Cost of living pushes young people into multilevel marketing 'hustles' - Stuff.co.nz

Young New Zealanders worried about the cost of living are being drawn into multilevel marketing schemes, but there's a warning that they can be costly, both financially and socially.

Multi-level marketing is where a person earns money by promoting and selling products, but also by recruiting others to sell, too. The more products you sell, the more money you make, and the more people you sign up to sell, the greater cut of the profits you get.

These schemes are legal because a product is being sold, unlike pyramid schemes which simply rely on new recruits paying to join.

A number of multi-level marketing schemes had been circulating the country for years including now defunct Tupperware, Mary Kay and Avon, as well as Arbonne, Doterra, Scentsy and Herbalife.

One of the longest-standing internationally is Amway, which sells household products at what appear to be inflated prices.

It also hosts conferences and offers mentoring plans and is experiencing a resurgence in interest among people aged under 30 hoping to side hustle their way out of a cost of living crunch.

In 2015 The Age reported Team Mak, a subsidiary of Amway, was accused in Australia of misleading young adults by hosting a series of information sessions in Melbourne for free mentorship but failing to mention it was for Amway.

Zoe Maddern can relate to that experience.

One of her friends from high school asked if she would be interested in an "amazing opportunity" and put her in contact with a "mentor". No one disclosed the Amway connection.

"They often do not disclose what you'll be doing or what company they work for in this stage," she said.

Maddern said the first meeting was to "build a relationship and build trust" to see if someone was a good match.

"In the meeting they will discuss what type of financial situation you are in, what you do for a job, your family, what are your hobbies. Then they will share 'their story'.

"This is basically just them saying how they were struggling financially, how they joined, so they could support their family and secure a better future for themselves and their family, making over six figures a year and how they became financially independent, and you can do the same."

She was given "homework" which was to write a list of 1000 things she wanted to do in life. The next meeting was one or two weeks later.

"In this meeting they go a bit more into depth about what you will be doing but are still very vague. In some instances they might tell you the name of the company in this meeting but it's unlikely," she said.

"In this meeting I was basically told that I would be working for myself, and selling and buying my own products."

The products were household goods which she said were priced much higher than at a regular retailer.

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"After this they then gave me a book to read to continue the recruitment. They gave me the book The Business of the 21st Century by Robert T. Kiyosaki.

"I decided to discontinue the recruitment when trying to search for a summary of this book and instead finding a video explaining the whole processes and how you can make money by joining an MLM but not nearly as much as they are advertising."

Once she pulled out of the mentorship her friend stopped talking to her.

Another woman and her husband were convinced to get involved with Amway in 2019 after a few of their friends were a part of it, and they saw their social media posts about all the valuable things they learnt at mentorship sessions.

"They invited my husband and I to the Tuesday evening mentorship nights at Massey University, which at first seemed really valuable. They [talk] about delaying gratification, working towards your future, becoming an entrepreneur."

But after attending a few sessions she realised it was essentially the same presentation every week, just presented by different people. It cost $5 per person to attend and there were at least 100 people attending every week, she said.

They were then told to pay for the Team Mak podcast subscription. Team Mak is run in New Zealand by Jono Rowe, who also runs the Legacy Leadership Program with his wife, Kirsty.

"The podcasts themselves are quite good and motivational. But then they also said we need to sell a few hundred dollars of things from the Amway catalogue every month, and we are encouraged to sell to others too."

People were not allowed to sell the Amway products unless they were signed up to the mentorship programme by Team Mak.

A few months later, after realising they were not going to make money selling products, the couple cancelled their subscriptions and stopped attending. She estimated they had spent $200 in three months with the company.

"From the Massey University Tuesday sessions we went to, it was so obvious that they prey on university students, young people and those who are finding it hard to find a job or those who might not have many friends.

"They make it sound like an exclusive club and that it's a privilege to be let in."

The mentors also checked all members' financial statements to see if they could join, she said.

Stuff

Multi-level marketing is where a person representing a company earns money by promoting and selling products, but also by recruiting others to sell.

A Wellington man agreed it was like people in the programme had been "brainwashed into thinking that they will be 'financially free' by 30".

"I pulled out but couldn't get my man [friend] out.

"They portray this image of becoming independent and financially free by joining the 'mentorship' program. Where in reality it's a cover-up for a company called Amway which works in a hierarchy format. But they tell you it doesn't."

Another person Stuff spoke to said he still had two friends in the programme but decided to leave after he attended a conference.

"My moment that told me the entire thing was a scam was when they brought out this speaker in a professional studio that spoke almost exactly like a cult leader."

Neither Rowe nor Amway have responded to a request for comment. Stuff has emailed Amway and Rowe and Team Mak and approached them via Facebook.

Bodo Lang, professor of marketing analytics at Massey University, said MLMs gave individuals a fair amount of freedom in terms of where, when, and how they worked.

"This perceived freedom, coupled with the often heavily promoted possibility of making a lot of money, entices consumers to engage in such schemes," he said.

"Flexibility and high earning potential sound too good to be true, particularly in the middle of a cost-of-living crisis. So at present, it is likely that many New Zealanders are falling for such schemes.

"In other words, those who need money and a stable job the most, are often left high and dry after being victims of such schemes."

Kath Dewar of sustainable marketing company GoodSense said it could be hard to tell the difference between a legal MLM and an illegal pyramid scheme.

"There's an onslaught of MLMs trying to take advantage of people made vulnerable by our broken economic system. The online world makes all this murkier. Generally with MLMs only the top couple of tiers make any money - and that can be millions of dollars, in companies with billions in turnover. "

But it was unlikely anyone joining in the lower tiers was going to make any money, and it was easy to end up out of pocket, with broken friendships and boxes of unwanted stock, she said.

Before committing to an MLM, Dewar recommended doing your own research on the company, not spending anything on an MLM that you could not afford to write off and being aware of what you were being told by others at the company.

"Even the friendliest-sounding MLM is messing with your mind to take your money. They all dangle a few top-tier people upfront in their marketing, with the promise of riches like theirs. And they all use sophisticated mind control to get and keep you hooked.

"There are books written on how Amway uses the same kind of techniques cults do. Like pokies or the lotto, MLMs prey on our vulnerable hopes and dreams, that we might get lucky, and our addictive tendencies as humans.

"In essence all MLMs use the science of how our minds work, to make the company owners rich. They don't care if you stay poor so long as they get ahead."

The Commerce Commission monitors the Fair Trading Act. It currently has three cases before the courts and one investigation under way into the alleged promotion of pyramid schemes.

"In the past 12 months, the Commerce Commission has received two inquiries related to Amway," a spokesperson said.

"On assessment of the information received, we have decided to not investigate this matter."