Oriflame is a direct selling company that utilizes a multi-level marketing model to sell beauty, wellness, and personal care products. Many people wonder whether Oriflame can be considered a network marketing or direct sales company. Here is an in-depth look at Oriflame’s business model and practices to determine if it qualifies as network marketing.
What is network marketing?
Network marketing, also known as multi-level marketing (MLM), is a business model where a company recruits independent distributors to sell its products directly to consumers. Distributors earn commissions on their sales and can recruit new distributors into their “downlines” to earn additional commissions on those sales. This creates a multi-level compensation structure.
Some key aspects of network marketing or MLM businesses include:
- Selling products directly to consumers away from a fixed retail location
- Recruiting new distributors into your downline to grow your team and earn commissions on their sales
- Commissions earned on multiple levels of your downline network, not just your individual sales
- Emphasis on recruiting new distributors in addition to selling products
MLM or network marketing relies heavily on person-to-person sales and recruitment of new distributors. The model encourages distributors to build “downlines” of networks of distributors under them to leverage their sales efforts.
Oriflame’s business model
Oriflame was founded in 1967 in Sweden and sells cosmetics and personal care products in over 60 countries. The company utilizes a direct selling model and independent Oriflame distributors, called “consultants,” to promote and sell its products.
Here are some key aspects of how Oriflame’s business works:
- Oriflame sells products directly to consumers via independent consultants/distributors rather than through retail stores.
- Distributors earn discounts on their own purchases and commissions on the purchases made by distributors they recruit.
- Commissions are earned by distributors on multiple levels of their network or downline.
- Oriflame emphasizes recruiting new distributors as a key part of the business opportunity in addition to selling products.
- Distributors purchase products directly from Oriflame and then resell them to consumers.
Oriflame distributors earn money through direct sales commissions and by recruiting, training, and leading teams of distributors they bring into the business. This multi-level structure where distributors earn commissions on their own sales as well as their downline is a classic element of network marketing compensation plans.
Is Oriflame considered network marketing?
Based on its key business practices, Oriflame does appear to follow a network marketing or multi-level marketing model. Here are some reasons why Oriflame is classified as an MLM or network marketing company:
- Oriflame products are sold through independent distributor networks rather than retail stores.
- Distributors earn commissions on multiple levels of recruited downlines.
- Building and training a downline team of distributors is emphasized as part of the business plan.
- The financial opportunity is focused on both selling products and recruiting new distributors.
- Oriflame distributors purchase products at a discount for resale directly to consumers.
The Oriflame opportunity heavily promotes recruitment of new distributors, earning commissions on downline sales, and leveraging networks of distributors to drive sales. These are core components of the structure of network marketing or multi-level marketing companies.
Key similarities to network marketing models
Here are some of the key ways that Oriflame’s business practices closely align with typical network marketing or MLM models:
Multi-level compensation
Oriflame distributors can earn commissions on multiple levels of their downline network. Typically, network marketing pay plans involve commissions on both your own sales and sales made by distributors you recruit. Oriflame’s compensation structure matches this model.
Emphasis on recruiting
Building a downline is heavily emphasized in Oriflame’s business opportunity. Expanding your network by recruiting new distributors is promoted as a key way to increase earnings. Recruitment of new participants is a core focus in network marketing.
Person-to-person selling
Oriflame products are sold person-to-person by distributors sharing the products and opportunity. This type of direct selling is central to network marketing instead of selling through retail stores.
Purchase products for resale
Oriflame distributors buy products at a discounted price from the company and then resell them to consumers to earn retail profits. Buying inventory for resale is common in network marketing models.
Criticisms of network marketing apply
Oriflame is subject to many of the same criticisms often applied to network marketing and MLM businesses. These include:
- Most participants earn low income or lose money.
- Focus is shifted heavily to recruitment versus product sales.
- Business structure enables pyramid schemes.
- Products may be overpriced to support commissions.
- Relationship selling can alienate friends and family.
While not inherently illegal, network marketing is controversial for relying heavily on recruitment and risking exploitation of personal relationships. Since Oriflame follows an MLM model, these issues are also relevant.
The FTC has monitored Oriflame
In the past, the U.S. Federal Trade Commission has monitored Oriflame to ensure compliance with regulations. In 1986, the FTC reached a settlement requiring Oriflame to modify its business practices and provide disclosures to avoid making deceptive earnings claims. This demonstrates that regulatory agencies view Oriflame as a network marketing company.
Oriflame promotes typical network marketing opportunity
Oriflame touts its business opportunity in ways that are characteristic of multi-level marketing companies. Promises of high income potential, time and financial freedom, dream lifestyles, and high ranks encourage recruitment. Testimonials focus heavily on success stories of top earners rather than typical participants. This type of promotional approach is extremely common in network marketing.
Conclusion
After looking closely at the compensation structure, emphasis on recruitment, person-to-person sales, and regulatory issues, it’s clear that Oriflame follows the core model of a network marketing or multi-level marketing company. While direct selling of products to consumers is involved, the financial incentives and opportunity are centered around building and leading a recruited downline team just like a typical MLM. Therefore, it’s reasonable to conclude that Oriflame can be classified as a form of network marketing business.