Do Multi-level Marketing Schemes Help Women?

Like all good sales people Rachel* speaks mostly in jargon and is vague when pressed for details. Her account is currently inactive, but for the past four years she’s worked as a freelance consultant for Oriflame Cosmetics in Medan. She makes it sounds like a great proposition for working women in Indonesia: “If you work hard then you can go abroad once a year for a free trip and you get a car. Oriflame also teaches you how to improve yourself and grow your own business.”

Oriflame Cosmetics is a Swedish company that has been in business for 45 years, and operates as a multi-level marketing scheme, or MLM. This is how it works: men and women sign up, not only to sell beauty products, but also to recruit others to work as consultants, creating a sales chain that looks like a pyramid. Oriflame has some three million members across 60 countries.

But Oriflame claims to be about so much more than just makeup; it says that it’s really in the business of empowering people to make their business dreams come true.

“We believe in dreams. A dream is individual and personal,” it gushes on its website. “Oriflame is, and always has been about fulfilling dreams. This is what we do. Every day. For people all over the world.” The company also pitches itself as a staunch believer in sustainability and helping the “most vulnerable in society”.

Being a part of this involves signing up to be a consultant. In Indonesia, this means that you get a salary and money from the products you sell, and the attractive prospect of financial security for women who may otherwise struggle to earn an income.

Limited opportunities

According to its 2016 Annual Report, Oriflame’s operating profit from Asia and Turkey skyrocketed from 9% in 2010 to 44% in 2016. Indonesia, along with Turkey, China, India, Mexico and Russia, is identified as a strategic market in the company’s global operations.

Rachel is an example of the kind of person that Oriflame appeals to. She’s struggled to find work since graduating with a degree in communications from Universitas Islam Sumatera Utara (UISU) in 2009. She’s not alone; according to data from the World Bank, there are 7.2 million people unemployed in Indonesia. She has a four-year-old daughter and, until recently, her husband worked outside the home; even if Rachel could find a job, the logistical and financial burden of arranging adequate childcare would place a strain on the family. It’s what makes Oriflame seem like such a good fit—it allows her to work from home and earn money while taking care of her daughter.

Rachel and her husband have both struggled to find work in Medan which is why Rachel turned to Oriflame. Credit: Teguh Harahap

But information about the actual sign-up process on Oriflame’s Indonesian website is sparse and confusing. According to Rachel, signing up as an Oriflame consultant in Indonesia requires an initial payment of IDR50,000 (USD4), plus the purchase of a welcome pack which starts at IDR119,000 (USD8). This comes with IDR200,000 (USD14) worth of starter products and a “free” gift, which in Rachel’s case was a handbag. Consultants then need to purchase more products to get an Oriflame account, which allows them access to free online business and marketing tutorials, as well as in-person seminars at Oriflame’s Medan offices. Oriflame produces a new catalogue of beauty products every three weeks.

Buying new products costs between IDR200,000 (USD14) to IDR900,000 (USD63) every month; the more you buy, the higher your level within the company, and the more you earn per recruit. It’s a potentially significant amount in a country where, based on figures from the World Bank, 27.7 million live in poverty and the median starting salary for a university graduate is IDR3 million per month.

The rate of return is also not particularly encouraging. At the time of writing, a lipstick is priced at IDR129,000 (USD9) online, and sellers are not allowed to mark up the price. Consultants earn between 10%–30% from their sales, depending on their status within the company and how many people they recruit. All in all, they tend to make between IDR20,000 (USD1.50) to IDR270,000 (USD18) in profit every month depending on the amount of products they purchase. At Rachel’s level, in the “Business Class” division, she had to pay IDR900,000 every month for new products.

According to Rachel, many who have signed up to Oriflame don’t try that hard to sell anything. “I use the products for personal use. You can sell them or give them to your friends and family and let them use them,” she says.

How, then, does anyone make money? Once asked, Rachel enthusiastically launches into an explanation of the second phase of the company’s marketing strategy: recruitment.

Consultants are encouraged to recruit others to sign up as Oriflame consultants. The company promises that doing so will help with “increasing your earnings” and also “developing your beauty, business and management skills through Oriflame Academy training courses.” Rachel explains that she recruits others by posting Oriflame promotions on Twitter and Facebook pages, but is reluctant to engage with the economics behind this. When asked how much she earns per recruit, she’s at first evasive: “It is not about the money. In Islam we are duty bound to help people to better themselves and get rewards.”

“They tell us that if people ask why the base salary is so low we have to explain that they need to work hard to make more money”

When pressed further, she explains that Oriflame’s base salary structure—which starts at around IDR100,000 (USD7)—is also tied to the number of people you’ve recruited. The more active consultants you recruit, and the more people they recruit, the more your base salary increases. The most Rachel has ever made in a month is IDR1,000,000 (USD70).

Considering the IDR900,000 she had to pay upfront for the products, it still doesn’t seem like a good deal. But Rachel isn’t necessarily being disingenuous; she’s been well-coached by Oriflame to make the scheme sound attractive. Rachel explains that the free training seminars push the women to work hard: “They tell us that if people ask why the base salary is so low we have to explain that they need to work hard to make more money. The trainers explain that if we are not diligent then we won’t make any money. The people who are successful are the ones who build networks.” “Building networks”, of course, refers to recruiting more members.

The glamour of success stories

For those struggling to increase their income, there are role models to look up to. Vonita Bermana Wickasono is a big success story for Oriflame in Indonesia. Once, at a conference for Oriflame’s biggest stars, the company proclaimed her its sixth best consultant in the world.

“I decided to resign from my job when my husband had to go and work in Kalimantan. So I had to choose between going out to work [in Jakarta] and leaving my children or resigning from my job,” Vonita says in a YouTube video where she talks about how Oriflame changed her life.

For aspiring earners like Rachel, Vonita’s videos are amazing. They depict a life of ease and luxury: getting a foot massage at a fancy salon while working on her laptop, receiving a free car from Oriflame as a reward for her sales portfolio, taking free trips to the Leaning Tower of Pisa or the River Thames on the company’s dime.

To achieve this, Vonita must be either selling huge amounts of makeup every month or recruiting large numbers of sellers. But something doesn’t quite add up.

“Almost all of these schemes tell you that you can make money by just recruiting three or four or five, let’s say five [new sellers]. Then you let the five do their five which gives you twenty-five,” Robert Fitzpatrick, President of the anti-MLM consumer organisation Pyramid Scheme Alert, told CNBC in 2013. “What they don’t show you is that you can only do that thirteen cycles, and you would exceed the population of the earth.”

Spending to earn

Remaining an active Oriflame member also comes with a monthly cost. This is where Rachel’s dreams hit a wall. Her husband, who was working as a casual labourer for a construction site, kept getting hurt as he was not provided with any safety equipment. Fearful that he would one day seriously injure himself or be killed falling off a roof, Rachel begged him to quit.

“Without his salary, I can’t afford to buy IDR900,000 [worth] of products every month so my account is now inactive,” she says. “Vonita was lucky when she started because her husband was working in Kalimantan and she used his salary to pay for the products. She was never stuck.”

The implication… is that failure is the result of shortcomings on the consultants’ part, and not a reflection upon the company’s business model

Rachel isn’t the only one who has faced problems. When asked if her friends have been successful selling Oriflame products or recruiting new members, she admits that none of them have, but insists it’s because they didn’t work hard enough, didn’t have the right attitude, or were “just not right for Oriflame”. Oriflame’s seminars heavily emphasise the need for hard work; Rachel recounts a session she attended where she was told that consultants were “lucky” to have access to the online training course (which they had paid for upon signing up) and that “you should spend all your time in front of your laptop studying until your hair falls out”. The implication, it seems, is that failure is the result of shortcomings on the consultants’ part, and not a reflection upon the company’s business model.

Oriflame’s main office in Medan is packed with customers at the weekends. Credit: Teguh Harahap

New Naratif visited the Oriflame head office in Medan on a Saturday. It was packed with members and the front lot was a sea of cars and motorbikes. The building houses a “Beauty Room” where members can try products and learn how to use them, a sales counter where they can buy makeup, and several back rooms used for seminars. On the day we visited, there was a free seminar for consultants on giving facials. The cashier counters, where sellers queue to pay for their new products and membership fees, were by far the busiest part of the whole enterprise.

When New Naratif asked to speak to an Oriflame representative, a customer service staff member said that the head of Oriflame Medan was out of town giving a seminar in Surabaya. He agreed to call and fix up an appointment in the next few days, only to send a text message saying that he would need to reschedule. Follow up calls, over several days, to try and confirm a meeting went unanswered.

Multi-level marketing: a good opportunity?

For women in developing countries with limited opportunities, multi-level marketing schemes like Oriflame’s seem like a path to success and a better life; a way to achieve financial well-being while also fulfilling responsibilities at home. Endorsements from success stories like Vonita add to the allure. Efforts to contact and interview Vonita went unanswered even while she continued to be active uploading Oriflame promotional videos on to her Facebook page.

Serious doubts remain over whether such schemes really empower and benefit their participants. Large amounts of money—sometimes beyond the means of the women who sign up—are required up front, with meagre financial return. Based on the figures put forward by Rachel, Oriflame sellers only earn a small profit on their sales even if they move huge quantities of product every month, and constant recruitment is simply not feasible as a sustainable way of raising one’s salary.

“MLM makes even gambling look like a safe bet in comparison”

In fact, studies suggest that almost no one makes any money out of a multi-level marketing scheme; a scathing report published on the US Federal Trade Commission’s website stated: “Failure and loss rates for MLMs are not comparable with legitimate small businesses, which have been found to be profitable for 39% over the lifetime of the business; whereas less than 1% of MLM participants profit. MLM makes even gambling look like a safe bet in comparison.” The companies themselves might do well, though; in 2016 Oriflame’s gross profit totalled EUR882.9 million, or almost USD1.1 billion.

Rachel can no longer afford the IDR900,000 a month required to be an active member of Oriflame. She’s been working on another plan: building a new business selling clothes online. It’s work that she enjoys, and she says it’s going well. But she’s still not ready to give up on Oriflame’s promise.

“I’m just trying to make my clothing business successful so I can save as much money as possible,” she says. “Then I can use the money to go back to Oriflame.”

*Name changed to protect her identity.

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