The Changing Landscape of MLM Beauty Brands From MLM to Affiliate: Can Beauty Brands Boost Sales with New Models?

The multilevel marketing (MLM) business model is currently undergoing significant transformation. Over the past three months, notable beauty brands such as Rodan + Fields, Seint Makeup, and Beautycounter have all shifted away from the MLM structure that once propelled their success.

Rodan + Fields transitioned from MLM to an affiliate-commission model shortly after securing $75 million in funding. Similarly, Seint Makeup recently announced its move away from rewarding representatives for recruitment, focusing solely on sales commissions. Beautycounter, following a failed $600 million investment from The Carlyle Group, is still months away from its relaunch after being saved from foreclosure by its founder and CEO, Gregg Renfrew. Despite these changes, Beautycounter products remain available in Ulta Beauty stores nationwide.

This wave of transitions raises critical questions: Why is the MLM model faltering, and can beauty brands that were built on this model thrive in the competitive retail and affiliate landscapes? BeautyMatter consulted industry experts to explore the future of MLM beauty brands.

The Rise and Decline of MLMs

The MLM model has long been intertwined with the beauty industry. One of the earliest MLM-style businesses, the California Perfume Company, later became Avon. The MLM model involves selling products through a network of independent sales representatives who are encouraged to recruit new members into their teams.

However, MLMs have faced growing criticism for being inherently exploitative, designed to benefit only a small percentage of individuals at the top. As Robert L. FitzPatrick, author of Ponzinomics: The Untold Story of Multi-Level Marketing, explains, “The income promise is not about selling products but enrolling people in the endless recruiting chain.” Critics argue that MLMs are essentially pyramid schemes, where only a few at the top can profit, often at the expense of others.

Proponents, however, defend the MLM model as offering autonomy, flexibility, and low start-up costs, providing entrepreneurial opportunities for those who might not have had them otherwise. The model is seen as scalable, with representatives’ earning potential growing as they recruit more members without a corresponding increase in workload.

MLM beauty brands like Avon and Mary Kay have seen significant success with this model. Avon is one of the largest direct sales companies globally, operating in over 100 countries. Brazil became Avon’s largest market, surpassing the United States in 2010, with other key markets in Poland and Latin America. In 2022, Avon generated approximately $1.33 billion in revenue from Latin America alone. Mary Kay, with over 3.5 million independent sales representatives globally, reported $2.7 billion in revenue in 2022.

The success of these MLM giants likely influenced Rodan + Fields’ decision to adopt the MLM model in 2007 after its founders, Dr. Katie Rodan and Dr. Kathy A. Fields, bought back the brand from Estée Lauder. They believed that direct sales via network marketing would better promote their products than traditional retail.

Since relaunching under the MLM model, Rodan + Fields has become a prominent MLM brand worldwide, with a $4 billion valuation when private equity firm TPG acquired a 25% stake in the company for $1 billion in 2018. However, underlying issues were evident. A 2016 income disclosure statement revealed that 90% of Rodan + Fields members earned less than $200 per month.

The brand faced further challenges last year, including layoffs of 75 employees at its San Francisco office. Moody’s downgraded Rodan + Fields’ credit rating to C, citing declining revenues and earnings, with revenue projected to fall to $600 million this year from $870 million in 2021. TPG increased its stake to a majority share for an undisclosed amount at the end of 2022.

In a recent press release, Rodan + Fields announced an additional 100 job cuts as part of its corporate restructuring and its move away from the MLM model. The brand is transitioning to a simplified business model, focusing on affiliate marketing to reach new customers. The new affiliate program, effective September 1, will provide existing consultants with higher commissions on customer sales and product discounts, while eliminating recruitment incentives. The brand aims to capitalize on emerging e-commerce platforms like TikTok Shop and Amazon.

“We are simplifying our business model to make it easier for customers and consultants alike to discover, share, and access our innovative products and expertise,” the company stated.

Rodan + Fields is confident that these changes will enable them to expand their impact and continue offering meaningful earning opportunities to their consultants. The company also secured an agreement with its minority investors for up to $75 million in funding to strengthen its financial position.

Seint Makeup followed suit on July 2, announcing on Instagram that it would also transition from MLM to an affiliate-commission model. Effective October 1, Seint artists will no longer receive compensation for recruitment, instead earning 25% to 45% commissions on sales, with additional bonuses for qualifying sales levels.

Founded in 2013 by Cara Brook, Seint Makeup gained popularity on TikTok with its “demi method,” a makeup technique similar to color correcting that achieves an even-toned complexion without foundation or concealer. According to a 2023 income disclosure statement, 46% of Seint artists in the United States earned an average annual income of $77. Seint’s direct selling model was unique in that recruitment was optional, with most artists focusing solely on customer sales.

With these significant shifts away from MLM, the beauty industry is witnessing the evolution of business models as brands adapt to new market realities and consumer behaviors. The future success of these brands in the competitive retail and affiliate marketplaces remains to be seen, but their ability to pivot may determine their longevity in the beauty industry.

Why MLMs Are Pivoting Their Selling Strategy

Multilevel marketing (MLM) companies are rethinking their strategies, increasingly shifting towards affiliate models and omnichannel partnerships. This shift is driven by the pressures from e-commerce, social media, and competition from beauty retailers. The affiliate model represents an evolution of direct selling, allowing MLM brands to better engage customers on their own terms. This strategic pivot reflects the strain on the traditional MLM model, as companies struggle to remain relevant in a changing market.

One example of this shift is Beautycounter, which initially thrived on the direct selling model through independent distributors. The company expanded into brick-and-mortar retail with stores in Manhattan, Denver, Los Angeles, and Nantucket. However, in April 2024, Beautycounter made a dramatic shift, terminating its entire distribution network and announcing the shutdown of its operations. The Carlyle Group later confirmed that the company was sold back to its founder, Gregg Renfrew, who planned to relaunch the brand later in 2024, albeit in a potentially different form.

Avon, a longstanding beauty brand, is also undergoing a significant transformation. The company has embraced an omnichannel approach, combining retail, social selling, online marketplaces, and AI-powered technology to modernize its business. Avon entered new retail spaces, including Superdrug in the UK and Naima Allscent stores in Italy, and launched on Amazon. Angela Cretu, Avon’s former Global Chief Executive Officer, emphasizes that the affiliate model remains a form of direct selling and is key to staying relevant in today’s market.

However, the biggest challenge MLMs face is recruitment. The rise of anti-MLM documentaries, podcasts, and social media content has made consumers more aware of the risks and false promises associated with MLMs. Younger generations, particularly Gen Z and Gen Alpha, are increasingly skeptical of MLMs’ claims of financial freedom. This growing awareness, driven largely by women who have been targeted by MLMs, is making recruitment more difficult and putting additional pressure on MLM companies.

As the anti-MLM movement gains momentum, MLMs are seeing decreased sales and struggling to maintain the “momentum” they rely on for success. The reputational and social risks associated with MLMs are becoming more apparent, leading many women to avoid these schemes to protect their social networks.

While MLMs are unlikely to disappear entirely, they are being forced to adapt to the changing landscape. By adopting omnichannel strategies and developing affiliate programs, MLM brands are trying to survive in a competitive market where customer loyalty and engagement are key.

Source >> https://beautymatter.com/articles/mlm-beauty-brands-are-rebranding