Kiwis who hope multi-level marketing will transform their lives
Published: Dec 28, 2018
By: Tess Nichol

Kiwis who hope multi-level marketing will transform their lives

Tens of thousands of Kiwis have signed up to sell products like makeup, health supplements and essential oils from home.

Whether its a full time job or a "side hustle" to make a bit of extra money, network marketing is attractive in that it's flexible, can be done in small pockets of time and has the potential to make you very wealthy.

Weight loss company Isagenix took New Zealand by storm in 2015 and recent inroads have been made by makeup and wellbeing company Arbonne. Successful network marketers spoken to by Stuff say it's been not only financially rewarding, they have also found a sense of belonging in their company's community.

But one critic has warned that the financial benefits are confined to those who get in soon after a company has launched, and others might find themselves making less than they thought or even losing money.

Michelle Siou sells cosmetics for a big MLM firm, which paid for her trip to Hawaii.

SUPPLIED

Michelle Siou sells cosmetics for a big MLM firm, which paid for her trip to Hawaii.

Network marketing, which often includes Multi Level Marketing (MLM) models, involves independent consultants selling products through their social networks, usually starting with friends and family.

Most sellers are women and the model is often marketed at mothers with young children.

While it's possible to make a bit of money from selling products, the real aim with MLM is to start earning what is known in the industry as "residual income". Residual income is earned once a seller recruits other people to their "team", meaning they then receive a portion of the profit those below them make from selling product.

The model for residual income relies on recruiting more and more people below you, to maximise the number of people sending money up the line.

While this system may sound rather triangular, MLM is legal and seen as distinct from a pyramid scheme by the Commerce Commission.

"In multi-level marketing, participants earn commission from selling real products, whereas pyramid selling is earning money solely or primarily by introducing other people into the scheme," the Commission says on its website.

"The Commission doesn't have a general position on business models that are legal," a spokesman said.

Alison King sells doTERRA oils. She sees it as recommending products she loves to people she knows.

Alison King sells doTERRA oils. She sees it as recommending products she loves to people she knows.

Alison King sells doTERRA essential oils in Rotorua and the venture is now her sole source of income. She is a high ranking 'silver' seller, meaning she has a network of people below her whose sales all feed into her monthly income.

She has been selling oils since March 2016, but only got serious about it in the last year or so.

"What I've earned this past month is more than I've ever earned doing a fulltime job."

The way King sees it, she's making money from recommending a product she loves and uses in her own home daily.

"If you were to go to the movies and see an amazing film and then you tell people you've seen an amazing film, you don't get any cut of the profit from the cinema from your friends and family who choose to go," she said.

"With [doTERRA], once someone has started with their oils, if they choose to buy more and maybe then recommend it to friends or family, then I get a small percentage of that."

She rejected the suggestion that the company's model was pyramid shaped, saying doTERRA's principle of "the power of three" (where you maximise its reach and profit by recruiting three people below you, who recruit three more and so on) was to be viewed as like a tree with many roots.

"We're all connected."

King is a true believer in the benefits of essential oils and working as a consultant has brought her more than financial security.

"I feel that I belong in doTERRA. I have a second family who I can call about anything, it doesn't have to be about the business."

Michelle Siou is a Wellington-based consultant for a "vegan global health and wellness brand" which only allows consultants to talk about it by name in media interviews if they have their quotes signed off by management.

The hair, make up artist and stylist  initially thought "there was no way in hell" she would get involved in network marketing, but she changed her mind after a respected colleague turned her onto the company's skincare products which hugely impressed her.

She attended the company's New Zealand launch party two and a half years ago and was instantly sold.

Since then she has earned enough to receive a free trip to Hawaii, and a range of gifts from the company including high-end jewellery. She was also able to spend a lot more time with her three boys than a traditional job would allow.

Siou coaches and mentors salespeople in her team and receives residual income from their sales.

Anyone was able to achieve the level of success she had or even overtake her if they were willing to work hard, Siou said.

"With this business you are not held back. It's an effort based business."

Victoria University's Head of School for Marketing and International Business Val Hooper said people like King or Siou were the exception rather than the rule.

"Initially it seems as though you can make a lot of money and usually what happens is at the rah rah sessions before hand - because you always get invited to rah rah sessions - they trot out people who make a great success of it," she said.

"But what happens is very soon you exhaust your clientele."

Friends and family were usually keen to support a consultant at first, but there was only so much they could buy.

"If you get in early you are sitting very pretty," Hooper said.

"But if you come into the scheme late it's a heck of a hassle."

Even where companies didn't require consultants to buy stock, there was usually an up front cost because it was necessary to buy product for your own use in order to know how it worked, Hooper said.

It was possible to lose money if the consultant then failed to sell any product because the market was saturated or the person wasn't cut out for the kind of selling required.

"If people asked my advice I would say to them look, if you're certain you're going to get in at the start of things and you're keen to do it then give it a bash, but I would alert them to the fact that [customers] can only buy so many lip liners or eyeliners.

"They need to really consider the sort of product and how often people would buy it."

Getting a reliable figure for the number of independent sales representatives in New Zealand is tricky.

There are dozens of companies operating in New Zealand, and many of them don't provide the information online. Stuff attempted to contact several of the more prominent companies' overseas offices but received no response.

The best guide for numbers comes from the Direct Sellers Association of New Zealand (DSA), a voluntary umbrella association whose members includes network marketing giant Arbonne, Mary Kay cosmetics, Scentsy candles and Young Living essential oils.

doTERRA is not a member.

In its 2017 end of year statistics, the most recent figures available, the DSA counted nearly 90,000 independent sales representatives working across its members' businesses in New Zealand.

By comparison, the United States' DSA showed 18.9 million people worked in direct selling in the USA last year.

While it might seem like every third woman you know is now selling candles from her living room, the DSA NZ data showed numbers actually dropped in 2017 to 89,638, down from 97,237 in 2013.

DSA executive director Garth Wyllie said this was a reflection of lower unemployment rates in New Zealand.

People were less inclined to pursue network marketing if traditional jobs were more readily available, he said.

King said social media algorithms could make network marketing seem more widespread than it really was.

She told Stuff doTERRA was currently in only 1 per cent of Kiwi households and that anyone interested in getting involved with the company shouldn't worry they've missed the boat.

"We're at the start of an at least seven-year growth trend. I don't see this ever going away."

* Have you been involved in a MLM business and want to share your experience? Write to us at life.style@fairfaxmedia.co.nz.