'Tis the Season for Multi-Level Marketing Pushes

With the holidays around the corner, you're likely to see a surge in MLM social posts. // Photo Credit: AndreyPopov/iStock/Getty Images Plus

In the evolving retail landscape, it can be challenging to keep up. It seems everyone wants a piece of the pie, which may mean a smaller slice for your spa if you don’t constantly innovate and change with the times. One potential disruptor to the industry is multi-level marketing (MLM) companies, which rely on a network of independent salespeople or consultants who sell directly to their friends, family, and community. They then earn income based on their sales and the sales of those they recruit to sell for the company. DoTerra, Rodan & Fields, and Young Living Essential Oils are just a few of the MLM companies making headlines these days. MLMs aren’t new, though. Remember Avon and Mary Kay? What’s new is the side-gig economy we now live in.

“Most consultants only want to earn extra cash to supplement their income, add to their retirement fund, be able to afford to take vacations, start a rainy-day fund, or start saving for their kids’ college fund,” says Kurnita Wallace, an esthetician and educator who also works as a consultant for Arbonne, a botanical skincare MLM company. Especially popular for selling essential oils, skincare, and supplements, MLMs, also referred to as pyramid selling, network marketing, social selling, and referral marketing, often get a bad rap in the spa industry, because many spa professionals feel like those selling for MLM companies aren’t qualified to sell such products. MLMs are also one more competitor vying for a piece of the retail pie. However, Kathryn Moroz, founder of Spa Advisors, a spa consulting company, thinks the additional competition is much ado about nothing. “This reminds me of when I was asked about how I felt about Sephora and others carrying professional skincare brands nearly 20 years ago,” says Moroz. “What happened? It made the industry stronger, not weaker. If you are afraid of every change and new method of distribution, retail, in general, may not be a field to enter.” 

The stigma associated with MLMs has long been reported in exposés on the topic, such as the recently reported LulaRoe scandal in which consultants were encouraged to buy inventory rather than actually sell leggings, and in an episode of “Last Week Tonight with John Oliver,” in which Oliver portrayed MLMs as pyramid schemes. Check out any online forum for estheticians, and you’ll discover plenty of healthy debate on MLMs. The biggest sticking point is the fact that the products are often sold by people who haven’t been professionally trained in skincare. “As a licensed esthetician who has invested in education, the challenge with an affordable business buy-in for consumers devalues our licensure and expertise,” says Denise Fuller, founder of National Aesthetic Spa Network (NASNPRO). MLMs do have their fans, though. Kim Collier, cofounder of Collier Concepts and a consultant for DoTerra, Juara, and Purium, thinks MLMs deserve a second chance and can even be a good fit as part of a spa’s retail offerings. “Remember when it was not desirable to have a product in your spa that also sold online or had a department store presence?” asks Collier. “Then, the internet, consumer demand, and global brand strategy changed all that. Everything known to humanity is now online and available worldwide.”

According to Wallace, some of the negative press can be attributed to how MLMs operated in the early days. For example, MLMs didn’t always abide by the best business practices or sell the highest quality products. And even today, many still find themselves in the news for the wrong reasons, such as the recent Rodan + Fields federal class-action lawsuit related to the marketing of its Lash Boost eye serum. The lawsuit alleges the company failed to reveal the harmful side effects of a key ingredient of the product. DoTerra also experienced some negative press when a woman shared a Facebook photo revealing the third-degree burns she experienced after applying DoTerra essential oils before using a tanning bed. The latter example speaks to why it’s important that those selling the product understand its effect on the skin. “NASNPRO believes that brands committed to supporting licensing and advanced education for professionals elevates the entire industry,” says Fuller. “MLM businesses are banned, because we strongly regard education required for professional licensing empowers the practitioner and protects the consumer. While sales are important to the success of the industry, understanding why we choose a product for a skin concern is an integral part of effectively serving our clients.”

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Another issue is the way MLMs are sometimes viewed. “People think of MLMs as get-rich-quick schemes,” says Wallace. “They see the top sellers earning six figures, winning trips, and getting cars. The truth is an MLM business is just like any other business, you have to work hard at it, put in the hours, advertise, etc…” Retail consultant Carol Phillips, founder and CEO of BeauteeSmarts, agrees that the only way to achieve success with an MLM is to work your pipeline. “I do believe that the allure, promise, and excitement of creating unlimited wealth has a real appeal,” she says. “There is no reason to sign up for any MLM if you are not committed to working it. There is a high level of burn up, because the goal is to sign up all your family and friends or your circle of influence.” Those who are prepared to put in the work—and deal with the consequences of potentially annoying those in their circle with what some view as an aggressive sales pitch—see it as an opportunity.

Collier sees MLMs as bringing value to the industry. “It’s a corporate business model that creates, delivers, and captures value, but with MLM, the middle class is capturing value in the form of a commission,” says Collier. “The unseen value in purchase is between the seller and the receiver, a trustworthy referral from a friend or a trusted spa, and the value is in commission earned on a product sale.” Another benefit is the personal connection that social selling creates. “It is through personal experience that we are keen to share the benefits and potential of a product,” says Collier. Although there are spas and estheticians interested in venturing into the MLM arena, spa owners are primarily concerned about the impact MLMs are having on their businesses. “Some spas have decided to carry lines such as DoTerra as part of their retail assortments,” says Moroz. “We would never source a line like this for a spa. However, that doesn’t mean it may not work for them. Many customers like their products.” 

In fact, that is usually what prompts people to want to get involved with an MLM. Wallace partnered with Arbonne after being introduced by a fellow church member who relied on the products while undergoing chemotherapy to treat her breast cancer. “She asked me to talk to her sponsor who just happened to be a nurse,” says Wallace. “So, I went to her house with an open mind, because as professionals we can become product snobs. She had me use the products and told me her story, which was epic as to how she was able to leave her six-figure job and stay at her son’s bedside while he was in the hospital for three months.” Of course, it’s the epic stories that sound too good to be true that often give MLMs a bad reputation. Nonetheless, each should be judged on its own merits. “I want people to know that not all MLMs are bad, and not all professional lines are good,” says Wallace.

Overall Impact

To remain competitive, it’s important to understand the playing field. According to Lisa Starr, spa business consultant for Wynne Business Consulting & Education, it’s difficult to measure the impact MLM companies are having on the spa industry, especially since consumers have so many options when it comes to purchasing their beauty and wellness products. From mass market retailers to online and specialty boutiques, the growing number of options and the fact that spa therapists are often shy in making homecare recommendations can dilute sales. Phillips believes the biggest impact is the irritation estheticians experience when getting pitched by someone who wants to share their latest discovery. “My four- and five-star resort spa clients are not coming in and saying they are using some MLM products at home,” says Phillips. “The estheticians I consult with are not seeing it in the treatment room. The typical MLM shopper is not your typical spa-goer. More solopreneurs or esthies in private practice come face to face with it more than resort spas.” Regardless of the impact, MLMs are here to stay.

Potential Threat

“Beyond the obvious competition for the client’s retail dollar, I think the proliferation of MLM products raises credibility questions for consumers when it comes to spa products,” says Starr. If top quality and efficacious beauty products are not only available at the spa, salon, or beauty boutique but also from my next-door neighbor, it doesn’t support the concept of positioning spas to offer carefully curated and professional-only products.” For many though, the concern is minimal. According to Moroz, only DoTerra and Rodan & Fields look to be any sort of threat to small day spas. Rodan & Fields is proving competitive thanks to its above average products and moderate pricing. “I feel there was greater potential for loss of revenue back in the ‘90s with Mary Kay, BeautiControl, and Avon,” says Phillips. “I frequently see on the spa and esthy forum boards content trying to set the MLM person straight. Lots of energy is being spent when the spa and its therapists should be learning how to sell what they do have, because most spas are still underperforming in retail.”

Tricks of the Trade

Although it’s easy to look at MLMs as competition, they can also serve to teach some key lessons about selling. “One reason MLM companies are successful is because they teach their sales force about the features and benefits of their products, and they make it easy for customers to shop their lines,” says Moroz. “When a spa does the same thing, utilizes their own products or other professional products in services and then educates the guest about the features and benefits, it is likely they will close a sale, too.” As Phillips notes, selling is an issue with which the spa industry has long struggled. “Even with 35-plus years of teaching how to sell, I am shocked that as an industry we still struggle with knowing how to comfortably sell,” says Phillips. “One thing is for sure, you don’t make any money in an MLM or spa if you resist learning selling skills. Honestly, MLM and even Amazon are not the problem, it’s a lack of selling skills and product in the spa.” 
 

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