Speculation has swirled that the popular multi-level marketing (MLM) company Rodan and Fields may be going out of business; however, everything is not as it seems.
Started by Katie Rodan and Kathy A. Fields (the creators of the skincare brand Proactiv) in 2002, Rodan + Fields has become one of the most well-known MLM brands in the world.
After being started under the traditional marketplace business model, the brand switched to MLM in 2007 after its founders sold it. It would then use independent consultants to sell its products rather than selling to stores, with the company being criticized for potentially being a pyramid scheme.
Is Rodan and Fields Going out of Business?
A massive shake-up at the MLM company Rodan and Fields led many to believe the brand is going out of business.
That, however, does not look to be the case.
The popular skincare and beauty brand is not going out of business but has decided to move away from the multilevel direct business model and instead establish a new affiliate program.
The MLM business model heavily on salespeople recruiting other members of the public to join the company, creating this change of profit all the way down the recruitment line.
This differs from affiliate marketing, where salespeople (or affiliates) sell products they enjoy and then get a commission for every sale instead of relying on the sales of those recruited by any given member for the bulk of their income.
This ground-shaking change at Rodan + Fields also came with eliminating 100 jobs at the company.
According to Women's Wear Daily, the brand has been struggling in recent years, which led to the change. The 100 redundancies are part of a greater corporate restructuring for the company following a $75 million injection of funding earlier this year.
This is in addition to the 76 layoffs that were made at the brand's San Fransisco base of operations in September 2023.
Rodan and Fields was not the first of these popular MLM brands to make this switch. Recently, the MLM makeup company Seint Beauty made a similar switch following years of controversy (read more about Seint Beauty).
What Happened to Rodan and Fields?
Rodan and Fields was once considered a billion-dollar business in the MLM space; however, it has started to flounder in recent years thanks to significant changes in the marketplace (including the rise of TikTok Shop, independent brands, and Amazon).
Per a 2016 Income-Disclosure agreement, more than 90% of its members made less than $200 monthly, and only 96% recorded earning more than $500 monthly.
Since then, the popularity of MLM brands like Rodan and Fields has declined.
A June 2023 study from Seeking Alpha revealed MLM brands had their UK market share halved between 2018 and 2022, adding to an already (at that point) two-decade-long slide of the business model.
Per a UK industry insider, this likely has to do with "a fragile economic climate" as well as "criticism faced by the industry:"
"The Direct Selling and Marketing industry is expected to perform poorly in the coming years… a fragile economic climate is expected to weigh on industry revenue. In addition, the level of criticism faced by the industry and inferences to pyramid schemes are likely to continue in the coming years."
This also comes as regulatory bodies worldwide crack down on the MLM business model and the companies that use it.
Since 2016, the FTC has been keeping a keen eye on the MLM industry, fining major players like Herbalife and Advocare over $350 million for their operating practices, even shutting the latter down as it deemed it predatory and a "pyramid scheme" (per the FTC).
All this, as well as the ongoing economic turmoil facing businesses around the world over the last few years, are likely to blame for Rodan and Fields' problems and what ultimately led the brand to move away from the MLM model entirely.
Rodan + Fields will kick off its affiliate program starting on September 1.
