Direct Sales Growing in Popularity, Concerns

Admin   |   08 September, 2015   |   594   |   3980

In 2011, Annamary Burton of Little Rock was an attorney for the Arkansas Board of Review and wanted to make some extra cash.

Her mother suggested Burton start selling Mary Kay cosmetic products.

“So I signed up, and just worked it,” said Burton, 43. “And it’s been great for me. I love the company.”

Burton is not alone. The number of people who are involved in direct selling, or multi-level marketing, has been climbing since 2011. The direct sellers pitch everything from jewelry to face creams to vitamin supplements, and usually their network of friends and family are the first to be pitched.

Multi-level marketing companies typically offer two ways a salesperson can make money: selling products that aren’t sold in stores or recruiting others to become a sales representative for the company.

The Direct Selling Association reports that 18.2 million were involved in direct selling in the United States in 2014, which is up 8.3 percent from the previous year. And the sales in the U.S. were $34.5 billion, up from $32.7 billion the previous year. In Arkansas, 216,489 people were involved in direct selling in 2014, which accounted for $210.6 million in sales, according to DSA.

The number of people who have been recruited to sell for multi-level marketing companies, though, has raised some concerns from critics of the industry.

“The message of these multi-level schemes is always the same,” said Robert FitzPatrick, the president of Pyramid Scheme Alert, a nonprofit consumer education group based in Charlotte, North Carolina. “It’s a utopian message based on the endless chain trick, so no matter how many people are involved at any moment, they are all promised unlimited income potential.”

He pointed to the recent example of the court action taken against the multi-level marketing company Vemma Nutrition Co. of Tempe, Arizona.

Last month, a federal judge in Arizona “temporarily halted an alleged pyramid scheme” being run by Vemma, according to a news release from the Federal Trade Commission.

The FTC wants the judge to order a permanent injunction against Vemma, which sells health and wellness drinks.

Vemma claimed its direct sellers, or members, “can earn substantial income by enrolling others either as affiliates or as customers, but Vemma focuses on recruitment rather than retail sales of its products to generate this income,” according to the news release. “The vast majority of participants make no money, and most of them lose money.”