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Book Review: Rock Your Network Marketing Business

Book Review: Rock Your Network Marketing Business

Succeeding in Network Marketing is super challenging (99% of new members lose money*). We’re excited about any book that might have insight on how to actually make it work. We checked out this book that promises to help. We highly recommend using your local library […]

Comparing Essential Oils

Comparing Essential Oils

When evaluating a potential business opportunity it is important to consider whether the products are competitive in the market. There are many measures of value for consumers including quality, price, brand, convenience, etc. When choosing a product it’s important to choose one that is competitive. […]

Is Stella & Dot a Multi-level Marketing Company?

Is Stella & Dot a Multi-level Marketing Company?

Yes! Stella and Dot is a multi-level marketing company.

We first researched Stella & Dot back in 2016. They hadn’t yet launched the sister brands Keep and Ever. Back then, their compensation plan was more easily accessible and all around the company was a lot more transparent. Today, it’s a little tricky to get clear answers about the company.

It’s harder and harder to tell that Stella & Dot actually is a Multi-Level Marketing company. They’ve coined new terms including: social selling and peer-to-peer sales. They’ve replaced the traditional tupperware and makeup “parties” with “trunk shows” and “events.” However, at the core Stella & Dot is still very much multi-level marketing.

Twitter post about a Stella and Dot online party.

Stylists sell jewelry at trunk shows (parties) and online via their personal websites. In order to become a Stylist you must purchase a starter kit. There are volume requirements, uplines, teams, and bonuses. Stylists absolutely must recruit other folks to join Stella & Dot to reach the higher income levels. Finally, there are volume quotas to maintain ranks and eligibility. In all of these ways Stella & Dot is a pretty traditional MLM.

Also, Stella and Dot is a member of the Direct Sales Association. A “national trade organization” and lobbying group that represents most (if not all) of the biggest players in multi-level marketing, network selling, and direct sales.

Check out our analysis of their Income Disclosure Statement.

No affiliation with Stella & Dot. Please contact us with corrections, updates, or additional information. This post was prompted by a reader question! Send us with your own questions as a comment here or on twitter!

How much can you earn with Stella & Dot?

How much can you earn with Stella & Dot?

Analysis of the 2017 Income Disclosure Statement “The earnings represented herein are not necessarily representative of the income, if any, that an Independent Stylist can or will earn. There is no guarantee that any Independent Stylist will earn any income.” Stella & Dot 2017 Income […]

Costs of Selling DoTerra

Costs of Selling DoTerra

Product Costs DoTerra has a monthly personal volume requirement of either 50 units or 100 units. This means to receive bonuses and to remain active.This amount often corresponds to the wholesale cost of products but sometimes is less (like with special kits). Shipping costs ($3.99-$24.99) […]

Holiday Pyramid Schemes

Holiday Pyramid Schemes

Sometimes it’s our best friends who get us into the most trouble. Just in time for the holidays, gift scams are back! If you hear about a game or project that seems too good to be true it probably is. These chain letters and mail scams are illegal in the United States. 

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Example of the Holiday Wine Exchange Scam

We’ve seen these chains/pyramids with:
– Gift Cards
– Wine
– Books
– Greeting Cards
– Small Gifts
– Cookies
– Money

The way these tend to work, you send out a request for six people to send you the item. They send out requests to six of their friends with the same promise. However, the scam/scheme relies on the people at the end of the chain sending without receiving. Eventually, some people can’t or don’t recruit new people.

While these scams seem like a lot of fun, they are illegal. Also, most people will lose out. They also mean sharing your information with strangers. If you’ve seen one of these scams, let us know!

More research

Snopes article: Secret Sister Gift Exchange

Forbes: Beware of the ‘Secret Sister Gift Exchange’

Good Housekeeping: The “Secret Wine Bottle Exchange” Scam Is Back

Thirty One Gifts Income Disclosure Statement

Thirty One Gifts Income Disclosure Statement

The most recent income disclosure we could find on the Thirty-One Gifts website was from 2015. However, an internet search leads various copies of a 2017 disclosure. It is difficult to find or cannot be found on the Thirty One Gifts official website. Below is […]

Book Review: False Profits

Book Review: False Profits

False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes, by Robert L. Fitzpatrick and Joyce Reynolds, explores the history and cultural context of MLMs and pyramid schemes. It isn’t a great book for understanding the intricacies of today’s multi-level marketing companies. It explains why […]

MLM or Pyramid Scheme?

MLM or Pyramid Scheme?

Probably the most common question we hear: “Is this MLM actually a Pyramid Scheme?” Unfortunately, there usually isn’t a straight forward answer.

What is a pyramid scheme?

“A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services.” -Wikipedia

This isn’t the whole story. Most people see “sale of products or services” and immediately think every MLM who sell a product cannot be a pyramid scheme. The reality is many pyramid schemes sell products.

When sales of a product are mostly to recruits or among the program members then it’s probably a pyramid scheme. This means that the only money coming into the system is from new people joining. It doesn’t matter if that money is from new recruits “buying” products, or paying membership fees, etc. A small amount of sales doesn’t count, this is just selling to hide the scheme.

Example MLM compensation plan recruiting explainer

Red flags to watch out for

  • Big earnings are from recruiting other people. Compensation plans focus on recruitment.
  • Earnings from retail sales to customers outside the network are small or not emphasized. There is little or no data on how much is earned from these kinds of retail sales.
  • People at lower ranks buy inventory that accumulates in their basements. See: inventory loadingbonus buying
  • Lots of exaggerated claims: the products sell themselves, the products are too good to be true, passive income, become a millionaire, no skills needed
products sell themselves, easy money
  • Prices for products are inflated. Claims that the product has no comparable product available in the market.
  • Commissions for recruiting new distributors. Especially when there is no legitimate product or service, or separate up-front membership fee. Similarly, commissions off of new recruits starter kits or membership fees.
  • High membership fees, expensive starter kits, required monthly purchases, frequent and expensive training kits. These are all ways that lower recruits can pay into the higher layers of a pyramid.

Multi-level marketing and U.S. Law

Many participants in MLM companies will say “this is not a pyramid scheme, pyramid schemes are illegal.” This isn’t quite the right way to think about it.

Suppose you were to steal something from a store not get caught. You could say “I walked out of the store without paying and they didn’t say anything. Therefore, it isn’t shoplifting.” Most of us agree, that is not the right way to look at it. Not being caught doesn’t make it legal, it just means you haven’t gotten caught.

illegal activity

If you’re asking if an MLM is a pyramid scheme, the participant should tell you why the program is not a pyramid scheme. They should not tell you that the MLM hasn’t been caught. Talk through the program together and check for red flags.

The United States has federal laws (for the whole country) and state laws. The laws that apply to MLMs are around investments, marketing, consumer protection, and more. There are not really MLM specific laws. Because there are a lot of places where it’s not very clear if what MLMs are doing is illegal or not, it is up to the courts to decide. In these cases, someone, many people, or a government agency will sue an MLM company and the courts will decide whether the company’s actions are legal or not.

Many MLMs have been sued and found to be illegal. Even more companies have been forced to change their policies, compensation plans, and practices.

More research

Here are documents the FTC has released to help us navigate the blurry lines of illegal MLMs and pyramid schemes:
FTC Guidance: “There are multi-level marketing plans – and then there are pyramid schemes.”
FTC Business Guidance to Multi-level marketing companies
FTC: The telltale signs of a pyramid scheme
FTC FACTS for Consumers: The Bottom Line About Multilevel Marketing Plans and Pyramid Schemes

Check out some of our pyramid scheme analysis of a few popular MLMs:
Is Young Living A Pyramid Scheme?
Is It Works! A Pyramid Scheme?
More here: http://stayonthelevel.com/tag/pyramid-scheme/

Finally here’s some more info on pyramid schemes:
Investopedia: What Is A Pyramid Scheme
How Pyramid Schemes Work

We’re not affiliated with any MLM. We aren’t lawyers and this isn’t legal advice, but contacting a lawyer for legal advice can be a great idea. Please contact us with any feedback or questions!

Is Young Living a pyramid scheme?

Is Young Living a pyramid scheme?

Young Living sells essential oils and other health and lifestyle products. The company says that it is a ‘Multi Level Marketing’ plan. However, MLMs share lots of qualities with pyramid schemes so it can be difficult to tell the difference. The US Government’s Federal Trade […]