The realities of social sales companies

Make-up, clothes, fitness programs—your Facebook feed is probably jammed with people selling stuff. And some of those people make millions. 

But the TODAY'S TMJ4 I-Team learned that money doesn't come as easily as it might look.

These companies promise more time with family, a schedule you choose and a lifestyle you can only dream of,  but once people put their money into a company, sometimes they learn the reality isn't what they thought it was.

Janey Bukofzer lives in Racine now, but when she was an Oklahoma teacher, she had the same frustrations as teachers now protesting. She needed a second job.

"I could also make some extra money to supplement my teaching income," Bukofzer said.

Bukofzer joined a multi-level marketing company called Lipsense.

Most multi-level marketing works like this: People buy into the company as a distributor, they get discounted materials, and sell them- hopefully for a profit. If they bring other distributors on, they get commission on their sales.

Bukofzer said buying in is just the start of the costs.

"I had to think about how was I going to package, how was I going to market myself, social media," she said.

Bukofzer built a team, but said she had to buy about $400 a month in inventory to even get her commission check.

"It was a little bit different than my expectations," she said.

Marquette University Marketing Professor Brian Spaid warns most people don't know what they're getting into.

"Half of individuals quit within the first year. And the number rises to 90 percent after 5 years," Spaid said.

He said people can profit, as long as they take the marketing part of multi-level marketing seriously.

"They need to think really strategically, otherwise they're bound to fail," Spaid said.

The Direct Selling Association—or DSA—estimates in 2016 there were almost 385,000 people in Wisconsin in direct sales. The association reports those Wisconsinites made more than $645 million that year.

Melissa Caira- Bukofzer's neighbor- is one of those people.

"I think they need to ask do they have the time to commit, why are they doing it," she said.

Caira started selling Thirty-One gifts when she went through cancer treatment and couldn't go back to work.

Now, she has a team, has earned vacations, and donates bags to cancer patients.

The company tells the I-Team that's not a typical outcome.

"You earn a little bit of extra money for a trip to Disney, to fix your car, to pay your bills, to get some braces on your kids," explained Sara West from Thirty-One Gifts. "Those kinds of things are more realistic."

Thirty-One and Lipsense, whose parent company is SeneGence, belong to the DSA, which has a code of ethics for members. 

The code requires companies buy back products from people going out of business for 90 percent of their cost. 

"At retail was worth about 3,000," said Bukofzer of her remaining inventory. "I think probably what I'll make on it is closer to a thousand."

When Bukofzer closed her business, she learned from other Lipsense sellers the company has strict rules for buying back products, and getting the money can take months. 

 

Now she's trying to sell what's left quickly at a low price.

"It's a hard lesson to learn, you know, that I could have that money for my family," she said.

There are many more of these companies out there and they all have a unique structure and different levels for buying in.

Lipsense and Thirty-One are around $50 each, but a clothing multi-level marketing company called Lularoe tells us their lowest buy in is about $4,000. The woman at Thirty-One recommends checking with the direct selling association before getting involved with a company.

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