Network marketing: Facts Versus Fiction

[dropcap]T[/dropcap]alk to some people about “network marketing”, and they’ll tell you it’s the best thing since cocoa tea – an opportunity to achieve a level of financial independence that many people only dream about. Others tell less glorious tales, speaking of ruined friendships and even ruined lives.

I recently read an article which asserted that network marketing is “forcing people into debt and psychological crisis”.  The sad stories described therein were very typical of many anti-network marketing screeds. Women (for some reason, it’s usually women) shell out large sums of money for start up inventory, find the merchandise difficult to sell, and are pressured by the person who recruited them into the network to continue making purchases and signing up more victims.

These tales contrasted with my social media feeds, which, in the past two or three years, have been increasingly filled with friends and acquaintances rhapsodizing about their experiences with network marketing programmes  – Global Wealth Trade, Total Life Changes, and Cutco, among others. How could a business model be both destructive and divine? I needed to find out more.

Network marketing is not a new idea – the California Perfume Company (you might know it as Avon Products) was founded in 1886. Compensation structures vary, but most operate similarly. People function as independent distributors of a product or service, recruiting others into the network to increase market penetration and selling potential. Each seller is usually drafted into the network by a friend, family member or acquaintance. Recruiters are rewarded for their efforts by earning a commission on sales made from their “downline” – the people they have recruited and the people recruited by their protégés.

That’s the concept, but what’s the reality? I questioned some people who I knew were involved in Global Wealth Trade (GWT), one network marketing programme active in Saint Lucia. The first four people I spoke to all told me the same thing – they’d signed up but their dreams of financial independence hadn’t worked out. Why? They didn’t have the necessary time, energy or temperament to move product and/or recruit others. With no retail sales and with no “downline” commissions, their vision fizzled and died.

Nobody, however, felt ripped off – everyone was quick to assure me that they shouldered all the responsibility for their lack of success. In the same breath in which they chastised themselves for their failure, they exhorted me to speak to “a lady” who was a raging success in the business.

“Talk to Vernisha,” sounded the chorus. So I did.

Successful network marketers are all evangelical about their programme and Vernisha Charles-Joseph is no different. As we chatted over video link, her enthusiasm grabbed me through my laptop screen. I had to draw the cloak of journalistic scepticism tightly around me to shield myself from the infectious zeal with which she told of her experiences. “This is how people get sucked in,” I thought, as our conversation developed.

A 10-year sales management job at a telecommunications company ended in 2008 and, after a while, the mother of four became weary of having to start at the bottom of the pecking order at every subsequent place of employment. “I found it became very tiring, and it became almost worse than monotonous . . . you wake up every morning, go to work, spend eight to ten hours on the job, come back home exhausted, and the quality of life was just not what I wanted. I didn’t have time for my kids. My children are very young, and very talented; it was not enriching for my family.”

A friend introduced her to the concept of network marketing in 2010 and, after almost 18 months of research, she purchased her first set of inventory in June 2011. Even then, her business sat dormant until 2012 when she finally decided to put some energy into it. The rest, as they say . . .

Even though Vernisha has given up working traditional jobs, don’t think for a second she’s spending her days sipping cocktails on a beach somewhere. She called me from her office in Castries, where she puts in full-time hours hawking her products and inducting people into the programme. She does sales, conducts informational and training webinars, and helps her downline recruits get established. “I am successful in my business because I put in the hours and I put in the work – and that’s maybe one of the downsides: persons come in with the mindset that they’ve bought a glorified lottery ticket.”

GWT is hot right now, and Vernisha seems to be doing well, but not all network marketing companies are created equal – some people do suffer. Several of my acquaintances have seen their budding Mary Kay empires shrivel and die in the face of increased shipping prices, customs nightmares, and loss of public interest in their products in the face of more competition from local beauty supply stores.

Some companies are scammier than others, structuring their compensation scheme to privilege recruiting activity over actually selling products. Some sell low-value products at exorbitant prices. What’s the substantive difference, really, between an illegal pyramid scheme where each person pays in $50, and a legal network marketing programme that sells $10 worth of vitamin supplements for $60? In each case, you’re paying $50 just for the privilege of being in the network – there’s zero value in that!

It turns out that network marketing, like all other entrepreneurial activities, is fraught with risk. If you want to be successful, you must carefully analyze the risks involved and evaluate how suitable the specific programme is for you and your skillset. I know I will never have the time and the patience needed to preside over a small network marketing empire like Vernisha, but I’m glad to see that her efforts have resulted in stable, profitable self-employment for her, and in foreign exchange from all over the world trickling into her local bank account – a boost for the nation’s bottom line!