Escaping MLMs wrote about a quote by Roberta Blevins of Life After MLM podcast and and Liz Lacuzzi of Was I in a Cult podcast.
Roberta was interviewed on “Was I in a Cult” podcast, in the episode “LuLaRoe: ‘What’s your Why?” - find the episode by clicking the title or follow the link here: https://podcasts.apple.com/gb/podcast/was-i-in-a-cult/id1582863762?i=1000549128882
Roberta: 90% of products that is sold from an MLM remains in the MLM — between consultants, sales to buy ranks, sales to help each other out… How is that a profitable business model? It’s very obviously not a business! Liz: It’s a pyramid scheme!
What can I say?
Can attest to that!
How does it work?
Well, there’s a few ways as Roberta points out “between consultants, sales to buy ranks, sales to help each other out…” just to put some examples from personal experience against this:
1. Inventory
You are encouraged to holding a certain level of inventory - after all your upline tells you as instructed by those who have gone before her; “You can’t sell from an empty wagon!”
You have to at least have demonstration products, you can’t sell what you can’t show and demonstrate. You also have to be “a product of the product” and at least try all the product yourself so you can talk about them and sell them.
So you start building an inventory of at least one of each product for demonstrating and one of each that you can potentially sell.
2. More Inventory
Then of course you’re being told that when you do in-home parties you need to at least have enough in inventory to sell to your clients and if your average group is 5 then you need at least 5 of the most popular products.
3. Minimum order volumes
Then you get a customer asking for products, they order £25 worth of goods, but you haven’t got them in your inventory so need to place an order. Now you don’t know how many orders you get in the month, but you can’t just order £25 worth, because you’re not ‘active’ unless you place a £200 minimum order.
If you just order anything under £200 you don’t get any commission, you still have to pay for postage, so you actually lose money by placing a £25 order.
So you take a gamble… because that’s what this business is; one big gamble!
You order £200 worth of products, pay the £140 and hope that you sell the other products.
4. Special, Limited Edition, New Products
Yes, every time the company brings out something new, you have to buy it, as per the recommendations on point 1. You need it as demo products and at least to try it yourself. When the new products tot up to less than £200 then you add more to make the order more than £200….
5. Discount levels, incentives;
If you order over £400 you get a bigger discount, so if your order is near to that magical *target* then you too it up until you go over that £400.
Oh but there’s also that incentive; if you place orders up to £1,000 you get these free products or this beautiful case or whatever trinket they hold in front of the reps to dangle that carrot.
6. Career Ranks;
One of my former team members/ colleagues said upon offering to buy some products, that she had to check as needed to put a £500 order in on the first of the month, just in case her team were going to order that month. If she didn’t put in the £500 order, then she wouldn’t receive her 12% team bonus commission… so she spent £300 in the hope that her team would place orders and she would receive 12% of the value of their orders. Imagine that she has 8 team members, only 5 place an order of £200 each, that’s £1,000 of team orders, so 12% bonus is £120. So this lady paid £300 to receive £120 in team bonus. Of course she will get her £200 discount back **IF** she sells those products at full RRP, but then she has spent £300 to receive £200 sales commission + £120 team bonus = £320, she spent £300, so all that for a £20 profit before expenses. She’ll also have paid postage on the £500 order and expenses to deliver products to clients as well as costs for promoting the products and then pay taxes on it as well.
She will have less than minimum wages in net profit!
The Deception
MLMs will deny that these practise are happening. They say they don’t have sales targets, but they do!
- That magical £200 or £125 or £195 minimum order to stay active, that’s a target.
- That magical number to hit a higher discount / commission level, or to maintain that rank and receive your team building commission, that’s a target.
MLMs will also tell you that they don’t require their reps to hold inventory, however the reps are encouraged to buy products for themselves or to demonstrate… this is all at cost of the rep.
The MLM markets their products to their sales force, they don’t always market to third parties or end users, they rely on their reps to make the purchases.
An example? how about we pick a brand that claims to be different from all MLMs… Tropic Skincare!
Mainly because ALL MLMs claim to be different!
Let’s pick this apart:
”All that’s required is to place an order of any sum over £1 within a 6-month period.”
This looks like you only ever have to spend £1 every 6 months, great! However the cheapest product is £3.50, so you will always spend more than that magical £1 minimum. There may not be any monthly targets, however they do offer:
“free shipping on any order over £30.“
So now the minimum order volume is £30 to receive the 25%-35% on every sale.
If you’re an ‘Ambassador’ and you sell products to others and all they want is a £18 Smoothing Cleaner, then the ‘Ambassador’ doesn’t earn their sales commission, plus they have to pay postage. This creates a need to buy more and place an order over £30 so its worth the Ambassador’s time. Thus encouraging buying of inventory.
After all, the average Ambassador spends 10 hours a week on their ‘Tropic business’. Note: that is 10 hours per week, assume they work 40 weeks a year, that’s 400 hours a year, or 33 hours a month. They earn on average £122 per month, that’s an amazing £3.70 per hour BEFORE expenses and taxes!!
Of course when you become an Ambassador at Leader level, you earn much more, an amazing £1,049 per month on average. This does require a lot more commitment though, so more than those 10 hours per week. Tropic Skincare does not disclose how many hours their Leader Level Ambassadors work, but let’s assume it is at least double the number of hours per week. After all it’s just a hobby for most, right? Let me let you in on a little secret; most Ambassadors will be spending a lot more time than 10 hours a week and Leaders will work close to full time hours, so nearer 40 hours a week… but we’ll go lightly. So 20 hours a week seems more than enough to spend on a hobby. Going by the same 40 weeks in a year, that’s 800 hours a year, that’s 67 hours per month, earning on average £1,049, so £15.66 per hour BEFORE Expenses & Taxes. At least that is above minimum wages, right? Eell, it would be if it weren’t for the following statement:
For Leaders to receive any extra bonuses or maintain their title, they must also sell themselves and lead by example. This means there’s never a scenario where Leaders are being paid commission on their team without also making sales themselves. On average, our Leaders do £1,049 personal sales monthly (2020) which is more than double the minimum personal sales needed to receive these bonuses.
Oh, hang on, that £1,049 is personal sales monthly? Not profit?
Well, ok let’s give them the benefit of the doubt (again) and say that it is profit from sales commissions and bonuses, in which case the personal sales must be much higher, since they would get a maximum of 35% sales commissions. Then by mathematical calculations their sales must be £2,997 each month. OK maybe less if they included bonuses in this, but their bonuses are based on how much their team sells.
Oh and hang on again; ”the personal sales monthly is double the minimum personal sales needed to receive bonuses”? Well that’s a SALES TARGET if ever I’ve seen one. So what’s this minimum personal sales requirement then? According to the Tropic Success Plan as shared by Tropic with Talented Ladies Club, this minimum is £500. The Team needs to do a minimum of £2,000 in order for the Leader to have access to these commissions. These are Sales Targets!
On the article linked above from Talented Ladies Club you can read what Tropic have to say about this:
Here’s what Tropic said on the issue:“We don’t give our Ambassadors sales targets in order to be an Ambassador, these figures are what Ambassadors opt-in to if they want to build a business.”
“We understand how you originally concluded a bottom level Ambassador is required to sell £250 to be on the system by just looking at the table from the Success Plan. However, to be a registered Ambassador on the system requires £0 monthly sales.“
“To stay on the system as an Ambassador, you simply need to have placed an order of any amount over £0 within a 12 month period. We offer products at £5 RRP so to the Ambassador, that would be one order of £3.50 needed to stay on the system in a 12 month period.”
“‘Active’ Ambassador is a phrase that collects together a group of Ambassadors who are achieving £250+ sales within a calendar month. This ‘Active’ title is used for title promotion criteria for titles above ‘Ambassador’ and for optional incentives throughout the year.”
“Above Ambassador, to promote to another level, we have a standard Personal Sales amount to encourage leading by example so that our leaders are doing their own sales. The £500 does not rise as the title progresses since the time the leaders have to devote to Personal Sales is spent elsewhere in their team through training and support.”
This is just twisting the issue; they’re saying if an Ambassador wishes to remain an Ambassador they have to pay a minimum over £0 (that’s the £1 as mentioned above) and if they want to be ‘Active’ and entitled to become a Senior or Team Ambassador, and be eligible for the team bonuses, then they HAVE to place personal sales orders of £250 a month.
A Leader has to put in £500 minimum per month. You lose all your bonuses and titles/ranks of you do not meet these minimum personal SALES TARGETS so it is not a matter of “opt-in” it’s a monthly sales target.
If you’re a Leader Ambassador, you’re not going to sit and wait for £500 in sales every month, you’re going to place that order whether you had actual sales or not, we saw that in my example of my former team mate in point 6 at the start of this article. She put that £500 order in not even knowing if her team were going to order that month. In Tropic that team also has to put in a minimum of £2,000 and if they don’t make that, what do you think that Team Leader is going to do to get her bonuses?
Exactly, make sure that her team buys more and if needed she will pay for the additional orders. So that £1,049 per month is fictional earnings, because at least £500 of that goes to ‘Inventory’ that the Leader may or may not need. No matter what Tropic says.
Oh and also Tropic claims that their Leaders do not earn recruiting commissions, again, they do! They may not pay a sign-up bonus (hardly any MLM does this as it is illegal) but they pay the Leader bonuses based on the sales volume that their teams do, you saw that £2,000 minimum team sales per month? Leaders are encouraged to push their team to place orders with Tropic, whether this is sales to end users or not, because Tropic has no way of tracking this. The Ambassadors can place orders and create ghost clients to make it look as if these orders were placed by real customers. Does Tropic check that the Ambassador actually delivers the products to an end user? No they don’t. So the ‘Recruiting Commission’ isn’t a one off when a new recruit signs up, it’s an ongoing percentage of the sales that the recruits put through with the company. Often pushed by their Leader.
THIS is how ALL MLMs twist the truth to fit their own narrative.
They protect themselves, because they’re not allowed to set Sales Targets or encourage Inventory Loading, but that doesn’t mean it doesn’t happen, and they know this full well. It happens, but legally they can’t be held accountable, because on paper they say they don’t set sales targets or inventory requirements. It’s manipulative and disgusting.