Whenever people talk about multi-level marketing schemes, chances are that they might be referring to pyramid schemes. It’s easy for people to use those terms interchangeably. Heck, I would often use MLM as the catch-all term because it’s easier to type down than pyramid scheme. Pyramid schemes and MLMs share very similar structures in how affiliates in these schemes are compensated. Those structures would often look like pyramids, hence the name.
What differentiates multi-level marketing schemes—sometimes referred to as network marketing schemes—and pyramids is how you earn money from it. In an MLM scheme, they would often have products that you, as an affiliate, would sell. You get commissions when you and your recruits sell a certain amount every month. Affiliates will earn a commission for every product sold to retail customers. In a pyramid scheme, you earn money from the people who become affiliates after you. Everybody who is in the higher tiers of the compensation will get a lot more money than you, depending on where you are in that structure. The people who joined after you will only get compensated when other people join the scheme. When no new members join a pyramid scheme, the stream of money stops. Nobody gets paid anymore. At least in MLMs, the retail sales of the products help fund the company. Some pyramid schemes will try to have products that you can sell. But that’s not really where they focus on.
BeautyCorner falls into the side of a multi-level marketing scheme. A lot of newer beauty brands, especially MLM companies like BeautyCorner or Seint, try to provide something better than what you would normally see in store shelves. In the case of BeautyCorner’s founder Gregg Renfrew, she wanted to have different beauty products that was made with as safe of a process that it can be. In the website’s Our Mission page, the copy mentions that Europe has banned more than a thousand ingredients commonly found in beauty products that you see in stores. While I was researching for this article, I found that they actually have a list of ingredients that they don’t use in their formulas and an actual glossary for the ingredients that they do use and what they’re used for. It’s kind of amazing that they actually advocate for a better standard for beauty products, even going so far as to testifying in the United States Senate regarding one of the bills that they were trying to pass.
The thing that makes a multi-level marketing scheme a multi-level marketing scheme is that you have to become an affiliate member in order to start selling their products. In the case of BeautyCorner, it costs $50 to become one of their consultants. That fee is good for an entire year. You have to pay $21 in order to renew. That fee basically gives you access to your own personal website that any of your potential customers can use to shop. A lot of MLMs have this nowadays because more people buy stuff on their internet. That website has an ID connected to you. So whenever somebody buys any product in that website, it gets counted towards your quota. You can still sell the products directly by buying one of the product kits that they sell.
One thing that I have been noticed while I was researching is that there some companies that let you host parties. MLMs like Pampered Chef, Cabi and Noonday Collection allow people to host parties to show off the products with the help of their consultants. The host of the party does get a commission when they reach certain quotas, sometimes with the added benefit of discounts on their store. Unlike most MLMs, BeautyCorner actually has brick and mortar shops in the United States. There is actual place where you can actually try out the products on your own. Though they only have about four stores. Still, it’s unusual to see that with MLMs.
While MLMs are seen as a bit more legitimate than pyramid schemes, there is still some risk in joining them. Not everyone has the opportunity to earn money from it. Even BeautyCorner acknowledges this in their consultancy enrollment page. It’s very hard to meet the quotas required by any kind of MLM company, especially if you are at a higher rank. That is one of the struggles with MLMs. There’s definitely a high chance that you will burn a lot of bridges with your friends and family once you join an MLM scheme.