Direct Sales Businesses Hurt the Very People They’re Supposed to Be Making Rich

ByElizabeth Licata

It’s impossible to even sign on to Facebook these days without a girl you knew in high school trying to get you to buy smoothies, or weight-loss wraps, or leggings, or makeup, or skincare products. It’s very aggravating. And the worst part about it is that this direct sales business is for the most part hurting the same women they’re supposed to be making rich.

Multi-level marketing or direct sales businesses promise big things. If you buy your inventory from them, then you can turn around and sell it at a markup to everyone you used to know in high school. Clearly, you will then make a fortune.

We all know that direct sales businesses are really annoying to the people being marketed to on Facebook. (Look, Denise, I am not going to buy your anti-aging creams. Get in line behind Becki with the kitchen tools. Susan, if that is a weight-loss smoothie in your hand I swear to God I will never “like” another picture of your baby ever again.) The problem is that very few people are actually making a fortune at this. Most people are actually losing money.

Most direct sales business consultants actually lose money

Quartz reports that a recent study of the business practices of 350 MLM companies indicates 99 percent of people who join MLMs lose money. The study was posted on the Federal Trade Commission’s website.

Most of the people investing in and losing money to MLM companies are women. Direct sales businesses offer an appealing story! You can work part time at your own schedule, and still make money! It’s very appealing to stay-at-home moms, because very few families can actually afford to live on one adult’s income. But also, childcare costs are very high. A lot of families are stuck in a difficult place where they aren’t financially comfortable on one salary, but the other parent–often the mom–would earn less than the cost of childcare. So they can’t completely afford to be full-time stay-at-home moms, but they also can’t afford to get a job outside the home.

So they become stay-at-home moms with a “side hustle.” This is a very common thing these days.

The MLM side hustle

MLM sounds like a perfect side hustle. Theoretically, you can do it when the kids are asleep, and thanks to the Internet you don’t even have to go outside and host parties. But that doesn’t actually make a ton of money. In 2011, the average annual income for a direct sales consultant was just over $2,400. That’s the average over all the people, though. Some people do make decent money at MLMs, but 99 percent don’t make any. (This mom makes $5,000 a moth selling sexy photos online.)

But actually making money requires a ton of contacts, sales, and time. It’s virtually impossible to earn the equivalent of a full-time salary without working at least 40 hours a week.

The customer base necessary to sustain actual income numbers is staggering. How many people do you know who would buy leggings from you if you asked them? And how many of those would come back the next month to buy more leggings? It’s no wonder we’re all getting calls from people we went to kindergarten with.

It’s not free to join a direct sales business, and very few people actually manage to be profitable. Most MLM consultants wind up with less money than they started with.

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(H/T Romper, Image: iStockPhoto / gpointstudio)

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