WTF is an MLM? MLM stands for multi-level marketing and there are probably people selling for some of these companies all over your Facebook feed, annoying the hell out of you right now.
The MLMs you've probably heard of
Multi-level marketing is happening all over your social media feeds. You probably have some friends (or at least connections) who sell for them. There are old school standbys like Mary Kay, Nu Skin, and Avon, but multi-level marketing companies are expanding into the millennial space.
Do you have a friend who constantly blows up Instagram with pictures of her Jamberry nails and a "link to buy in bio" caption? That person is working for an MLM.
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Have you ever had a Facebook friend invite you to a Stella & Dot party? That person is selling for an MLM.
Has someone tried to casually work their love for using (and selling, in case you want to do it, too!) Scentsy candles? You guessed it: MLM.
Okay, but what are MLMS?
Multi-level marketing companies (or "direct sales" companies, as you might have heard them called) are companies in which people are recruited to sell product (the nail stickers, the candles, the whatever), but also to recruit other salespeople. While the sellers do make a (usually nominal) commission on the product they sell, the real money is in recruiting other sellers to the fold.
This is why your friends who sell these products might not just be telling you about how great their nail stickers/candles/whatever are, but also gushing constantly about how great selling their nail stickers/candles/whatever is. They might even come right out and ask if you'd be interested in getting in on the
amazing opportunity yourself — and that might sound counterintuitive. "But wait, if you're selling nail stickers and we have a lot of the same friends/potential client base and I start also selling nail stickers to largely the same group of people, doesn't that just cannibalize your sales and hurt your business?" you might think.
But no, it doesn't hurt their business, and here's why: In a MLM situation, if sellers are able to sign up other salespeople to work under them, they get a percentage of the sales these people make. And the person who signed your friend up for the MLM? They get a percentage of her sales, and so on and so on upwards.
Wait, that sounds like a...what's the name for it? Oh yeah, a Pyramid Scheme.
If MLM sales opportunities sound a lot like Pyramid Schemes, that's because they essentially are. In a Pyramid Scheme, people are recruited not to sell a product or service, but to recruit other members into the scheme (often, members will pay a fee to get started with the "business" and to buy the tools they "need" to recruit other "sellers" — sorry, but explaining Pyramid Schemes requires a lot of quotation marks).
After a few rounds of this, recruiting new members becomes virtually impossible and most people in the scheme make little to no money, with people at the top taking in a profit and leaving people lower down the pyramid broke and sad. Pyramid Schemes are illegal in many places, but MLMs are, for the most part, totally legal. Since the sellers do technically pedal and profit from products or services, they manage to stick around. But since the real money is still in growing the
pyramid seller base, MLMs rub a lot of people the wrong way.
John Oliver did a really great deep dive into MLMs and the problems with them in a recent segment on his HBO series, Last Week Tonight.
So, do people actually make money working for MLMs?
The short answer is no, not really. Sellers for MLMs might make some money selling the product or service the company focuses on, but for the most part, these direct sales opportunities aren't lucrative for the people who invest their time and money (because yes, selling for these companies typically involves a monetary investment as well).
While MLMs might sound appealing, especially to millennials, who are masters of the side hustle and always looking for jobs that offer flexibility and a little extra income, it's unlikely that you'll make much money, if any at all. And also, everyone on social media will hate you just a little bit every time you post about your nail stickers and scented candles, so it will cost you social capital too.
If you want to sit around with your friends and drink wine and wear leggings, just do that. You don't need to do it under the guise of a business venture.