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Are Multilevel Marketing Firms a Total Scam? Check out the Billion-Dollar Industry Targeting Moms

For women who stay home with their children or are just looking for a way to boost their family’s income, multilevel marketing (MLM) – also known as referral selling or network marketing – seems like a sound way to make money without having to go to an office or find consistent childcare. On the surface,…

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For women who remain home with their children or are only looking for a way to increase their family’s income, multilevel marketing (MLM) – also called referral advertising or network marketing – appears like a solid method to make money without needing to visit a workplace or locate consistent childcare. On the outside, signing on to disperse products from such groups looks like a fantastic idea.

In fact, over 20 million Americans are involved in an MLM at some point or another. And why not? All you need is the active profile on social networking and a little bit of trust. However, for many women who get involved in those companies, the big paychecks and extravagant vacations offered by the likes of Herbalife, Young alive, along with LuLaRoe are simply too good to be true.

When Marlie Ezarik, a mommy and educator from Texas, was initially introduced to LuLaRoe – an MLM that sells women’s clothing and leggings – that she was excited to emulate the success that her sister, Jana, found selling to the corporation. But while Jana was among the lucky few pulling in tens of thousands of dollars each month, Marlie did not have precisely exactly the exact outcomes. Actually, after investing the required $5,000 in the brand’s starter kit and getting unlucky with a couple costly repairs upon buying a new residence, Marlie found herself filing for insolvency .

“You turn into this pushy Partners that nobody would like to turn into… You reach a point where you keep failing, and you’re only stuck with all this stock.”

“It is about how the company is sold for you,” she informed POPSUGAR. “It is not an easy, part-time job because it might seem to be. It’s not just 20 hours per week – it is a significant job. You have to have the ability to devote the time. In my experience, you can not have any job during the time that you’re attempting to market LuLaRoe.” Marlie soon felt himself sliding down a slippery incline she never meant to be around, particularly due to her limited control on inventory. “At LuLaRoe, you do not get to choose the prints that you want,” she clarified. “Most folks have at least 1,000 parts of inventory. I’d have these parties, and the people I invited would say,’I have already seen this material,’ and they were perfect. I simply could not eliminate specific products. At that stage, your manager will let you know to buy more inventory or venture outside and find more people to buy what you’re promoting. You turn into this pushy salesperson that no one wishes to become… You get to a place in which you stay failing and you’re only stuck with all this inventory.”

Once she chose to stop, Marlie contacted the new to receive a refund for every one of her leftover stock, which was hard. “I was able to really get my money back from LuLaRoe. But, I’ve got friends who have been awaiting for more than two years for their refunds,” she clarified. “When I needed to send my entire inventory backI went through around 20 rounds of emails with the company to confirm the styles and amount of this inventory. I needed to go back and forth with them until we eventually agreed on an amount”

Based on the business, selling products is simply one anticipation. “MLMs are a type of business model that enables people to earn money in one of two manners. One is by selling services or products to others and creating a retail gain,” Bonnie Patten, the executive director of Truth in Advertising and a mom of three, informed POPSUGAR. “The next way that they make money is by recruiting others to duplicate sales to others to be able to produce a team or’downline,’ then they get gains from what their downline sells”

Although multilevel marketing has been an attractive solution for moms for years – believe Tupperware, Mary Kay, Pampered Chef, and Avon – 73% of these involved make no money or drop money, as demonstrated by a study performed by the AARP in 2018. So it’s easy to see why MLMs have this kind of questionable reputation. For women who have multiple mouths to feed or are on a limited income, signing up to participate in an MLM can potentially be a big, expensive error.

Can MLMs target moms specifically?

Anyone with a Facebook account may be pitched products, but it is difficult to deny that the overwhelming quantity of moms being targeted. Overall, 75% of those who work for MLMs are girls , together with moms making a large part of the percentage, confirmed Patten. “Moms with toddlers infants want nothing more than to be able to remain home with their kid, not have to go back in the workforce, and concurrently make some good money,” she stated, adding this:”And that’s the way lots of these MLMs are marketed – which you can make fulltime pay functioning part-time hours.”

Furthermore, lots of the merchandise offered by MLM businesses can easily be marketed toward moms, whether a man is promoting leggings, essential oils, all-natural cleaning goods, or wellness replacements. Those that take part in health-centric MLMs can be particularly aggressive toward moms, especially if they just welcomed a baby.

“They market that you can stay at home with your children and have your MLM company. New moms especially are so simple to prey on. It is terrible.”

“MLMs prey on new mothers,” said Claudia*, a mom that has been contacted by a number of MLM distributors over recent years. “They write to me saying things like,’Hey, you eventually had a baby! It’s time to get back to shape at this time, drink this coffee, and choose these organic pills, and you’ll lose 20 pounds!’ I felt targeted by multiple people within my immediate postpartum stage. I particularly love when they ask how you are feeling and instantly go in their spiel about their magical potion that can cure postpartum depression and anxiety!”

Obviously, there are some MLMs that rely on good, conservative guilt. “Guilt in new moms is real, and guilt as a new mother coming to work is very real,” explained Jennifer Doll, another mom who was approached by different MLM agents. “They advertise that you can stay in your home with your kids and have your MLM business. New mothers especially are so simple to prey on. It is terrible.”

Claudia and Jennifer aren’t alone when it comes to the sheer number of pitches they get, both on social networking and also in person. Though many women are roped into these companies by guarantees of sisterhood and mentorship, many women find themselves ghosted if they decline to participate. “A lot of these women prey on your loneliness,” shared Colleen Fremont, a girl with friends in MLMs. “Even if you don’t sign up to market, they will guilt-trip you over you not being’inviting’ by throwing parties or even allowing them post in your wall to sucker your family and friends into spending money. When you say’no,’ they turn on you and may get very nasty. It’s a really effective type of gaslighting.”

How do moms get involved with multilevel marketing?

Women may get involved in multilevel marketing companies in many of ways. But most moms get recruited by active vendors via social networking. Tempted with foolproof advertising strategies and less-than-accurate success reports by active MLM members, moms frequently get roped into signing up or purchasing starter kits or products in the hopes of”beginning their own company.” As soon as they start selling, their upline – or the man who recruited them to connect – takes a percentage of that seller’s profits.

Tara*, a stay-at-home mother, was doubtful of MLMs in the beginning. After losing her pregnancy, she was approached by a friend who suggested getting a LuLaRoe distributor. She jumped at the opportunity. “I was told a lot of tales of other mothers in similar positions who left tens of thousands a month,” Tara told POPSUGAR. “They left that their husbands had to quit their jobs to assist them! On top of all that, there was the particular sisterhood of’mommy directors’ that would help me, train me, lift me, invite me, accept me, and eventually become my very best friends.”

“I had been a weary mom of three children – just being a newborn – and was told to give up balls of precious little sleep to attempt to market just a couple more pieces”

Desperate to contribute to her family’s finances, Tara dropped in despite certain reservations she’d about being”discouraged” by her superiors to voice concerns she had with the business. For the initial two weeks of the operation, Tara had success. After spending $7,000 on inventory upfront and an additional $1,500-$2,000 in miscellaneous startup expenses, Tara believed she was primed for victory. She brought in $8,000 in earnings over a six-week interval – though only half that amount had been profit – then bought even more inventory per her upline’s advice.

But when she found that she was expecting again and again failed a difficult pregnancy, the service system she thought she had vanished from under her feet. “After the baby came, I struggled even more difficult,” said Tara. “I ended up and requested my leadership for help. The information I got? Something has to be forfeited. Housework, time with children, sleep. Pick one and forfeit it in order to earn the sale. I was a weary mom of three kids – one being a toddler – and was advised to give up balls of precious little sleep to attempt to market only a few more pieces”

Tara knew it was the beginning of the ending and eventually canceled her contract, but the bad luck didn’t stop there. Her effort to have a clearance sale to sell her off remaining product was swiftly closed down by her upline because it moved against her contract. Now with more than 200 products sitting in her basement, Tara recognized the error of her ways. “I dropped a friend, managed to get myself to debt, and missed out on time with my kids,” she clarified. “I officially stopped in October 2018 and I still have 200-ish pieces that I’ll likely end up donating. I am still paying the debt that I got myself into”

Because of this, Patten encourages people that are considering linking a multilevel marketing business to take a good, hard look at their social circle before registering. “The money is not in selling the the nutritional supplement to customers,” she explained. “The major money made by those at the peak of the distributor ranks is always through building and recruiting enormous downlines which have over 100,000 individuals inside them.”

Do MLMs make false earnings claims?

There’s no denying that MLM participants and businesses are dishonest from the past in their own earnings claims. In actuality, the issue is so widespread throughout the sector that Federal Trade Commission (FTC) chairwoman Edith Ramirez invited MLMs to become more transparent at the Direct Selling Association’s Business & Policy Conference in 2016.

“Multilevel entrepreneurs must quit presenting business opportunities as a means for people to cease their projects , earn thousands of dollars per month, create career-level earnings, or becoming rich because in reality, very few participants are most likely to accomplish that,” she said. “Although it might be true that a rather small fraction of participants do have achievement of the kind, testimonials from such rare people are most likely to be misleading because participants generally do not recognize similar incomes.”

Stacie Bosley, a professor and economist in Hamline University, hinting the promotional material of several MLMs do not line up with fact.

“The data from the firms themselves show that most people are making zero dollars in revenue, which means they’re creating a negative profit as soon as you factor in expenditures,” clarified Stacie. “There’s a small majority that’s earning something on the order of minimum wage, and then there are some big winners. This troubles me as the numbers don’t remotely fit up to what companies are claiming in their marketing content and testimonials. Companies suggest that it’s easy to be lucrative and it is all up to the vendor to succeed.”

False income claims are pervasive in MLMs which the FTC has registered 27 class-action lawsuits against MLMs within the past 40 years alleging that particular businesses were working”illegal pyramid schemes.” Since 2013, firms such as Fortune Hi-Tech Marketing, Vemma, Herbalife, and Dluca have all been sued by the FTC. All the cases have been settled.

Even though the term”pyramid scheme” is thrown around in the same conversation as MLMs, Joe Mariano, the CEO of that the Directing Selling Association (DSA) – a for-profit firm responsible for”promoting, protecting, and policing” this industry – said there is a difference. “The issue with the brand new scheme is the point where the reimbursement comes in,” he explained. “At a pyramid scheme, there is no actual commerce going on, nobody is actually using the product or if they’re, it is a sham. The compensation is coming out of the recruiting of other people to the plan… Folks are convinced to become involved on the promise of a get-rich-quick type of approach.”

But, according to the FTC, some of the telltale signs of pyramid strategies are in line with numerous MLM expectations:

  • Being asked to Purchase a Lot of stock upfront
  • Your pay is based mostly on the amount of people you recruit
  • You’re Expected to Purchase products and services you don’t need to stay in good standing with the company

For many new MLM members, they are unaware of precisely how much product they will have to purchase upfront before really selling anything. Though it might be easy to generate a few sales in the beginning, often consultants are left with tons of goods they can’t market, even at a discounted rate. All of a sudden, that”simple” paycheck is out of reach. They are not breaking even, let alone making an additional income.

“We couldn’t just sit back and wait for complaints or problems to return to us”

Besides following up on reports of false income claims, the DSA also established a Direct Selling Self-Regulatory Council in partnership with Better Business Bureau (BBB) in January 2019. The purpose of the program is to pronounce”principles that are clear, but primarily was pioneered and took action based on consumer complaints.” For the previous two decades, Mariano has left the magician one of his top priorities. “We understood there was a need for something, particularly in the areas of product and earnings claims, which we could not simply sit back and wait for complaints or issues to come into us,” he clarified. “We believed we had a duty to finance that attempt to ensure the entire industry was plausible.”

For what it is worth, not all of direct-selling businesses have thus qualified to be DSA members. LuLaRoe and Monat – a favorite beauty-based MLM – for example, are not part of this DSA. Even Though the organization does not”expressly comment on findings” associated with its evaluation of candidates, Mariano summarized its membership coverage:

Throughout the [membership] procedure, employers are assessed for their compliance with the DSA Code of Ethics at various areas like income representations, merchandise claims, a provider’s compensation program, adherence to the code’s inventory repurchase and refund policies, salesforce training, along with other business practices related to customer protection. Firms — applicant and member alike — must address Code of Ethics complaints and queries logged together with the code administrator, an external third party who also enforces the Code of Ethics. A pattern of a refusal to follow a locating or treatment imposed by the code administrator may create a delay or ineligibility for membership consideration.

For Mariano, upholding the standards laid from the DSA is critical. “Any person company and certainly any 1 individual connected with this corporation could do something that ends up being a violation of this code, could run afoul of this legislation, somehow,” he clarified. “That’s going to occur necessarily once you have as a lot of people involved as we all do, and at any company, not only direct selling. And that is the reason why the code administrator has this very active role to deal with those individual problems and any systemic issues which may arise with businesses.”

Even though the DSA is trying to pay its moral foundations, some watchdog groups are suspicious of its potency. Truth in Advertising conducted industry-wide investigations in 2016 and 2017 between DSA associates, looking at both false earnings and health claims. Its findings have been startling. “In 2017, we followed up with an investigation into income asserts,” explained Truth in Advertising’s Shana Mueller. “We looked at all 140 DSA businesses and found that more than 97% (137 from 140) of DSA-member businesses or their branches were made or making false and unsubstantiated income asserts .” Because DSA members will be the”cream of the crop” in order to speak, it is very likely that non-members will also be producing ethical missteps, too.

Can MLMs make bogus health claims?

Among all the goods being marketed, sellers who work to get health-based MLMs are far more prone to misleading potential buyers. Although exercise and workout programs like Beachbody offer nearly 100 at-home workouts, there is a lot more gray area in regards to the guarantees made by goods like dietary supplements pills, shakes, and essential oils.

For moms having postpartum depression, stress, or even a sick child, buying in these claims can be particularly tempting. “Once I was pregnant with my first child I had an Isagenix seller always talking about how I needed it to possess an’IsaBaby’ and how the infant would be so far healthier and brighter when I drank her shakes, even” shared yet another mother termed Jennifer Kern-Kaminsky. A mother of two named Chami Krueger also has had similar encounters:”One of my kids has OCD and another person is type 1 diabetic, and also I have approached often about this’amazing’ oil or supplement which will’heal’ my children.”

According to Patten, the wellness community within the MLM world could be particularly dangerous for this reason. She said:

The wellness industry inside the MLM neighborhood is unquestionably the fastest growing and hottest sect. We did analyses into each of the DSA companies during 2016 and 2017 which were selling nutritional supplements and discovered that 97% were using illegal medical claims. Many of these MLMs that are selling wellness products, essential oils, nutritional supplements, CBD-type products – you name it – are utilizing illegal disorder treatment claims. There are various testimonials by mothers and dads speaking about how it has helped their childrenthemselves, their grandparents, or whomever, and that’s very compelling for a great deal of women.

Even though the DSA says it is trying to improve the MLM business as a whole, the group has rewarded firms with questionable track records before.

Truth in Advertising found that Jusuru – a health-based MLM – and its distributors have left”more than 50 cases of unsubstantiated health and disease-treatment asserts .” Its vendors have claimed that the goods”treat, cure, or relieve” rheumatoid arthritis, osteoarthritis, neuropathy, cancer, psoriasis, and diabetes, fibromyalgia, and tenderness. Furthermore, Truth in Marketing also”accumulated over 40 examples of deceptive, atypical, and unsubstantiated income claims concerning the financial gains consumers will attain by getting distributors of Jusuru.”

After receiving a warning letter from Truth in Advertising at June 2016 for using deceptive marketing and advertising approaches, Jusuru looked into those unethical practices and added an earnings disclaimer to its advertising and advertising materials shortly afterward. Despite being in breach of this DSA’s code of integrity in addition to federal and state laws, the DSA granted Jusuru with a”Rising Star” award the exact same year. Additionally in 2016, two extra nutrition companies – 4Life and Nerium – won awards for their respective advertising and sales efforts although both parties were simultaneously found to have created”unsubstantiated disease-treatment claims.”

Can moms earn money out of MLMs?

Although it is possible for girls to earn money through multilevel marketing businesses, the numbers are not in their favor. My Daily Option – an MLM company behind CBD products such as HempWorx – released its income disclosure announcement (pictured above), and the prospects of earning real money are gloomy.

In general, over 41,000 individuals – approximately 57% of the firm’s distributors – reported earning $10.22 a month as”builders,” or even the lowest rung on the company ladder. Compare that to the three individuals in the”super affiliate” level, who net over $65,000 a month by their downlines, and the writing is on the walls.

For Mariano, it boils down to expectations. “The huge majority of people are only going to earn a few added dollars,” he clarified. “It depends on what your measure of success is when one makes the decision to get involved with a direct-selling business. So you might be tremendously successful with your very limited goals as soon as your target was flexibility and to create that little extra income”

While making a little additional cash is surely tempting, for most, it is only a pipe dream. “If you examine the limited data that’s available about how many men and women are reaching the top rankings in these MLMs, customers have a higher prospect of going broke than ever reaching the top level,” cautioned Patten. “After you take into account how much the products and services price and someone’s time and effort, no doubt the huge majority of distributors are losing money.”

Ultimately, it’s up to women to make their own financial choices. But fair warning: mothers should do their due diligence before signing up for an MLM – it will certainly cost them.

*Source’s title was altered to protect anonymity.

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Look Back at Each of the Artists Who Have Won MTV’s Coveted Video Vanguard Award

Jennifer Lopez was the first Latin artist to win MTV’s Video Vanguard Award at the VMAs last year, and it got us thinking about all the other musicians to receive the honor over the years. The Vanguard was created in 1984 and renamed after the iconic Michael Jackson in 1991; it recognizes artists’ overall achievements…

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Links”>Jennifer Lopez was the first Latin artist to win MTV’s Video Vanguard Award in the VMAs last year, and it got us thinking about the rest of the musicians to get the honour over the years. The Vanguard was created in 1984 and renamed after the legendary Links”>Michael Jackson at 1991; it recognizes artists’ overall achievements in music and film, also there were actually two inaugural winners: David Bowie and The Beatles.

While there’s been lots of disagreement over who probably should possess a Vanguard celebrity but doesn’t – *cough* Missy”Misdemeanor” Elliott *cough* – it does not get awarded annually and has sometimes been awarded as a life achievement award instead. My favorite thing about the Vanguard Award is seeing the way the artists celebrate and take them. Beyonc√© damn close performed her complete self-titled record ; Links”>Kanye West damn near ran for US president Links”>Justin Timberlake damn near resurrected *NSYNC in the deceased ; along with Links”>Lady Gaga had me damn close throwing wine at the TV if she presented Britney Spears having an award while dressed as her male alter ego, Jo Calderone. Why that happened, I’ll never understand.

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Gwyneth Paltrow’s new video demonstrates that she is a master at ASMR.

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Welp, Disney is going forward with that a Home Alone reboot (yes, another remake), along with the movie’s original star, Macaulay Culkin, has some thoughts.

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