Among Filipinos, there’s a common jest that when a friend sends you a text asking if you’re open-minded about a business opportunity, it’s essentially the sign to promptly disregard, delete, and permanently block the message (or friend). The line of messaging almost often leads to the same place: the promise of wealth and opportunity, as long as you help them sell their range of wellness and beauty products and recruit more people to do the same. Once you buy into the idea, you become part of that cycle, too. All in a day’s work for your average MLM, short for multi-level marketing.
The multi-level marketing structure has become a prevalent business model all over the world, and the Philippines is no exception. Also known as the direct selling model, it involves a hierarchical structure of individuals who receive compensation for their sales. They will also be compensated for the sales made by the distributors that they recruit. MLMs promise their sellers financial freedom and flexible working hours, making it an attractive option for those seeking out entrepreneurial opportunities. In order to be considered an MLM company, they should not have physical or e-commerce retail shops; instead, all purchases and repurchases should be made through accredited distributors.
In the 1940s, there were patio parties, where dealers would demonstrate Tupperware products to housewives through drinks and parlor games that showed how durable the products were.
The direct selling model started in the West in the early 20th century, with women entrepreneurs like Madam CJ Walker, known as the first Black female self-made millionaire in America, pioneering a pyramid structure in her company. Walker’s model gave Black women job opportunities where they would otherwise be consigned to work as maids, cooks, and laundresses. The modern MLM structure took form in the 1940s, when companies selling nutritional products and cleaning supplies paid commissions to sellers who not only moved products fast, but also recruited other individuals to sell as well. (Today, these are known as downlines.) In that same decade, a woman named Brownie Wise started patio parties, where dealers would demonstrate Tupperware products to housewives through drinks and parlor games that showed how durable the products were.
Many of these elements still exist in many successful MLMs today. In the Philippines, MLMs grew in popularity in the 1990s after these companies saw the potential of the country’s consumer market. The model also appealed to Filipinos from diverse backgrounds, especially women who wanted to augment their household incomes and find alternatives to traditional employment.
Cosmetics company Avon is one of the earliest and most popular brands to be known for direct selling. Avon would distribute product booklets that included cosmetics, underwear, and fragrances. At the end of each booklet is an order form that buyers could send to their Avon lady to purchase.
Since then, the Philippines has become home to several direct-selling companies that offer a range of personal and homeware items. As many of them continue to expand their operations, it’s clear that the Philippine market shows significant growth potential for MLMs. The Direct Sellers Association of the Philippines currently has 26 member companies, with more than 2 million network marketers nationwide.
At the beginning of the pandemic, it had been a struggle for beauty consultants to reach out to sellers online. Younger distributors adapted easily, but their older sellers struggled with doing demos via video call.
The COVID-19 lockdown years, however, became a test of survival; without the ability to demonstrate products face to face, how would they market their products to potential buyers and downlines? Wellness brands grew in demand due to the prevalence of COVID-19, Amway country manager Leni Olmedo said in an interview with Philstar.com. “Conversely, spending for color cosmetics and luxury skincare has been deprioritized in favor of essential purchases,” Olmedo added.
For cosmetics companies, especially those in the direct selling business, there was a need to update the format in order to ensure survival. For American direct-selling company Mary Kay, this meant opening the MLM model to something new: e-commerce.
Mary Kay Philippines country head Criscy Camacho says that at the beginning of the pandemic, it had been a struggle for beauty consultants to reach out to sellers online. Younger distributors adapted easily, but their older sellers struggled with doing demos via video call. To provide additional support to sellers, the brand launched a new system, called the Beauty E-Pass, in the Asia Pacific this year. The online store is a portal for customers to order products, while the order fulfillment is done at the Mary Kay warehouse. Customers are only allowed to make purchases through a beauty consultant’s unique link. The advantage of having the Beauty E-Pass is that it takes a lot of administrative work from the beauty consultant, and also relieves them of having to stock up on their own inventory.
“That’s our way of introducing e-commerce now to their business,” Camacho explains. “There’s a lot of clamor now [for an e-commerce site], especially in the past two to three years during the pandemic. And we were very careful because it was going against many of the direct selling rules, so we had to set up certain ways to help them do their business.”
Despite the lockdown struggles, the industry seems to be on an upswing as consumer spending increases. Early in 2023, Avon Philippines introduced a new fragrance with socialite and actress Heart Evangelista as the face of the campaign. In March this year, Filipino direct-selling company Personal Collection set up shop in Malaysia, making it the first Filipino-owned direct-selling business to open in that country. Though the global brand does not usually have formal celebrity endorsements, Mary Kay Philippines recently signed actress and motivational speaker Rica Peralejo-Bonifacio as a brand ambassador.
Following global trends, skincare is becoming an in-demand product line for Filipino beauty consumers. Makeup, however, continues to be a hero product line among Filipinos.
For many successful MLM companies, it all boils down to how good the product sells, and how well the distributor evangelizes about them. The Tupperware parties attracted mostly housewives and mothers who spent a lot of time at home. In the Mary Kay experience, many of their distributors are company employees, government workers, and healthcare professionals who start by tapping into their workplace networks. Camacho notes how one of their sales directors (distributors who form their own team of beauty consultants) was an engineer whose downline are also co-engineers.
“The majority of [our beauty consultants] are already working,” Camacho says. “So they really do Mary Kay as a side hustle to augment their husband’s income or their own jobs.”
A significant part of the MLM model is taking time to demonstrate the products’ capabilities in person, but in the last few years, they have gotten more creative with marketing their products on social media. Though TikTok does not allow direct selling content on the platform, distributors can circumvent this rule by doing product features, reviews, and first impression videos instead. They direct customers to an outside link if they’re interested in actually purchasing the product for themselves.
The distributors’ personal interaction also serves as market research for MLMs to know exactly what consumers gravitate towards. Following global trends, skincare is becoming an in-demand product line for Filipino beauty consumers. Where in the ‘90s, skincare products in popular direct-selling brands were limited to toner, moisturizer, and sunscreen, other personal care items like serums and essences are now being offered to consumers. Makeup, however, continues to be a hero product line among Filipinos. Camacho says that their buyers still gravitate towards color cosmetics; their lipsticks, CC cream, and foundation are consistently some of their most in-demand products across the Philippines.
With so many retail options available today, direct selling is challenged with staying relevant.
The secret, perhaps, may not be in the model itself but in the product.
While Filipinos have long embraced the MLM model, many still perceive direct-selling companies with suspicion. There have been countless stories of individuals falling prey to pyramid schemes, an illegal business model that prioritizes recruitment over actual sales. Some have taken advantage of values like religious obedience and feminism to sell women to pyramid schemes. The pressure of forming downlines and maintaining a certain status within the company has left people with thousands of dollars in debt. The allure of wealth and success with a low startup cost doesn’t underscore the importance of sales as a skill, which may explain high attrition rates within the industry. A 2011 study by the Federal Trade Comission suggests that 99% of people who participate in MLMs end up losing money after expenses.
Even without the opaqueness of MLMs that make it alluring to fraudulent behavior, retail has changed so much in the last century. Shopping malls offer a range of local and foreign brand options. E-commerce boomed in the last few years due to persistent lockdowns. With so many retail options available today, direct selling is challenged with staying relevant.
The secret, perhaps, may not be in the model itself but in the product. There have been enough examples of successful MLMs who have practiced transparency in their operations and who emphasize the quality of their products, not their downlines. It’s a strategy that may also explain why direct selling works well in the Philippines, where communities are closely knit and personal testimonials are a huge buying factor for many. Having an up-close demonstration of a product’s effectiveness, especially for something personal like makeup and skincare, can make a purchase more likely. For Mary Kay, they found significant success in Mindanao, which doesn’t have as much access to retail spaces as the rest of the country, so having product demonstrations introduces them to beauty and skincare innovations that may not be readily available in their communities.
“We have a hub in Davao, but we go all the way to Zamboanga,” Camacho says. “Mindanao consumers are usually young, tech-savvy… For them, it’s aspirational to have something that’s only available in Luzon. They become more creative about getting good products to reach their side of the Philippines.”
The MLM model may have its fair share of detractors, but it’s clear that legitimate ones do exist, and have growing networks to show their viability. In the case of the Philippines, legitimate direct-selling companies continue to be growth opportunities for working-class Filipinos. It also grants consumers access to alternative retail concepts. Caution is always warranted when approached by such a lucrative opportunity, but the other side of the coin stays true: it also helps to keep an open mind.
