MLM: Multi-level marketing companies promise part-time work that will bring in lots of money. But is it too good to be true?

• Author: Penrod, Emma

KIRK JOWERS ADMITS quite readily that when he was first offered an executive position at doTERRA, he had concerns about taking the job. The company was, after all, engaged in multi-level marketing, which Jowers suspected had a bad reputation for a reason.

After becoming the company's vice president of corporate relations and European markets, Jowers had a change of heart. Multi-level marketing, he says, is changing for the better--but some companies are adapting better than others.

Just as retail has struggled in recent years, multi-level marketing is also experiencing a slowdown. Some companies, including doTERRA, have continued to enjoy substantial growth--but mostly, Jowers says, because they have changed the way they think about how multi-level marketing firms ought to behave.

But bad actors--companies that often put their sales consultants in untenable and financial situations--do exist, Jowers says, and the difference is becoming increasingly stark. Sales consultants are increasingly informed and less financially dependent, allowing them to vote with their feet, and slowing sales may have trapped some companies in a cycle that continuously undermines their own consultants.

According to the Direct Selling Association, MLMs saw an average growth rate of 1.3 percent last year--though industry-wide sales have remained relatively flat around $35 million a year, says association COO Adolfo Franco. "Last year's sales picked up a little bit, but overall there has not been the growth that we have seen in the past," says Franco.

Part-time work?

Multiple factors are forcing direct selling to evolve and adapt to a modern retail landscape, but Franco and others in the industry believe the primary challenge for today's MLMs is full-time employment.

The fact is, Franco says, that the majority of direct sales consultants work part-time, seeking supplementary income. Of the 16.5 million people the Direct Selling Association estimates become involved in an MLM, only a million will sell full-time. So when the economy is doing well and most Americans see little reason to bring in supplemental income, MLMs tend to suffer.

Retail, which often relies on seasonal work to boost sales, sees a similar trend, says Franco, Though direct sales were once primarily a means of reaching far-flung or otherwise difficult-to-access customer populations, today, these populations can order--and compare prices and specifications--online as easily as everyone else. This forces companies that once focused on the social aspect of the business to drive sales and compete using the same raw metrics as everyone else--the quality of the product and the price.

Yet, the internet has also given rise to new outlets for direct sales, as well, says Franco. Facebook, in particular, has enabled sellers to reach more customers and fulfill orders faster. Social media sales, says Franco, are particularly attractive to young customers.

Utah, says Franco, has been a leader in terms of innovative MLMs. Utah was already regarded as an industry hub because of the large...