Multilevel-marketing firms will pay you to sell products to everyone you know. What could go wrong?
1. “You’d do better slinging french fries.”
Even if you don’t recognize the jargon used to describe their business, there’s a good chance you’ve encountered reps from direct-sales or multilevel-marketing companies before — possibly in your own living room. Companies using this model hire people to peddle everything from toys to nutritional supplements to utilities, through parties and solo demonstrations. Sound familiar? The industry encompasses well-known brands like Avon, Tupperware and Amway. Salespeople earn commissions on their sales, and in many cases, on those of new salespeople they recruit. As Robert FitzPatrick, president of consumer-watchdog Pyramid Scheme Alert, puts it, multilevel marketers “sell not only the lipstick — they sell the business opportunity.”
And business is booming: U.S. sales totaled nearly $30 billion in 2011, up 4.6% from 2010, according to industry group the Direct Selling Association. Indeed, during a poor economy, it’s not unusual for the direct-sales business to perform well, says DSA spokeswoman Amy Robinson. Individuals looking for extra income are drawn in by the promise of potential earnings, such as those advertised on Avon’s sales site: “Choose to work as little as 20 hours a week — and you’ll probably earn more than from a ‘regular’ part-time job.”