Can You Make Money with Amway or Other MLM Companies

One way many people make ends meet, or gain extra cash for investments or luxuries is via "side-hustles", jobs they do when not at their regular employment.  One such side-hustle that has been around for years is direct sales, otherwise known as "Multi-Level Marketing".

What Is Multi-Level Marketing?

Multi-Level Marketing is a business model wherein the company's products are sold directly from one person to another, without a physical store.  The sales people are independent contractors who set their own hours and find and service their own customers.

It is called "multi-level" marketing because one characteristic of these businesses is that if you recruit and train a new sales representative, you get a share of his/her commissions, and depending on the company, a share of the commissions of the people those people recruit.  The people whose sales earn you money are called your "downline".  Generally speaking, people who make a lot of money in multi-level marketing companies are people with big downlines.

What Types of Products Are Sold Via Multi-Level Marketing?

The multi-level marketing model is used to sell products from insurance to cosmetics to toys or kitchen gadgets.  Well-known names include Avon, Amway, Pampered Chef and Discovery Toys. 

How Do I Start With MLM?

Many people have been invited to parties where the purpose is to display and sell MLM products.  You can go to parties selling Pampered Chef kitchenware, essential oils, candles or even sex toys.  Besides taking orders for merchandise, the sales representative is almost certain to tell you that you too could make money selling this stuff.  Today, many MLM sales people offer merchandise via facebook or webpage, and, again, let you know that you too could be doing this. In short, anyone who purchases anything from a MLM representative is likely to be encouraged to become a sales representative themselves.

Why Would People Recruit Competitors?

If you and I pretty much have the same circle of friends, why would I recruit you to sell the same widgets I'm selling?  Isn't that self-defeating?  There are three  reasons MLM sales people try to recruit friends and family to sell:

• They receive commissions from their "downline".  When a representative recruits you, he or she trains you as well, and for the rest of your MLM career, will get a commission on things you sell.
• It turns you into a regular customer.  Many MLM products are small low-priced consumables. They are things that will pay a very low per-item commission--the money is made by acquiring repeat customers who purchase multiple items per sale.  By signing someone up as a salesperson and giving them the "dealer" rate on the product, you improve the chance that they will buy the product regularly, even if they don't sell any.
• They get to sell you a kit and starter supplies.

How Much Money Can I Make Selling Mary Kay?

There are people who make a living selling Mary Kay, Pampered Chef, and other MLM products.  However, according to this website, in 2010, Mary Kay had about 30,000 representatives in Canada in 2010.  Of those, about 3,800 had both been with the company for a year, and had earned commissions in 2010.  Over half of that 3,800 earned less than $100 in 2010.  However, Mary Kay did have 24 people in Canada who earned over $100,000 in commissions.

I researched this subject a couple of  years ago and at that time most of the companies had a document on their website that showed the number of distributors they had and the percent of people with various earnings.  I can't find such charts now so the law that required them to be displayed must have changed.  Nevertheless, the figures I remember were similar to those listed above for Mary Kay--namely that few people stuck with it very long, and most of those who did still didn't make much.

The other thing to remember is that while companies tout commission rate of 50% or more, they don't emphasize things like shipping, maintaining inventory, gas to deliver product or the cost of brochures or other advertising.  If you are going to sell essential oils, diet supplements or Amway products, you are running a business and will have business expenses.

Still, I think many of us know people who have been selling these products for a long time.  Some readily admit they aren't making much if any money.  They like the products and sell to a few friends.  They aren't making real money because they don't treat it like a real job.

Is MLM the Side Hustle for Me?

Honestly, probably not.  First, realize that with ANY sales job, if you are selling low dollar products, you are going to have to sell a lot of them to make money. The higher the price of the product, the harder you are going to have to work to find customers, and the less often they are likely to buy.  Think car dealership vs grocery store.

The Car Dealership

When you walk into a car dealership, you probably want to buy a car.  However, there is a good chance you are going to walk off that lot, after spending time with a salesperson, without buying anything.  If you do buy something, chances are you will not be back for years.  On the other hand, the salesman who does sell you your car will probably make a day's pay (or more) on the deal.

The Grocery Store

When you go into the grocery store, you probably want to buy groceries and it would be unusual for you to leave without buying anything.  Chances are very good that unless you are visiting from out of the area, you will return to that store in the near future.  While the per product mark-up of about 15% isn't that much per item, when you consider the number of items moved per day, most grocery stores are profitable, even after paying the help--and speaking of  "the help", the amount of employee time  you consume per item is pretty minimal.

MLM Products

The price of most MLM products is closer to the price of groceries than to the price of cars.  If I run out of lipstick, and you happen to call and ask if I want some today, I may buy, but unless I am highly invested in your brand or product, calling you for it is an extra step and if I have to wait for you to get it before I can get it, then I have all the reason to buy a competing product. As a dealer you need me to return over and over again, just like the grocery store does, but you are giving me the attention that I get at the car dealership.  

Think about it.  How much do you spend on make-up every month, total?  $100?  To me that is high,but let's go with that number.  If I buy $100 worth of cosmetics from you every month and you have no other customers, you make $50.00. Sounds good, right?  If all you want is enough money to buy your own make-up, then maybe, especially if we are friends, will see each other regularly, and you know that I will not need samples or freebies, and you know that I won't be getting any of my makeup at the mall.  

What is more likely is that you happen to catch me at the right time or that you have a product or two that I like, so I buy it from you periodically, when I want it.  If you want to sell me other stuff, you need samples, you need to spend time talking it up.

What Kind of People Make Money With MLM?

People who make money with MLM are people who can sell--not only can they sell the  products to retail users, they can sell the concept of running your own business to other people and they can keep those people motivated to continue to sell both product and program.  They are also people who work their business full time.  

But I Want to Try MLM

The first step in "starting your own business" to sell MLM products is to purchase a sales kit of one sort or another.  The kit will contain samples, sales materials and perhaps some saleable products.  New sales reps are encouraged to "invest in their business" by buying more than the minimal kit and by investing in training classes.  If you want to try MLM sales, the first thing to do is determine how much you are willing to lose in the process--and then limit the amount you invest in product and training to that amount until you have earned enough to recoup your investment.  

While some of the MLM companies sell products people really enjoy, the reality is that most of their sales representatives do not have earnings commensurate with the efforts they employ.  There are plenty of available side hustles that are worth more to the average person. 

*Part of Financially Savvy Saturdays on brokeGIRLrich. *< and The John and Jane Doe Guide to Money & Investing. *