Multi-level marketing’s predatory practices

Multi-level marketing’s predatory practices

There’s something about a fast track to wealth that captures the minds of Americans, especially those who have recently become adults. Paired with their lack of experience and marketable skills compared to more seasoned Americans, this desire to earn quick money makes young people susceptible to predatory business practices. Although technically conducting business in accordance with the law, multi-level marketing companies are among the agents that prey on young Americans.

When high school graduates and new college students leave home, they usually receive a letter from an organization called Vector Marketing Corporation before they do so. Vector is the sales branch of Cutco Corporation, which produces kitchen accessories, especially knives. Cutco is an example of a multi-level marketing company. Multilevel marketing companies utilize a pyramid-shaped marketing strategy whereby they draw revenue from direct sales to customers and by recruiting team members to sell the product as well.

Companies like Cutco encourage their “sales representatives,” who are also known as “downline distributors,” to recruit more distributors, and even go as far as seizing the numbers in their representatives’ phones to contact individuals about joining the team. The organization then distributes its products to the sales representatives—the high school students and college students that they recruit—to sell to customers.

Vector attracts students by offering rates at $18 per hour for the one-hour appointments that their sales representatives hold with customers. The company also provides free “training” to the representatives, basically teaching them a sales pitch and sending them off to sell the product. Some online sources allege that Vector forces its representatives to purchase the knives from the company, which would pose a large financial burden and make selling the product all the more urgent. The company website refutes this claim, however.

For people without much job experience or marketable skills, high pay is hard to pass up. However, by advertising to young people commission far above minimum wage, they are misleading them. Workers see the high commission but fail to understand that they are “contractors,” not employees. They receive no wage or salary; they are only paid for hour long sales presentations, and they receive no protections from legal rights of employment law provisions. Vector also does not reimburse their sales representatives for travel expenses, and because the representatives are selling the cutlery in the homes of customers, they must spend money on gas and have access to a vehicle. Unless they are depending only on customers who are nearby, which would typically be people they know, the travel expenses and opportunity cost of wasted time are high.

When the sales representatives sell the products locally, they will likely be depending on the relationships that they have with neighbors, friends and family. After selling—or, according to Vector, loaning—the cutlery to their representatives, Vector endorses the sale of the products to those most personally close to their representatives. Therefore, Vector is taking advantage of their sales representatives’ relationships. Multilevel marketing companies know that it will be easier for their representatives to sell the products to those close to them. They are deceitfully using the emotional connections that their representatives have with others to make money. For some, perhaps selling the knives is a temporary means of making money, but for most, this is unsustainable and bound to lead to trouble.

Vector can have a large impact on young people who are trying to at the very least break even on their investment in the products they bought from the company. The system that the company uses encourages their workers to risk damaging the relationships they hold with people they know. Te workers may hassle the customers, desperately trying to sell the product. People swept into the business model are indoctrinated by company managers and co-workers, and a pattern of groupthink emerges. Despite the reality of the situation, that the business’s practices are duplicitous, the representatives may convince themselves otherwise. For young people, working for Vector may look attractive at first, but it has the capacity to harm them.

The incentive that multilevel marketing companies like Vector weigh on their student workers is insidious at all points in the process, from the too-good-to-be-true numbers offered, to the financial and social burden that they place on young people. These companies may be selling a product, but they look a lot like a scam.