its members as “slaves,” physically branding their skin, and much, much worse.
The line between MLM and cult, then, is finer than any of us would like to believe. A vast majority of these businesses would never abuse their members, yes, but the association is disconcerting to say the least.
Knowing the difference
Those in the business can articulate what to look for if you actually want to find success in MLM. Network Marketing professional Gino Niccoli advises seeking an upline that trains you well and brings you prospects for your downline, for example. The product should be of quality and have a unique selling proposition, he says, if you don’t want to work uphill to make less money in a saturated marketplace. Lastly, if company profit comes from distributorship fees more than product sales, that’s a definite red flag.
At the end of the day we are all responsible to approach business propositions with healthy skepticism, but MLM has earned an extra dose of it in my opinion. Many of us as women can and should do more with our talents. The world needs them more than it does overpriced leggings.