A pyramid scheme is a business setup where people are promised incredible returns and profit for recruiting people into the business. Each participant joining the business pays to join and needs to recruit two or more people into the business to make returns on the previous payments made.
This business setup does not offer any product or service, and the main source of income for the participants is the amount of money brought in by the recruits. This means that the business is unsustainable, as it gets to a point where the recruits fail to earn money if they cannot bring new people in. For this reason, pyramid schemes have been ruled illegal and fraudulent in the UK, the US, and many other countries.
Understanding the structure of a pyramid scheme is crucial to answering the all-important question that forms the basis of this guide. This is because Scentsy, like many businesses of its kind, make promises of riches, prosperity, and ease of making money to their participants.
However, this is one of the signs of a pyramid scheme, which brings people to ask, “is Scentsy a Pyramid scheme?”
In this guide, we will discuss the answers to this question while touching on other important details, such as the nature of the business and the probability of making a profit.
What Is Scentsy?
The story of Scentsy started in 2003 when Colette Gunnell and Sara Egan, who were sisters-in-law, started the business in Salt Lake City, Utah. The original business idea came from Sara Egan, who was more interested in using scented candles and products more safely and sustainably.
This interest gave rise to the company’s first product – an electric candle warmer. This product gained acceptance among a lot of people as it was a safer and healthier alternative to the use of conventional candles. After the success of the electric candle warmer, Scentsy began to produce other products, such as room sprays, wax melts, diffusers, detergents, and air fresheners.
These products helped Scentsy generate enough buzz to attract the attention of entrepreneur Orville Thompson and his wife, Heidi. The couple acquired the business in 2004, moved it to Idaho, and changed the company’s sales policy to what they referred to as a party plan sales technique.
How it Works
When you join Scentsy’s party plan sales team, you are referred to as a Consultant. Currently, there are about 10,000 Scentsy consultants in the US alone. Scentsy, however, has a ranking system for its consultants. The only way to move up this ranking system is by recruiting more people and making high product sales, which brings us to your job as a Scentsy consultant.
Your job as a consultant for the company is to promote its products and get people to buy them. When people buy the products you promote, you get commissions on these sales. You are also bringing in more people to join the company as consultants. When you do this, and the consultants start making sales and recruiting others, you earn commissions based on these activities.
However, other intricacies go with joining the business. For instance, to sign up as a consultant with Scentsy, you need to pay $99. This fee allows you to access products you will promote to people. You also need to pay $10 monthly to keep your website up.
Also, as a consultant who has not recruited anybody into the business, you must sell products worth $200 monthly out of every 12 months. If you have downlines, you will need to sell the same worth every month out of every 4. Failure to meet this rule could result in your account with Scentsy getting deleted.
If you cannot manage to sell $200 worth of products to people, you may need to buy them for yourself. Thus, you may need to add that to the cost of getting the Scentsy business up and running.
How To Make Money with Scentsy?
The compensation plan released by Scentsy gives an accurate idea as to the number of ways you can earn money as a consultant for Scentsy. According to the compensation plan, there are ten different ways of making money with Scentsy.
They include:
- Product Sales Commission which is 20 to 25% of product value
- Wholesale Volume Bonus
- Frontline Bonus for Team Wholesale Volume
- Frontline Consultant Bonus for Team Wholesale Volume
- Frontline Star Consultant Bonus for Team Wholesale Volume
- Frontline Superstar Consultant Bonus for Team Wholesale Volume
- Frontline Director Bonus for Team Wholesale Volume
- First Generation Direction for Team Wholesale Volume
- Second Generation Direction for Team Wholesale Volume
- Third-Generation Direction for Team Wholesale Volume
Of these ten ways of making money, only one, the first option, has to do with the sale of products. The other reward options depend on your ability to recruit more people into the business. Thus, the main means of making money as a Scentsy consultant is recruiting people and having a team under you.
In fact, a section in the Scentsy Consultant Guide mentions that “there is no better way to grow your income other than building a team.” Another part states, “you get paid more when you bring in more people into the business.”
How Much Can You Get Paid with Scentsy?
While ten sources of income within a single business seem lucrative and promising on paper, it is important to confirm if it works in real life. To do this, we examine the Income Disclosure Statement released by Scentsy in 2020 for consultants in the UK.
The Income Disclosure Statement is an official statement showing the income generated by the business for a specific year in view. The breakdown of this statement showed that only 25% of the consultants actively sold Scentsy products for the year. This means the remaining 75% dropped out of the scheme before the year ended.
Of this 25%, the minimum annual commission was £127, the maximum was £268,654, and the median average was £1106. If the median average commission is divided by 12 months, we see an average consultant with Scentsy makes £92.16 monthly, which is less than £5 daily.
Is Scentsy A Pyramid Scheme?
Scentsy is not a pyramid scheme. Pyramid schemes do not have products or services to sell, and Scentsy has, so it is clearly not a pyramid scheme. Instead, it is an MLM business. This is why, despite having a product to sell, the scheme also relies on recruitment and bringing more people into the business.
The fact that 9 out of 10 means of generating income with Scentsy depends on recruitment, and the business also lays heavy emphasis on the recruitment of people into the business shows that recruitment is the main way to make money in Scentsy, validating its MLM status.
While MLM businesses are legal in the US and many parts of the world, the Federal Trade Commission carried out a research where it discovered that 99% of people in an MLM business lose their money. This research is also corroborated by the Income Disclosure Statement released by Scentsy, which showed that an average consultant made less than £5 daily.
Bottom Line
Scentsy is not a scam, nor is it a pyramid scheme. It is an MLM business that is completely legal in many parts of the world. However, its legitimacy does not translate to profitability, as making lots of money in the business is not as easy as the company and its promoters make it sound.
If you are planning to sign up for Scentsy as a consultant, you should know that the FTC has discovered that 99% of people who join MLM businesses lose their money in the end. Hence, it is advisable to check out other legitimate side hustles that help you earn money from home.