Tag: MLM

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 […]

Safety and Dangers of Essential Oils

Safety and Dangers of Essential Oils

Essential Oils can be dangerous. People selling the essential oils for companies create articles and guides in order to sell more oils. This can make it difficult to find good truthful information about safe ways to use oils. Additionally, members selling dōTERRA and Young Living […]

LuLaRoe Lawsuits – News Roundup

LuLaRoe Lawsuits – News Roundup

Pyramid Scheme Allegations

CBS News story with detailed information around the $1 billion lawsuit filed in October alleging LuLaRoe is a pyramid scheme. Also references LuLaRoe’s own legal action against critics.
https://www.cbsnews.com/news/lularoe-is-accused-of-being-pyramid-scheme/

Fortune.com article explaining LuLaRoe and referencing the lawsuit filed in October alleging LuLaRoe is a pyramid scheme.
http://fortune.com/2017/11/01/lularoe-lawsuit/ 

Teen Vogue’s includes the court documents here:
https://www.teenvogue.com/story/lularoe-leggings-lawsuit-alleged-pyramid-scheme

 

Other Lawsuits

Additionally, previous legal battles over product quality and payment processes were also reported on by CBS News.
https://www.cbsnews.com/news/lularoe-legal-woes-multi-level-marketer-product-defects/

https://www.cbsnews.com/news/lularoe-multi-level-marketing-women-clothing/

Today reported on product quality lawsuits
https://www.today.com/style/lularoe-leggings-under-fire-after-customers-say-it-easily-tears-t108835

LuLaRoe also sued for improperly collecting sales tax
https://www.cbsnews.com/news/fashion-marketer-lularoe-sued-over-sales-tax-charges/
https://www.forbes.com/sites/kellyphillipserb/2017/02/27/popular-fashion-line-lularoe-sued-for-overcharging-customers-sales-tax/

 

Local news outlets also reported on the LuLaRoe lawsuits. Please comment with additions to our roundup! Thanks.

Making Money with dōTERRA – Compensation Plan

Making Money with dōTERRA – Compensation Plan

According to the official dōTERRA compensation plan, advocates make profits on the dōTERRA items sold to retail customers or preferred members. Profits are the amount sold over wholesale costs. Additionally, advocates can make money on bonuses paid based on the wholesale purchase volume of the […]

Is Du North Designs a pyramid scheme?

Is Du North Designs a pyramid scheme?

It’s hard to tell if Du North is a pyramid scheme… and that’s not a great sign. Du North Designs sells leggings directly and through distributors. Most of their business and their stated business model is “Multi Level Marketing.” MLMs share many qualities with Pyramid Schemes […]

Is “It Works!” A Pyramid Scheme?

Is “It Works!” A Pyramid Scheme?

It Works! sells the weight loss and cosmetic wrap products (“crazy wrap thing”). It Works! claims to be a ‘Multi Level Marketing’ company. MLMs share many qualities with Pyramid Schemes. Because they share so many qualities it can be incredibly difficult to tell if the company is a good company to join.

The US Government’s Federal Trade Commission has more information about pyramid schemes to help.

How to spot a Pyramid Scheme:

  • Large profits are based primarily on recruiting others not on the real sale of goods.
  • Recruits are forced to buy more products than they could sell often at inflated prices.
  • People at the bottom (new recruits) make excessive payments for inventory that accumulates in their basements.
  • Many schemes will claim product sells like crazy — but actually sales are only occurring between people inside the structure or to new recruits. Check to see if price is inflated.
  • Commissions for recruiting new distributors, no legitimate product or service, OR separate up-front membership fee (having a product/service doesn’t remove all danger).

How does It Works! stack up?

  • If you look carefully at the compensation plan for It Works! much of the big profits come both directly and indirectly, from recruiting others to sell the wrap products.
  • Recruits are encouraged to order inventory for auto-shipment; which could lead to extra wraps that maybe difficult to sell.
  • Returns and refusals of merchandise delivery have penalties.
  • Though there are not direct commissions for new distributors, compensation is based on the number of distributors on your team, and bonuses are paid for reaching the next the next levels sooner, each require recruitment. In this way, there are indirect commissions for recruiting new distributors.
  • There are costs to join. Inventory, and materials for selling It Works!  body wraps (“starter kit”) are rolled up and you cannot become a consultant without purchasing a starter kit.
  • The wraps offer unbelievable results, explaining all of the benefits on their site. However, their site also states: These statements have not been evaluated by the Food and Drug Administration.

It Works! seems like a Pyramid Scheme

Pyramid schemes will disguise themselves as MLM or direct sales companies, and it appears that It Works! is doing that because of the red flags above. Whether it’s a pyramid scheme, a scam, or just an unhealthy business, It Works! shares many bad qualities with Pyramid Schemes. These qualities make it a dangerous opportunity and everyone should probably avoid It Works! and all of their products.

What do you think?

More Resources

Investopedia: What Is A Pyramid Scheme

How Pyramid Schemes Work

Last Week Tonight: Multi Level Marketing

Last Week Tonight: Multi Level Marketing

Check out this great video from John Oliver about Multi Level Marketing

Is LuLaRoe a Pyramid Scheme?

Is LuLaRoe a Pyramid Scheme?

Probably, it’s hard to tell. LuLaRoe claims to be a ‘Multi Level Marketing’ company. MLMs share many qualities with Pyramid Schemes but are a bit different. Because they share so many qualities it can be incredibly difficult to tell if the company is a legitimate […]

Joining Jamberry

Joining Jamberry

Jamberry is a multi level marketing company which sells a nail ‘wrap’ product (kind of like a polish replacement).

It’s relatively easy to find information about Jamberry, their company, products, and compensation plan. You can sign up on their site to become a consultant and they will assign you a sponsor if you don’t already have one.

Products are sold on their website, directly through their consultants via inventory on hand, through orders, or through the consultant’s website. Also, Jamberry consultants are known for hosting parties to sell the nail wraps and give workshops.

What does it cost to get started?

To begin selling Jamberry nail wraps as a consultant you purchase a starter kit. A starter kit costs $99 and includes application tools, business materials, samples, etc.

Additional Expenses [1]

It’s against Jamberry’s policies to create marketing and business materials, they must be purchased directly from Jamberry. Catalogs cost $6.50 for 10 and must be purchased with each new release (every 6 months), another site reports the cost as 25 catalogs for $14.50 with free shipping. In addition to catalogs there are also host join pamphlets, sample cards, postcards, order forms, and more.

To sell Jamberry online you’ll pay $10 every month for a website.

There are also additional costs associated with collecting money and running a business: credit card fees, tax preparation, etc.

costs add up
For purchases, marketing materials, and direct sales you’ll also likely need to pay shipping and handling (including for your starter kit).

Do you need inventory? Can you just sell online and take orders?

You can just sell online. However, there is a lot of pressure to carry inventory. Most of this pressure comes from sponsors who benefit from consultants purchasing additional product. Additionally, much of the trainings and success stories revolve around parties where customers learn to apply the nail wraps and buy products at the parties.

Inventory held on hand may also go out of style as new nail wrap styles are released. Returns by consultants have limitations outlined here. Mostly, consultants may return only $1000 in any 1 year period, and may only return marketing materials upon resignation.

Encourages personally purchasing to meet quotas and get bonuses

Because commission structure requires consultants sell a certain amount each month ($200+, host a party with a certain amount of sales, etc), consultants may be encouraged to purchase a significant amount each month regardless of whether customers have actually made purchases.

This seems like a good idea because otherwise the consultant will lose access to higher commissions or bonuses. Additionally, they may be pressured for letting down their team or sponsor who may miss out on opportunities well.

This cycle of personal purchases to meet quotas can lead to debt, stress, and problems. Personally purchasing to meet qualified volume requirements is never a solution, ask sponsors for other solutions — introduce you to new leads, co-host an online party, etc.

Who is getting paid and how? Details!

Unlike some of the other programs Jamberry’s compensation plan is right on their site here.

They also publish the number of active consultants at each rank in 2015 here.

Jamberry Compensation

More here: Full Jamberry Compensation Plan

Commissions

Consultants make commissions based on their personal retail sales volumes (30%)

Once they maintain $200+ in PRV (personal retail sales volumes) they can get additional sales bonuses (up to 10% more).

Consultants recruit other consultants to add “legs” and “downlines.

Managers and executives make additional “generational overrides” or commissions based on the PRV of the generations in their downlines. The number of generations they can collect commissions on depends on their own rank and team’s total retail volume, personal retail volume ($700), number of active legs, and more. The overwhelming majority of consultants never reach these ranks.

Jamberry consultants can make additional bonuses for moving through ranks quickly (“Fast Start Rewards”), advancing to each level (“Rank Advancement Bonus”), and more.

Resources

[1]  This blogger does a good job breaking down the additional costs of becoming a Jamberry consultant and has some other posts skeptical of Jamberry.

Compensation plan

Consultants at each rank and earning ranges (2015)

Becoming a Stella & Dot Stylist

Becoming a Stella & Dot Stylist

Stella and Dot is a multi level marketing company which sells jewelry. They are known for their trunk shows and stylists who help customers with creating overall looks to go with the jewelry. You can find vague information about Stella and Dot’s compensation and initial costs […]