Utah MLM explosion

6787

The statements “I found myself again,” “I own my homemaking status now” and “my experience has only been positive,” might sound like snippets from a promotional video, but these are statements taken from interviews with LDS women when asked about their experiences selling with multi-level marketing companies (MLMs).

MLMs have a big economic impact and post large recruitment numbers. Every day, 5,500 new people join MLMs as sellers, swelling the ranks of companies throughout the world, according to KUTV. This rapidly growing business market has taken an especially strong root in Utah, and the state has more MLMs per capita than any other in the U.S.

This map shows top MLM companies across the U.S., and companies marked in green were founded by members of the LDS Church. (Map by Marinda Risk)

Jane Driggs, president and CEO of Utah’s Better Business Bureau, said there are about 70 companies registered as MLMs in Utah. She said the majority of these companies are rated by the Better Business Bureau with a “B” or better, and only four fall below a “B.”

Driggs said Utah’s Better Business Bureau gets a couple of complaints a year about the MLMs in Utah, but that number has dropped since MLMs started initially popping up in the Beehive State.

“We’d get more complaints about their programs where you register to become an independent distributor and then you’re automatically shipped the product every month, but that has dropped off significantly,” Driggs said. “Now we mostly get complaints about advertising — so the product is not what they advertised or what they implied it would be, or people are seeking refunds and aren’t able to get them from the company.”

Driggs said Utah has high MLM activity because Utah has less government intervention and regulation than many areas. This makes it easy for Utahns to start small businesses and grow them.

Having supportive friends who are already selling the same products seems to “help people make it in the MLM business — or not make it,” according to Driggs.

In 2017, total annual revenue from the nine top-earning Utah MLM companies came to over $7.6 billion. That much money influences Utah’s economy; although, depending on the company, much of the money may stay with the top leadership instead of trickling down to the most-recently recruited sellers.

This chart shows total annual earnings and sellers for various top MLM companies from 2013. Data was sourced from networkmarketingcentral.com. (Graph by Marinda Risk)

Mark Showalter, BYU Department of Economics chair, said companies qualify as MLMs when their retail sales are done through individuals rather than storefronts or registered business sites, and when part of the compensation for the recruited seller comes through fees on “downstream” agents.

“The most successful MLMs I’m aware of in Utah Valley (like Nuskin and doTerra) have very large markets outside the U.S.,” Showalter said, adding that the vast number of multilingual people in Utah Valley also adds to the high number of MLMs in Utah.

Showalter said, “Things that sound too good to be true usually are.” If the pitch for a product focuses on making a lot of money from downline distributors, it is not likely to make a profit for the seller. People shouldn’t see such an offer as a “winner of the lottery opportunity,” according to Showalter, because sellers are more likely to lose money in that system.

Driggs echoed Showalter’s statement, highlighting the difference between Ponzi schemes, a form of fraud in which investors believe in a nonexistent product, or enterprise, and quick returns to the first investors from money invested by later investors, and MLMs.

I think consumers need to make sure that the company they want to sell for is actually an MLM and not a Ponzi scheme,” Driggs said. “It can be hard to tell the difference, but consumers need to make sure they’re dealing with a company that’s more concerned with selling the products than getting more people on the team.” 

According to a 2011 study conducted by Jon Taylor, president of the Consumer Awareness Institute and a specialist on MLM companies, the actual numbers for those making a profit by selling for MLM’s was remarkably low, especially when compared with other common means of making money. The following numbers are likely tempered by the type of MLM a person is involved with (individual companies may have higher or lower rates of profit than this for sellers):

After expenses, zero percent of wage earners at traditional jobs in the study lost money.

After expenses, 61 percent of small business owners lost money.

After expenses, 99.6 percent of recruitment-driven MLM sellers lost money.

Based on this study, any consumer looking to purchase from an MLM or join one as a seller would benefit from checking multiple sources about the specific company. However, positive stories with MLMs are just as noticeable as any negative ones.

Lauren Gemmell is one such example.

Gemmell has been selling LuLaRoe clothing for about a year and has had a positive experience with the company. She started selling the merchandise because a friend of hers was a consultant, and she loved the clothes enough that she wanted to start selling them herself.

Lauren Gemmell’s daughter hides among the brightly colored LuLaRoe clothing her mother sells in Utah through the multi-level marketing company. (Lauren Gemmell)

I have made money working my business. It wasn’t easy, but paying off the initial investment was a huge goal and accomplishment,” Gemmell said. “I spend about 25 hours every week working my business. I try to use all of my daughter’s nap time and a couple of hours after she goes to bed to work as much and as efficiently as I can.”

Gemmell said she enjoys recruiting other people to sell the clothing but said she can also make “plenty” of money without a downline of sellers under her. She said her experience selling with LuLaRoe has left her feeling “definitely more positive and happy.”

Of the women The Daily Universe interviewed, the majority said they were most successful when they treated their MLM selling like a real business and put a great deal of time and energy into marketing and selling their product.

“(Selling for an MLM) is not always about the money, and it’s certainly not a competition,” Gemmell said. “It’s hard work, but I have thoroughly enjoyed having something to call my own, watch it grow and have something I look forward to doing every day.”

Print Friendly, PDF & Email