How COVID-19 Paved the Way for Multi-level Marketing Companies3 min read
If there’s one thing we all remember about COVID-19 is the long grueling lockdown period!
The stay-indoors order was extended twice and lasted for over six months. During this time, many people lost their jobs or chose to stay home rather than risk being exposed to the virus during their commute or in public places such as restaurants and grocery stores.
The result was a significant drop in sales for brick-and-mortar retailers. This created an opportunity for internet companies to step in and fill this void with their e-commerce platforms.
In particular, multi-level marketing companies were able to take advantage of this opportunity because they already had large online communities built up when the COVID outbreak began.
These companies were able to leverage this existing audience to drive sales during this time period by hosting sales events online via social media channels such as Facebook Live or Instagram Stories.
How Do MLMs Work?
With so many people staying home, there was an increase in online activity that fueled multi-level marketing companies (MLMs). MLMs are typically characterized by products that are sold through direct sales representatives who get paid for each purchase made by their downline.
For example, if you sell a product through Amway or Herbalife, then you make money from those purchases plus any bonus money earned from recruiting other sales representatives (who also get paid from those same purchases).
The restrictions also caused many people to stay indoors more often than usual which led them to spend more time on their phones than usual.
One of the companies to benefit from the new regulations was Avon. Since they already had a strong online presence, they were able to use this opportunity to their advantage by offering new products and services that would appeal to people who were stuck inside their homes.
Amway also promoted itself as an “alternative” way of making money during economic downturns. This helped them gain more followers and create more sales opportunities with less competition.
As time went on, other companies started using these same tactics to their advantage as well. Some examples include Tupperware and Mary Kay Cosmetics (MLM).
A survey conducted by the Direct Selling Association (DSA) on July 29 found that 51% of its members reported a positive effect from COVID-19 on their 2020 revenue. In a later survey, 59% said the same.
Statistics: Most MLMs Admit COVID-19 Had a Positive Impact
The DSA is quick to point out that this is not a scientific study, but rather a survey of 51 companies representing 25 different companies. However, it does provide some interesting data on how the pandemic has affected MLMs and other direct selling companies.
The DSA commissioned an online survey of its members in early June and again in early July to gauge the impact of COVID-19 on their business. In both cases, the question asked was “How has COVID-19 impacted your business?” The answers were:
- Negative: 1% (1/51 respondents)
- Neutral: 5% (2/51 respondents)
- Positive: 44% (22/51 respondents)
- Very Positive: 32% (16/51 respondents)
Despite complaints about the structure and legitimacy of MLMs, COVID-19 was indeed a time to blossom.
Multi-level marketing companies sell their products directly to consumers through independent contractors who sign up as sales representatives. This business model allows them to avoid paying taxes and other fees that would be required if they were classified as a corporation or a limited liability company (LLC).
Author Bio: Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of mlm merchant accounts. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie with ice-cream on his backyard porch, as should all right-thinking people.