Student participation in multi-level marketing (MLM) schemes is a growing and highly controversial phenomenon. Many MLM schemes may appear to be viable business opportunities, especially for those experiencing financial difficulties, such as students. These schemes can, however, leave their members in a much worse condition than before they joined.
The typical MLM is a business structure similar to a pyramid scheme. According to Marketing Schools, MLMs function through “sales reps receiv[ing] compensation for their own sales…[and] a percentage of the sales generated by other salespeople they recruit”. Consultants involved in MLMs usually sell products directly to consumers through relationships and word of mouth. MLMs such as Herbalife, Amway, Tupperware and Nu Skin have become increasingly popular in South Africa, and many consultants rely heavily on social media to promote their products.
The prospect of earning money while choosing your own hours may seem especially appealing to students. However, there are often more negative than positive consequences associated with participation in MLMs. According to “The Case (for and) against Multi-level Marketing” by Jon M. Taylor, the “[l]oss rates are extraordinary – over 99% for all of the MLMs for which I have been able to obtain relevant data”. Taylor explains that, since it is “[b]uilt on an endless chain of recruitment, MLM is inherently flawed, deceptive, and profitable only for founders and those at or near the top of a pyramid of participants – usually those at the beginning of the chain of recruitment. MLM is also extremely viral and predatory”. According to MLM Statistics, “[d]ue to the relatively low income, high costs, and difficulty in actually selling products, it’s extremely difficult to make a substantial profit with these companies”.
Students all over the world tend to be particularly financially vulnerable and this problem is only amplified in South Africa. According to the article “Does Financial Assistance Undermine Academic Success? Experiences Of ‘At Risk’ Students In A South African University”, which was published in the Journal of Education (University of Kwa-Zulu Natal), “the majority of South
African households are unable to support a dependent at university”. According to BusinessTech, students from eight of South Africa’s top universities owed over R711 million on tuition fees and loans as of 2015. Most students in South Africa cannot afford to become entangled in a marketing scheme that costs them more than they can earn.
A second year genetics student spoke to PDBY about her experiences with Amway. She explained that, as an introvert, “making cold calls and prospecting people helped me come out of my shell”. She also explained that she “really [likes] the products”, and she still uses some of them. However, she did say that the “environment had a lot of toxic positivity. I realised that people weren’t really friends and some mentors in higher ranks didn’t really care about helping”. She states that these mentors would use their people skills to “give the people they recruited a false sense of friendship and belonging. It’s like they would love-bomb you and you would feel so good because human connection in the real world is so rare especially since making friends as an adult is so hard, so being welcomed felt comforting. But if you expressed doubt, wanted to leave the business or just shop then they would divert all that attention and find someone else. People would join genuinely believing they were helping themselves and they would invite friends because they genuinely wanted better for the friends and family.” She talked about how Amway encouraged emotional manipulation, saying that when friends would express doubt the higher ranking members would encourage them to neglect those relationships. “[They] would make us feel like our doubtful friends didn’t care about us, didn’t want to succeed [and] said we should distance ourselves from them.” It reached the point where “people would prioritise the business so much that they were willing to miss weddings, birthdays etc to attend functions or not schedule as much time to spend with family”. She explains that the idea of “hustle culture” was stressful and that even though they promised flexibility, it really took up a lot of time. “My family and I spent a lot of money. I didn’t have any since I was about 18, 19 at the time and only made around R100 which mostly came from our own pocket and a little from the people we managed to recruit.” She spent a lot of money, since you cannot promote and sell products you are not using yourself. “It was hard, people hate it when you’re trying to sell something.” While leaders would say that anyone could become successful, she found that most of the people who were doing well “either joined years ago or when the business was new in their respective countries”. If you “didn’t do well or get a certain level, we were made to believe it’s completely our fault or that we didn’t work hard enough”. “The worst thing about this for me, is that when you’re in it feels like you could come out with something meaningful and useful. But if you put [in] a lot of effort, money, time and still don’t succeed… after leaving the business, you have nothing to show for it.”
While the idea of earning money through one of these structures may seem harmless, MLM Statistics emphasises that before you join a multi-level marketing scheme, you should think carefully. “Look at the income disclosure statements, payment plans, and requirements for each company individually. Consider other ‘side-gigs’ that have a higher level of success. Make informed decisions based on accurate statistics.”