It's legal, but is it lucrative? Inside the risky world of multi-level marketing
Companies like Epicure and Scentsy enable people to work from home, but one professor says to be careful
Multi-level marketing is nothing new. From Tupperware to Avon, these commission-based sales positions have been a popular way to make money from home.
But sometimes, business can come to a screeching halt. That's what happened to Amanda Kirby and every other Epicure ambassador in Canada.
Kirby, who lives in Pouch Cove, N.L., has been both a consultant and a customer of Epicure for half a decade.
The B.C.-based seasoning and culinary brand is labelled as gluten and allergen-free, which makes it very attractive, she said.
Epicure is one of many popular companies that use multi-level marketing.
According to the Competition Bureau, "a multi-level marketing plan promotes the supply of a product to participants in the plan. Participants earn compensation based on supplying products to other participants or customers."
Commission-based consultants are considered self-employed by the Canadian Revenue Agency.
Kirby did not start selling Epicure products for the money, she said, but because her son — who has autism — is particularly fond of it. However, she told CBC News she sees why it is a seemingly popular trend to become a consultant on the island.
"You can do it from the comfort of your own home," said Kirby.
But, as with any business, there is a level of risk.
The costs of business
Epicure ceased operations after entering bankruptcy in January, leaving its sales community in the dark, Kirby said.
"I just woke up and I heard my friends were messaging me, like, asking me if I had certain products," Kirby said. "And I was like, why is everybody so eager all of a sudden? And I found out that they were going through a rough time."
People are still able to order from Epicure's website — which is advertising a liquidation sale — but Kirby said she hasn't had any communication from the company.
She doesn't know what will happen next.
Although Epicure is not Kirby's main source of income, Concordia University marketing lecturer Robert Soroka said people can get in over their heads when being involved in multi-level marketing.
"When you lose your own distributor … you're going to lose the clients as well," said Soroka. "There's a significant sacrifice."
Soroka also noted how the products sold by multi-level marketing companies are typically much more expensive than regular retail companies — and the price tag affects both the customers and the sellers.
Former Scentsy consultant Emily Pretty, who lives in St. John's, warns against investing too much money into such companies.
Scentsy is an Idaho-based company that sells scented wax, sprays and more.
"Between samples and gift boxes and the little knickknacks and business cards and website renewals, I would say I easily spent six or seven grand, easy," said Pretty.
The St. John's woman said she made "nowhere near" that amount in profit in her five-year run of selling Scentsy products.
Scentsy consultants are technically considered "independent business owners" by the company, marketing officer Mark Stastny wrote to CBC News. He said, "their financial returns will be directionally proportional to the effort they put in."
For this reason, Pretty stressed that it is important to do research before taking on the risk of losing money or failing to build a customer base.
"You can be a boss babe. You can have your own business," said Pretty. "If you're going to spend the money to earn money, spend the money on yourself. Invest in yourself, not someone else."
Multi-level marketing versus pyramid schemes
Scentsy's website claims to be a "party planning" company that gives people the opportunity to sample products and eventually become a consultant.
In an emailed a statement to CBC News, Stastny wrote that the company "does utilize a multi-level compensation plan that technically classifies the company as an MLM."
Stastny's statement also said, "if a company leads with product and has real customers willing to pay for their products or services, chances are they are a healthy company providing value to the market," referring to common conceptions that paint MLM companies as predatory or even illegal pyramid schemes.
Soroka told CBC that the idea of a pyramid scheme is that each level is making money for someone else on a higher level — oftentimes pushing a product with little to no value.
At some point, the people on the lowest level of the so-called business pyramid will have no money left.
"It's just a sham," Soroka said.
Multi-level marketing is legal, but difficult, according to the lecturer.
"Multi-level marketing, it's just another way of cultivating a distribution channel," said Soroka. "It's not the easiest way to turn a buck."
Soroka said consultants are often dependent on others on their team who are just as motivated as they are.
One current consultant in St. John's can attest to that.
The smell of success
Dana Hennessey's home office is a hub for business. It's where she packs up orders, balances books and makes a living.
Hennessey sells products for Scentsy, and is soon entering her 10th year of representing the company. Her home, which was doused with the warm seasonal scents of her products, is a reflection of her dedication to the business.
The work-from-home mother has heard the "boss babe" jokes and accusations of wrongdoing plenty of times.
"I would never choose something that would, you know, intentionally hurt other people or scam other people," Hennessey said in an interview, sitting in her living room.
"Sometimes people have different mindsets on things and I can't really change that…. So I took it upon myself to try and prove them wrong in that aspect. And I would try to run the business in a very ethical way," said Hennessey.
Hennessey told CBC News that people are increasingly skeptical and even hostile toward people who represent companies similar to Scentsy, but she doesn't let it stop her.
WATCH | Epicure salesperson Amanda Kirby says she didn't see the bankruptcy coming:
It is now her sole source of income.
Hennessey is an example of success in this business, but Soroka still encourages caution.
Soroka told CBC News that multi-level marketing, or direct sales, "attracts people who are incorrectly looking for a quick get-rich-quick scheme. It attracts people who might not have the professional or academic credibility to get into a company in a sales position."
The marketing lecturer said people should know what they are getting involved in before setting up shop.
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