Let’s talk about MLMs (Multi-Level Marketing). They’ve invaded our direct messages, our lives, and now our wine?
Essentially MLMs are pyramid schemes; however, they operate under the guise that they sell a product. Most of the products these MLM companies sell are terrible quality and marked up by 300% and a lot of them are backed by claims that have not been approved by the FDA or literally any other federal agency. So the product sucks, but MLMs are still legal because technically they aren’t pyramid schemes. Pyramid schemes are illegal because pyramid schemes don’t offer products of any kind. That’s one of the legal loopholes that MLMs have exploited.
MLMs are predatory and that’s why so many people are against them. They prey on vulnerable people such as stay-at-home moms who want to work to provide for their families, but they are also busy taking care of their kids. MLMs prey on college students and recent college grads looking for jobs. They promise flexible hours and the ability to work from your phone to potentially make enough money to financially support yourself. Recently, more and more people have been joining MLMs because of how negatively everyone has been affected by the COVID-19 pandemic. Many people have lost their jobs and have no way to earn extra money, so the idea of joining an MLM seems like a be all and end all.
Here’s the thing. Unless you join when the company first starts, there is very little chance that you will be making six-figures like these companies advertise. Maybe 1% of consultants make enough money to live a lavish lifestyle and most people lose more money than they make. According to the FTC, 99% of people lose money when joining an MLM. Fortunately, this is public information and you can look up income disclosures on any MLM by just a simple Google search.
Some red flags you should look out for is if the company makes you purchase a starter kit of some kind. In order to join the company, you’ll need a kit to “start your own business” and it’ll range anywhere between $100 and $5,000 depending on the company. If a job wants you to pay to work for them, you should turn the other direction! Another red flag is if they use the terms “upline” and “downline.” These are specific pyramid scheme terms that are based on recruiting. Depending on the company you can make commission based off how many people you recruit, the sales of the people you recruit, or both. Even though you can earn commission from your own sales, if you make more money from recruiting than sales, it starts to become more like a pyramid scheme and a lot less like a legitimate business.
Unfortunately, MLMs are evolving and they’re just about everywhere, selling EVERYTHING. There are MLMs for cleaning supplies, fat burning coffee, nail polish, adult toys, shampoo, and so much more. They’re even selling wine!
There’s one wine MLM in particular that keeps popping up and it’s Scout & Cellar. I’ve seen their starter kits and I’ve read all of the terms and conditions of joining and there is absolutely no question that they’re an MLM. When you Google “wine MLM” it’s literally the sixth result! Other companies I have researched are Wine Shop From Home, Traveling Vineyard, and one that really shocked me— One Hope. One Hope is a tricky one that I really had to dig into to find out all of the tea, but it’s piping hot. Some other wine MLMs to watch out for are Wein International and Boisset Collection.
It’s also illegal to sell and serve alcohol without a liquor license and the wine MLMs don’t provide these licenses to their consultants, so what they do is sell wine through what looks like a unique referral link online. You still have to go through the company website and pay the ridiculous shipping costs, but consultants do earn commission off of the sales they make and it isn’t a lot. These wine MLM consultants sometimes host “parties” at their private homes so you can taste them and see if you want to purchase them, but beware because there is almost always some sort of sales pitch to join their downline involved!
I’m going to be starting a mini blog series going into depth about each of these wine MLMs because I do believe they’re selling crappy wine and in my opinion, that should be a crime in itself. Stay tuned for these posts when they go live!
I recommend reading Ask ME About Mary Kay. It’s an insightful book written by Jackie Brown, who actually experienced what it’s like being a part of an MLM.
Also, I’m adding an interesting short documentary about one of the worst MLMs, LuLaRoe and some of the women who were negatively affected by this business model. I highly recommend giving it a watch because it’s fascinating.
Yay! Glad someone else is catching on….it’s such utter BS that they are allowed to get away with not permitting their reps. I just don’t get it. One local rep told me she would deliver sippy cups of samples. And I’ve seen pictures of reps in TX handing out samples in bags to random strangers in an outdoor mall. SO illegal!
OMG! That’s so crazy!!!
One can tell who drank the KoolAid here…just saying.
Did you write any follow up article on that subject? I am interested. I see where MLM can get criticized but I don’t fully understand why. Leaving the compliance issue aside for wine businesses, when a company offers referral links it is the same no?it s really standard now. Also how is it different than any sales team who earns commission on their personal sale and then on the team’s sales too, it is normal compensation plan any industry, so why is it bad in the MLM world?
Hi there! This is an excellent question. When someone is earning commission on personal and team sales in a regular company, most of the time they will earn what’s called base pay, so even if you’re not making any sales, you’re still guaranteed your base pay. MLMs do not offer base pay, so you’re not even getting the bare minimum. A company that’s offering commission on top of your base pay doesn’t make you buy the products from your own money to sell them. Usually with an MLM, they require you to buy products to sell or at least the “starter pack,” so it’s more likely you’ll lose money than make it. LulaRich is a docuseries about the LulaRoe MLM on Prime that’s really interesting. I highly recommend watching it. Cheers!
Sabrina, you basically handpicked a few companies on which to provide feedback. And therefore, your analysis fits your agenda. A pyramid scheme is illegal, and is not the same as an MLM. Let’s discuss why for a moment, shall we?
-A pyramid scheme does not sell product as you mentioned, it is money for recruiting, a chain letter gone bad
-A reputable MLM sells product
-In an MLM, you get commission on your teams’ sales because you train your team regarding the product, and techniques to run a successful business
-In a reputable MLM, I can never make more than my teammate in her business. If Sally joins my team, and Sally makes 5K in December, I can never exceed that 5K based on Sally alone, I still have to work my own business to earn 5K
-Reputable MLMs have a business plan that is transparent, a plan for promotion that is also transparent, most retail companies do not provide their employees with this information
-In an MLM my income is a direct reflection of my efforts, if I don’t work my business…NO MONEY – working my business includes; introducing people to product, discussing the benefits of the products to them, introducing people to the business and providing them an opportunity to join my team if they so decide, training my team to be successful
-MLMs allow time flexibility, effort-based income, room for personal and professional growth, and is by far not a get-rich-quick scheme. People actually have to work.
I own my own business (an MLM), I have a few extra thousand dollars per month, a great support group, new friends that I will have for life, awesome products that have transformed the way I look and feel, and a business I am passionate about. What I do not have: employees, rent for a building, insurance costs, stock of product stored in my house, a competitor on every corner, concern for another COVID-19 wave – my business thrives regardless, exorbitant startup costs (what business doesn’t require an up front investment to start? – rent, supplies, liability insurance, malpractice insurance, tools, etc)
So, my question to you is: Do you want to talk about how you got burned, an why you feel so bitter?
Hi Jessica, thanks for your comment. Since my specialty is wine, I handpicked wine MLMs specifically because they fit my blog’s niche, not because I have an “agenda.” My analysis comes straight from the source itself: the MLM’s website. Sure an MLM sells product, but the main way you make money in an MLM is by recruiting other people and that’s the whole point. The FTC says 99% of people will not PROFIT from an MLM and this has nothing to do with how much and how hard they work and everything to do with how the system is set up. You talk about owning your own business, but if you look carefully into your MLM’s terms and conditions, you might actually see a line where they say it’s actually not your business and everything you do or create is owned by them. This blog is my business. Everything on this blog is owned by me and not by WordPress or my hosting website. And sure every business requires start-up costs, but Scout & Cellar, itWorks, ONEHOPE, etc. are all companies that have CEOs. Those businesses require you to pay to be a sales associate/recruiter. Maybe you’ll make enough to support yourself, but 99% of the time you won’t. So good for you for getting in on your MLM early enough to make enough money to pay your bills, but MLMs are still dumb systems regardless. I stand by my statement that they are predatory and I feel lucky that I have never been involved in one.
So you recruiting people for parcelle and earning a commission on sales is any different?
You could not be more wrong about MLMs. YES there are people out there who are predatory, but when done correctly and you follow true mlm structure, I assure you—not a scheme.
Actually, yes! I earn a commission on sales made through Parcelle; however, I don’t recruit people to sell for Parcelle and I don’t make money off of recruiting people. The problem with MLMs is NOT the product. It’s the fact that most of the money made is by recruiting people and if you don’t join early, then it’s almost impossible to make money. The Federal Trade Commission has a whole article about MLMs and pyramid schemes. The fact that the FTC has grouped them together should be a red flag for everyone.
Tell me you’re involved in an MLM without directly telling me you’re in an MLM…Hun 😂
Thank you for the article. In my younger years I was involved with several MLM’s. I should have guessed that Wine Shop was MLM but I was seduced by the concept of having in home wine parties. Not that I wanted to be a consultant but I wanted some who was one to host a party in my home. Thank you for bringing up the legalities. When I’m reading to order I’ll go through a company.
I work for a wine MLM. I have explicit knowledge and documentation of the company’s compliance team encouraging the independent consultants to break state laws in order to sell their product. I have spoken directly to the Chief Compliance Officer/co-founder that defends the loophole approach. Where do I go from here?
Oh wow. I’m not qualified to give legal advice; however, if it were me in this situation, I’d submit reports to the FTC or the BBB.
I work in the wine industry in compliance. You can absolutely send the documentation to the state’s alcoholic beverage commission (ABC) and/or Dept of Revenue. Many states have some sort of whistleblower protection, too. Good for you for taking the high road!
Just stumbled upon this almost 2 years later! My MIL had a wine party a few weeks ago which I attended. The wine was overpriced but meh at best. During the whole party I kept finding it strange how she pushed the whole “join my team” thing. I did a simple search and bam found your blog! I work in normal sales and this whole thing baffles me. I would never ask one of my customers to join me to become my competition! So backwards.