4 reasons not to turn to an MLM for an income boost

When you find yourself strapped for cash or looking to boost your income, you might stumble across multi-level marketing while researching options.

Also known as direct selling, multi-level marketing (MLM) is a form of direct sales that distributes products or services through salespeople who are not employees of the company and do not receive a salary or wage.

Wellness and cosmetic products are most common — think Doterra (essential oils), Arbonne (skincare and make-up) and Isagenix (supplements), for example.

Recruiters of MLMs often target vulnerable people and lure them in with pitches including flexible working hours, being your own boss and the ability to "get rich quick".

And when money is tight, there's no shame in being susceptible to that kind of temptation.

Revisiting stories we've done in the MLM space and speaking to Professor David Wishart, who has researched the dangers of the schemes, we cover four reasons why selling lipstick to your friends, family and church group may not be the solution you hope it to be.

There is 99.7 per cent chance you will lose money

While some MLM recruits spruik an income that allows them to travel the world and buy new cars, even Direct Selling Australia (DSA), the representative body for direct selling, says:

"Direct selling isn't about buying boats or bigger houses … [rather] earning additional income that contributes to school fees, weekly groceries, saving for a holiday and bills."

And that is optimistic for most members.

Gerard Brody, CEO of Consumer Action Law Centre, says despite many painting a picture online that MLMs are funding a wealthy lifestyle, more than 99 per cent of recruits will lose money, as found by SBS' The Feed and US experts.

Professor Wishart says it's important to remember MLMs "don't operate within the social contract that business has with society".

"If you are in business, yes you look after your own needs, but there are limits and morality — everyone is supposed to have that," he says.

"[MLM recruits] operate outside of that.

You could lose friends

Members of MLMs often rely on existing relationships for sales and recruitment.

"Many people become frustrated with friends attempting to 'commodify' their emotional connection," says Maire O Sullivan, lecturer in marketing at the Cork Institute of Technology, who has studied MLMs through a feminist lens.

Lucy*, a young stay-at-home mum, told us while she wants to support her friend's MLM venture, the "harassment is relentless".

"I have a very, very strict budget and I can't buy this crap all the time.

"I hate MLMs so much. The guilting, the relentless posting … and the girls from school in my DMs like, 'Hey babe, how are you?' I don't respond anymore because I already know what they want."

Dr O Sullivan says some MLMs encourage members to cut ties with those who don't support their venture.

"Participants are encouraged to cut out anyone who expresses doubt as this negativity will prevent them from achieving their full potential."

Feeling like a failure, despite trying your best

Many MLMs push the line that you earn as hard as you work.

It's that kind of toxic positivity that leaves people feeling ashamed when they don't make it in direct selling, explains Dr O Sullivan.

Sara Balanuik experienced this when she started selling weight-loss products.

"I hustled hard but was still not a successful boss babe, as was promised."

The single mother was told by her "upline" she wasn't seeing results because she wasn't working hard enough.

Anna Jenkins, a senior lecturer in entrepreneurship and innovation at the University of Queensland's School of Business, says it's a business model that sets people up to fail.

"It is very, very important for all potential sellers to make themselves aware of the statistics around MLMs."

An ethical conundrum

The difference between MLMs and illegal pyramid schemes is that there is a product.

But many MLMs have a business model that focuses on recruiting "downline" and getting new distributors to buy the product, rather than on actual sales to consumers, making them akin to pyramid schemes.

While MLMs aren't illegal, they aren't exactly ethical either.

"While there are many genuine underlying economic activities involved in these schemes, they commonly operate to profit those at the top. And disadvantage those at lower levels," Mr Brody says.

If you've made it this far and are still considering becoming a "boss babe", reach out to those who've tried it before for their insight.

Professor Wishart says to do your due diligence on the company.

"Read what you're in for. Work out what the terms are.

"Look at the product and the sales commission you get on it. Compare the product with what else is on the market. Nobody buys Tupperware anymore as there is stuff that is just as good."

And manage your expectations. Using your membership to score discounted lipstick might be on the horizon sooner than that new car.