Only One in Four Multilevel Marketing Consultants Profited From Their Work

An estimated 28 million Americans have participated in MLMs, but most quit within a year of joining.

With millions of hashtags on TikTok, and a highly anticipated Netflix documentary debuting in December 2021, multilevel marketing companies like Arbonne and LuLaRoe are getting a lot of attention.

Multilevel marketing (or MLM) is a business model in which distributors recruit workers to sell products directly to their family, friends, or communities, sometimes through parties or social media. These workers are then encouraged to recruit people that they know to become sellers in order to earn a commission on their sales. Some join these companies hoping to save money on products they already purchase or even make extra cash selling goods they enjoy.

Despite how common they are in the United States, multilevel marketing companies (sometimes also called network, affiliate, or referral marketing companies) are sometimes shrouded in mystery in terms of how they work and whether or not they’re legitimate. Our recent research shed light on the realities of what it is like to participate in a multilevel marketing company.

Key Findings

• More than one in 10 American adults have participated in a multilevel marketing company. This equates to an estimated 28 million people. Nearly 60 percent quit within 6 months of joining.
• 33 percent of Americans have purchased products or services from an MLM company within the last five years, and only 11 percent were dissatisfied with the quality of their purchases.
• Though earning extra money was a key motivation for many who joined MLMs, just one in four sellers earned profits. Seventy-six percent broke even or lost money in their endeavor.

Multilevel Marketing Trends in America

It is quite common to purchase products or services from multilevel marketing companies in the United States. In fact, 33 percent of Americans have purchased items like cosmetics, kitchen supplies, nutritional supplements, essential oils, or even adult products from network marketing organizations.

Although the peer-to-peer selling models used in MLM companies are not traditional, many people are satisfied with the overall price and quality of their purchases. Only 11 percent of people noted being completely dissatisfied with an MLM product. On the other hand, 40 percent were extremely or very satisfied with the quality and price of their purchase.

MLM Product Misgivings

Among those who haven’t recently purchased, most said it’s because they simply didn’t want to buy from an MLM company. The hesitancy to purchase products or services from MLMs may stem from cultural stigmas that surround these companies and their legitimacy. Some people may have opted out of shopping from MLMs after seeing negative memes on social media or documentaries such as “Betting on Zero," which showcased the impact of Herbalife on some of its participants.

However, many other people haven’t purchased because they haven’t had the opportunity or they lack awareness of the variety of products available. Around 35 percent of people who’d never made a purchase said they hadn’t simply because they’d never been asked and 28 percent claimed to not know enough about their products.

Potential Benefits for Sellers in MLMs

Given the unusual business model, participating in a multilevel marketing company isn’t for everyone. Members of MLM companies are encouraged to promote and sell their offerings to other people that they know and onboard new recruits into the business. The lines can be blurred between family, friend, and customer. For some, this is a downside to participation. But for every product or service that the recruits sell, participants are typically paid a commission on their recruits' sales.

There can be hundreds, thousands, or even tens of thousands of participants and recruiters in an MLM company, and participants in our study cited a range of different factors that motivated them to join.

Wanting to make money was the main motivation for many. The second-most motivating factor was the flexibility that MLMs can provide, especially for those eager to be their own bosses or for parents desiring to work from home with their children. However, with more and more companies moving to remote work models, MLMs aren’t the only option any more for those in search of flexible employment arrangements.

The third-most motivating factor revolved around getting discounts on the products being sold – which can range widely depending on your company and status. The fourth-most motivating factor was wanting to support a friend or family member who encouraged them to join.

Challenges in MLM Companies

Though participating in an MLM company may be the right fit for some people, our research revealed that the benefits may not outweigh the challenges. Most sellers tended to quit within six months of joining. Unfortunately, many of those who were involved in MLM companies faced hurdles that led them to abandon their entrepreneurial efforts.

Only 14 percent of sellers remained with their MLM company for more than a year, and just five percent were currently involved with a company at the time we conducted our research.

Further, only one in four people who participated in a multilevel marketing company reported earning any profits. After purchasing inventory and paying any startup fees, it can be difficult for consultants to generate returns, although some companies illegally claim their participants can generate incredible profits.

At the start of the pandemic and the resulting economic crisis, some prominent MLM companies claimed that individuals who’d recently lost their jobs could earn substantial income by joining their ranks. The Federal Trade Commission issued stern warnings to companies who offered these shallow promises to recruits. Around the same time, the FTC also issued warnings to MLM organizations that made false claims that their products could treat or prevent COVID-19.

Besides difficulties generating returns on investments, other challenges for MLM participants included:

• Recruiting others to join the company. Fifty percent of participants in our study reported this to be one of the most challenging aspects of working for an MLM organization.
• Feeling confident in selling. Participants often have to juggle multiple business roles, such as generating leads, creating social media marketing materials, and closing sales. More than a third of sellers said their lack of confidence in these areas made their work challenging.
• Competition. Thirty-two percent of people said that it was difficult to find potential buyers who hadn’t already been scooped up by another seller; those that they tried to get to purchase their products or services were already buying the company's products from someone else.

What to Consider Before Joining a Network Marketing Company

It is possible to earn money participating in a legitimate network marketing organization. However, there are a few considerations you should make before deciding to join any MLM company.

For example, before signing any contract with a multilevel marketing company, make sure to perform adequate online research. Try to find out whether any current or past members of this company had any positive or negative experiences while working there and selling their products. Ask current or past members if they believe joining their MLM company was worth it and why.

Also be aware of any up-front costs. Malicious MLM companies, often referred to as “pyramid schemes", often ask for a lot of money up-front but result in little return or profit. Overall, just ensure that you are confident that you will gain, not lose, money while working for one of these companies.

If you do decide to join an MLM company, make sure to remain aware of the possible dangers of unlawful marketing. If promoting health or wellness products, be sure that you follow your local and federal laws. Don’t make false medical claims and be sure to consult the FDA before making any claims that could possibly contradict with their regulations.

Doing adequate research on companies, products, and work cultures before you sign any contracts or make any purchases can help protect you from predatory business models and ensure you have success in saving money on your favorite products.

Our data

We surveyed 1,024 American adults about their experiences shopping from and marketing for various MLMs. The survey took place online in November 2021. Survey respondents were representative of the U.S. population based on age, gender, and race.