Be Your Own Boss. Start a "Business."

There's a job scheme that's been annoying me lately.  The most direct way to introduce it is to recall those "summer job" ads for Cutco knives.  Via Vector Marketing, CutCo makes most of their sales through "independent sales representatives."  Here's an article by Scott Schlimmer that explains his experience with Cutco.  He got an offer in the mail when he was 18 years old which promised him an $18 an hour job.  He bought the required $200 sales kit and then was instructed to practice selling to his "nearest relatives and family friends."

His account is worth quoting because it outlines the basic model that I want to discuss:

"My parents, relatives, and family friends did buy Cutco. They did not buy because they were wowed with the products. They bought because I was selling to them, and they were supportive. This is what Cutco preys on. Bring in young kids. Use these kids to make sales to the kids' family and contacts. 

Once you have sold to all of your family and friends, what do you do then? Vector does not give you leads. As if the $100+ dollars each family member has spent on knives is not enough, Vector then has you pull your leads from them. You ask each person for 10 leads...

The seller does not get paid just to show you the knives. There is no $18 per hour. You get paid a minimum of $18 per appointment. However, it is extremely embarrassing to request the minimum, because that would indicate that your commissions are low."

In researching this, I've learned that this is called network marketing or affiliate marketing or home-based business marketing or just direct selling.  Not surprisingly, wikipedia has some pretty clear descriptions going on.  There's a fine line between this model and an illegal pyramid scheme.  Here's how it usually works:

1. Use the language of entrepreneurship to lure students and low income workers in.  Phrases like "start a business," "be your own boss," "flexible work schedule," or promises of high hourly wages or commissions are common.  This angle is obviously very appealing to people whose other employment options may be low-paying service or retail jobs.
2. Make the new contractor purchase a sales kit.  Could be $99, could be $400.
3. Train the contractor in how you want them to sell: what to say and what to purposefully omit.
4. The contractee makes appointments through his social network to "demonstrate" products and make a high pressure sales pitch.
5. His friends and family buy products because they know and like him and want to help him.
6. Not surprisingly, there is a lot of markup and most of the profits go to the company.

Sure, lots of companies have salespeople.  But there are a few things very wrong about network marketing.  Most obviously, it commodifies relationships.  Would you buy $100 knives if you saw them in the store?  Probably not.  Would you buy $100 from your nephew Joey who just spent the last 45 minutes earnestly going through his sales script in your living room?  Probably yes.  It hijacks the trust between people.  It's not word of mouth if someone else is putting the words in your mouth.  When people are able to avoid traditional advertisements, marketing people find other ways. 

Once someone sells knives to everyone they know, CutCo has no obligation to that contractor.  She has served her purpose by exhausting her social network.  From a labor perspective, this is a brilliant strategy.  Salespeople don't get paid for training and have to buy a sales kit or put down a deposit to even start, so even if the person sells nothing the company still has $100.  Unless she sells more than $1000 of merchandise, her commission is 10%.  That might almost cover the cost of the deposit - a triumphant break-even, unless you count gas money.  One of the forums had a post from a CutCo corporate employee boasting that their knife factory in New York was unionized.  Seriously?  You don't see any inconsistencies there?

I'm not trying to pick on CutCo alone.  They are just a good, well known example.  Amway, Primerica, Tupperware, and Avon are others that operate like this.  When I search for these companies, I get lots of hits of long angry forum threads screaming "IT'S A SCAM!!"  Well, obviously I think so too, but they're not doing anything actually illegal. Some of these companies include a "multi-level marketing" aspect where salespeople have to recruit other salespeople, coming even closer to a pyramid scheme.  When it comes down to it, these companies are not offering real jobs and are just being exploitative and it's up to you to realize that.  This is where the deceptive recruiting comes in.

"What would the opportunity to own your own business mean for you? 
An opportunity to make more money, be your own boss, spend more time with your family, give back to your community, create a legacy for your children, or build something uniquely your own." (Amway recruiting materials)

Amway's four founding principles are Freedom, Family, Hope, and Reward.  Primerica's slogan is "Freedom Lives Here." At the end of one of their promotional videos, one fine print statement says "the images of luxury travel, homes, and purchases are not intended to demonstrate the earning potential of typical RVPs/Representatives."  These companies adopt the ol' familiar American rhetoric of taking initiative and not being a drone to shepherd you into a position where you probably will make less than a drone and compromise the integrity of your personal relationships to do so.

your life as an amway salesperson.  results may vary.

Sure, you make money - By taking it from people you know and then forking over most of it to some lame company.  I've been particularly angry (can you tell...?) about this since encountering a few people I know who are talking excitedly about "building their business" or being "promoted" after recruiting new people.  This is not starting a business.  This is marketing someone else's business.

One more point.  With Amway, you can buy anything you can think of online through an "independent business owner" and he will get a commission from it.  The logic is, if you're buying something anyway, like toilet paper, why not give my buddy Jonathan a cut of it?  Your desire to achieve the feeling of helping someone out may trump your usual comparison shopping.  And worse, it will further confine you to buying into Amway's way of doing things.  Buying a t shirt through your your buddy Jonathan's Amway products because you want to help Jonathan effectively blocks you from filling that need by buying a t shirt produced locally, sustainably, from someone you know, etc.

Now I'm all riled up.