In the window of the coffee shop hung bubble letters trapped in a net of white twinkle lights: NERIUM PARTY. Below, an LCD screen displayed a slideshow of before and after photos of chins, necks, and forehead wrinkles. Three people rustled around in the back of the café, setting up more lights and books.
A tall blonde in a jean jacket and high leather boots strode over with a bottle of champagne and plunked it into a bucket of ice.
“If we make a sale,” she proclaimed, “we’re poppin’ this baby open!” She grinned wide at the whole café (two people) and rushed off to set up more tissue paper decorations. The blonde girl clacked back over to us again. A diamond-encrusted N glittered on her lapel. She stuck out her hand to me.
“Hi!” she chirped. “I’m Merrill. I can’t wait to meet you and be friends!” At a loss for words, I asked her what Nerium was. She launched into a full product pitch.
“So these people were working on a way to cure cancer, and they found out that the nerium oleander was amazing for skin care. I mean, this stuff is groundbreaking. It’s made my pores virtually invisible.” I squinted at her face. “I found out about it while I was learning to slaughter my pigs,” she continued breathlessly. “It’s amazing.”
“Like,” she continued, “remember when the Internet came out and people were all like—What is that? Well this is the same. Here’s another chance. I mean, in their first year they’ve made $100 million in sales. That’s more than Google. So if you missed that boat, here it is again! This stuff is revolutionary.”
NERIUM IS A REAL COMPANY. But after that it gets foggy. Digging under the mess of glowing reviews about the product reveals a tangled web with no clarity in sight.
Nerium used to claim that a doctor named Robert A. Newman, professor emeritus, who worked with MD Anderson, discovered the active component in Nerium AD. (He also endorses a very science-y nutritional supplement called New Mark.) Since then, MD Anderson has taken steps to distance itself as much as possible from NeriumAD. “It's important for you to know,” Anderson explained in a press release, “that MD Anderson did not develop this product and does not vouch for its effectiveness or safety ... does not endorse this product or company ... is not connected to this product and we do not profit from its sales ... [and] has not authorized the use of its name in connection with this product.”
"Everything is pyramid-shaped. There can only be so many people at the top."
Although Nerium states that their product produces real results and is a product of real clinical trials, they fail to cite any specific papers. A quick Pubmed search brings up zero results of oleandrin’s positive effects as a cosmetic. There are a few published papers that deal with the oleander extract, and none are about anti-aging. One is about asthma, one is a review, and one is about tumor suppression in skin cancer. (Oleandrin kills cells, so it may suppress tumors.) Basically, if there is any actual scientific data our there suggesting that Nerium has any benefit for your skin, it's not peer-reviewed or published.
Beyond the website, the rest of the sales are made through multi-level marketing, otherwise known as direct sales. Like Mary Kay or Avon cosmetics, Nerium recruits a team of people to sign up customers through old-fashioned door-to-door-style selling.
First, the seller shells out a simple start-up investment of $100, $500, or $1,000, Then they get a few bottles of Nerium in the mail. For the first 500 bottles they sell (priced anywhere from $80 to $150, depending on current promotions), they get 10-percent commission per sale. Selling more bottles generates a higher commission percentage. There’s also a bonus for signing up new “preferred customers” who get Nerium delivered straight to their mailbox on a monthly basis. But the real money comes from adding more brand partners to the team. As brand partners move up the ladder, not only do they get a bunch of swag (free bottles of Nerium, an iPad, a Lexus), they also get bonuses and promotions. (The whole compensation plan is listed here.)
Merrill, at 25, is now a Nerium “director,” which means that she and her team have sold 4,500 bottles, recruited three other people, and convinced them to sign on the same number of sellers. She gets a 10-percent coaching bonus—that is, five to 10 percent of each of her team members’ total commissions.
MERRILL STARTED SELLING NERIUM after a series of personal crises. She’d just quit business school, and her family was strapped for cash after the stock market flopped. They were considering selling their Colorado ranch. So Merrill started an aggressive campaign to revamp her family’s business. She started selling compost, enrolled in environmental studies classes at a community college, and acquired a litter of piglets to raise for meat. She fell in love with another young entrepreneur, an owner of a tequila company. Everything was clicking. But then, when her boyfriend suddenly passed away, she was lost.
Still, there was work to be done at the ranch. She kept caring for the pigs and advertising for compost sales. At a convention for pig slaughtering, she got to talking with another young female farmer. The girl told Merrill about the great new product she was selling—Nerium. So Merrill took a semester off from school and road-tripped to California to clear her head. There she went to her first Nerium convention.
Now she sells Nerium part-time. She spends the rest of her days managing the ranch, taking tae kwon do lessons, and working to build her dreams. Her parents bought into the company as well, helping her throw parties while they care for the pigs and run the family boarding stable.
“I am so blessed to be part of this company,” she says, whenever she gets the chance.
ACCORDING TO THE DIRECT Sales Association, total direct retail sales in the United States have grown by 5.9 percent in the past five years (to $31.63 billion in 2012), and there are 15.9 million people selling everything from kitchen wares to slimming yoga pants.
Usually, salespeople (or “brand partners,” in the case of Nerium) sell items at small parties. The seller gets 20 to 50 percent of sales, as well as a commission for signing up new sellers. The median income is only about $2,400 annually, a figure that can be significantly higher depending on how many other people the seller manages to recruit.
In 2009, the Financial Industry Regulatory Authority put together a study using transcripts from investment fraudsters to show that they use psychological tools to net customers. First there’s the “phantom riches” technique, which promises high returns with little investment. Another tactic is using “source credibility,” in which sellers show off fake diplomas to prove their authority. They also play off peer pressure, assuring people that others have already cashed in, promising free parties, and creating a false sense of scarcity through constant sales and promotions.
There’s also a 2005 study from the University of Canterbury in New Zealand on the psychology of pyramid scheme investment. It found that about half the participants involved were not able to correctly identify a pyramid scheme as a risky investment option.
“The more money people chose to invest in the pyramid scheme the higher they perceived the likelihood they would receive the financial returns on offer,” writes researcher Alexander Mackenzie. He found that the more money people invested, the more likely they’d be to try to convince someone else to invest. “Even though pyramid schemes are all based on an impossible tenet [that each investor earns money by getting additional investors to give them money],” he writes, “there seems to be an underlying attraction to pyramid schemes for people.”
Interestingly, the study found no correlation between investing in a pyramid scheme and people’s intelligence, gender, reasoning ability, or propensity to seek thrills. “There is,” Mackenzie admits, “something rather odd about it that calls for future research. In the meantime, however, the apparent vulnerability of some or many to the appeal of such schemes indicates it is probably worthwhile for society to keep them illegal.”
If you look at Nerium’s marketing schematic, there’s one person on top, and from that one person branch a bunch of other people—all selling, or attempting to sell, Nerium. Each of them makes an initial investment. It doesn’t matter how much product they sell—the company gets their money anyway.
Many investors in multi-level marketing don’t make that much money. Take, for example, the Mary Kay empire. Tracy Coenen, a financial-fraud investigator and former Mary Kay lady, founded Pink Truth, an online community dedicated to giving “a voice to the millions of women who have had negative experiences with Mary Kay.” Coenen estimated that fewer than 300 U.S. Mary Kay ladies are earning a six-figure income after business expenses—roughly 0.05 percent of the 600,000 American consultants. Many of them lost big money in their career in makeup sales.
Right now, no such support group exists for ex-sellers of Nerium except one blog, a pet project of two California doctors who work for another skin-care company.
“So $534 later, here was my kit in the mail with books and bottles,” someone named Emily wrote in the comments. “I made my attempt, since apparently the bottle sells itself, and it honestly didn’t. I got my mom to buy out of the kindness of her heart, and she swears she hasn’t noticed a difference. I’ll admit, my face felt softer, but I took pictures and nothing physically changed. I could probably put any lotion on my face and leave it on at night and it’d feel better. The smell is off-putting as well, and my upline always told me I’d get used to it, even love it. Nope, never happened. I still think it smells like mold."
BACK AT MERRILL’S RANCH, the family is thriving. Her parents breeze around the house, dropping off organic produce for the pigs or gathering wine and stacks of crackers for Nerium parties. Her parents, she insists, are totally changed people because they’ve started selling Nerium.
Since her initial $1,000 investment in October, Merrill says she’s earned $4,500. She’s qualified as a “director” in the brand partner hierarchy, and she’s already earned her first Lexus bonus ($500 toward leasing one of the fancy cars). She plans to give it to her parents.
Despite the negative attitude that seems to surround the direct sales world (and the Nerium business), Merrill has total faith.
“People get disgruntled,” she said, “because they expect to make all this money right away. But you have to work for it. You’re really your own boss—nobody’s waking you up in the morning and telling you to go to work.”
As to whether or not it’s a pyramid scheme?
“Everything is pyramid-shaped,” she said. “There can only be so many people at the top.”
Merrill is selling a product that she truly, deeply believes in. “I mean,” she said, “it’s really the best.” Plus, working with Nerium was a welcome change from the compost business.
“After all,” Merrill said, “there’s only so much shit I can sell.”