Stella and Dot was founded in 2004 by Jessica Herrin and Blythe Harris. The company is named after their grandmothers. Rather than using traditional sales, Stella and Dot use a network of ‘Stylists’ to sell their lines of jewellery, handbags and clothes.
Here at The Finance Guy, we believe you can't make money with network marketing, but we won’t let that stop us from doing a full review of Stella and Dot. We want to know if this is a real money making opportunity, or just another MLM.
What Is The Stella And Dot Opportunity
We looked at the official Stella and Dot stylist opportunity page, which turned out to be little more than a sign up page. It has only a very brief outline of how the MLM part works. It explains that as a stylist you can earn commission, work your own hours and get discounts on Stella and Dot products.
They then go on to show us the different starter packs. You can choose from a selection of either $99 or $59 packs to get yourself started as a Stella and Dot Stylist.
We then see some photos of women who have become successful Stella and Dot stylists, along with some quotes from them about the business. We then see in nice bold letters that ‘when women support each other, incredible things happen’.
This very vague information is all we could find on the website, so we looked a little further. We managed to find a video presentation of the Stella and Dot opportunity shown below:
The video presentation is done by one of the co-founders, which is nice to see. The first thing they tell us is that their passion is to help you fund yours. This is common MLM speak which is that this is the opportunity to be financially free and chase your dreams.
The video then goes on to tell us that now is the right time to become a Stella and Dot Stylist because they are about to have a ‘breakthrough’ decade. Apparently the last decade was just a rehearsal, but now that they have new clothes lines and some tools for ‘social selling’ over the internet, the opportunity is ready to really take off…
This is the opportunity to turn you ‘passion for fashion,’ into a flexible source of income. Like all MLMs, one of the biggest features, is the ability to become financially free working your own flexible hours.
Another benefit common to most MLMs, is that as a stylist, you’ll get your very own Stella and Dot website. This means that you can sell to anyone in the world with an internet connection. All you have to do is share you personal link.
They call the ability to sell through your smartphone, ‘conversational commerce’. Allegedly this makes it easier to build repeat customers. How this is better than sites such as Amazon which also let you shop from your phone, we are not sure.
The business model sounds simple enough, first you save money with a discount on products you would have bought anyway. Then when you ‘wear it and share it’ you can earn commission when others buy it through your link.
The video then explains that you can earn even more income if you become a mentor and recruit others to become Stella and Dot stylists. This is what is known in MLM as building a downline. The general idea is that you start earning commission from your sales as well as all the sales from all the people below you in the MLM system.
How Do You Make Money With Stella And Dot
While the video gave us an outline of the Stella and Dot opportunity, we want to understand exactly how much stylists can earn, and what they need to do for their commissions. To help us with this, we found a copy of the Stella and Dot compensation plan.
Stella and Dot have somehow managed to keep their compensation plan down to just 2 pages, but hopefully we’ll be able to extract some useful information from it. Below are the different ways you can earn commission from Stella and Dot:
Personal Sales Commission
This is what most MLMs would call ‘retail commission’. It is simply the profit you can make from selling Stella and Dot products to customers. It starts of at 25% for accessories and 20% for apparel. It’s possible to earn higher rates of sales commission, if you become a ‘monthly power seller’, in any given month. All you have to do is order enough Stella and Dot products to make up the Personal Qualifying Volume (PQV). The PQV needed and the higher commissions possible are shown below:
Each of Stella and Dot products will have a point value for PQV. They explain that you get around 1 point for every U.S $1 you spend. This is based only on the product prices not any other costs such as shipping etc. From this we see that in order to qualify for the power seller bonus, you need to order at least $2,500 worth of product in a month.
While it’s nice to see that it’s possible to earn more commission, to us, it could also be that they are encouraging stylists to over-order. It’s possible that some stylists will order Stella and Dot products to qualify for the next bonus, not because they need the product. This would mean that Stella and Dot are encouraging Stylists to overspend.
Team Sales Commissions
These are the earnings you can make if you recruit others to become Stella and Dot stylists. If you sponsor someone to your downline, you will earn commission every time they buy product. It doesn’t end there, you can also earn commission on the people they recruit.
The team sales commissions you can earn with Stella and Dot are shown in the table below:
As we can see, the amount of team commission you can earn, depends on your rank in Stella and Dot. Before you can earn any team sales commission you need to reach the rank of ‘Lead Stylist’, or higher. You’ll start of earning 4% from anyone you personally recruit. You earn the maximum team commission once you reach the rank of ‘Senior Director’, or higher.
If you make it to the top ranks of Stella and Dot, you can earn 12% commission from anyone you personally sponsor in your first line. You can also earn on an extra 3 lines in your downline. the total commissions you can earn are:
LIne 1 - 12%
Line 2 - 7%
Line 3 - 3%
Line 4 - 2%
As we can see, there is a total of 24% in team sales commissions paid on a total of 4 levels in your downline. This all sounds well and good but we should remember that these commissions are included in the price you pay for products. In other words, if you are a new Stylist, 24% of what you pay to Stella and Dot, goes to your upline as commission.
Star+ Team Commissions
This is an additional 1% commission that is payable on any star team volume regardless of what line they sit on in your downline. While not properly explained, we believe that if someone in your downline reaches the rank of ‘star stylist’, they are the top of a ‘star team’. Everyone below them in the downline will contribute to the 1% Star+ Team commission
You can only start earning Star+ commission once you reach the rank of ‘Associate Director’, or higher. Once you reach the ‘Star Director’ level, you can earn the Star+ commission on 2 generations. This means that you get paid not just on the first star in your downline, but also on the next one below them in their downline. If you reach the top rank of ‘Double Diamond Director’, you can earn this on up to generations of stars in your downline.
Once again, it’s nice to know that you can make all this commission, but it is all included in the prices you pay. In other words the 5% of what you pay to Stella and Dot goes to people in your upline as Star+ Team commissions.
How Do You Get Promoted With Stella And Dot
If you want to earn the full commission with Stella and Dot, you will need to climb the ranks of their MLM system. To reach any given rank, you need to be ‘qualified’. The qualifying criteria for each Stella and Dot rank are shown in the table below:
As we can see, gaining promotions requires a combination of volume and ‘qualified legs’. To become a ‘Lead Stylist’, you need to spend at least $500 per month, and have one qualified leg. If someone in your downline also spends $500 on Stella and Dot in a month, then the leg they are in becomes ‘qualified’.
If you want to make it to ‘Associate Director’, you’ll need 3 qualified legs, and at least one person in your downline needs to have reached the rank of ‘Star Stylist’. You’re personal volume requirment will now be $2,000 plus you have a group volume requirement of $20,000 for the month. Group volume is money spent by everyone in your downline (this includes stylists who spend less than $500 for the month). That all adds up to a lot of Stella and Dot purchases per month.
Once you reach the rank of ‘Star Stylist’, you can use ‘Alternate Leader PQV’. This means that rather than having to personally order $2,000 worth of product per month, you can order just $500 per month. To qualify for this, you need to personally sponsor a new stylist, and have them spend $500 on Stella and Dot during their initial ‘jump start’ month. If you are a new stylist, the person who sponsored you might try and encourage you to buy $500 of products right away (as a jump start). While they might tell you it’s in your best interest, it could be that asking you to spend $500 saves them spending $1,500 in the same month.
How Much Are Stella And Dot Stylists Earning
To find out how much Stylists are earning, we looked at the 2018 Stella and Dot income disclosure statement. The most noticeable part of the disclosure, is the table shown below:
The first thing we notice is that 71.3% are at the initial ‘stylist’, rank. This is a bit disturbing because it tells us that only 28.7% of Stylists have achieved any promotion at all with Stella and Dot.
The next thing we notice is that only 1.7% of stylists make it to the rank of ‘Director’, or higher, where the average income is over $35,000. In other words 98.3% of Stella and Dot Stylists earn less than minimum wage.
As unlikely as it may sound, this table actually shows the Stella and Dot opportunity in a good light. Only stylists who earned a commission are included in the above data. In the print below, they explain that 68% of Stella and Dot Stylists earned no commission at all in 2018
If we were to include all the stylists, we’d find that only 0.54% of Stella and Dot Stylists earned more than $35,000 in 2018. In other words, 99.46% of Stella and Dot stylists earn less than minimum wage.
Another group not included in this income disclosure, is all the stylists that quit in 2018. It’s quite likely that most of the stylists who earned nothing with Stella and Dot in 2018 will drop out of the MLM in 2019. In other words we could estimate that close to half the Stella and Dot Stylists quit every year. If we were to include those which drop out in the income disclosure, the results would only get worse.
Why Is It Hard To Make Money With Stella And Dot
The problem with the Stella and Dot opportunity is not unique to them. It’s difficult to make money with any MLM system. The reason for this is because network marketing is designed to sell products and make money for the corporation. If you become a Stella and Dot Stylist, you’re their customer, not a company shareholder.
While ‘conversational commerce’ from your phone sounds, easy, it’s also very competitive. You can easily promote Stella and Dot from your phone, to anyone with an internet connection. The problem is, so can all the other Stella and Dot Stylists.
Just like any business, to be successful, you need to be good at attracting customers. If you join this opportunity you will be in competition for customers with all the other Stella and Dot Stylists. Unless you have access to a unique market or have a strategy that nobody else is using, it’s going to be very difficult to make money with Stella and Dot
Is Stella And Dot An Illegal Pyramid Scam
Even though MLMs closely resemble pyramid schemes, they are not illegal. The reason dates back to the 1979 case of Amway vs the FTC. After 4 years in court Amway was found to be offering a business opportunity, rather than a pyramid scam. The technicalities came down to wording in their paperwork. One example requires consultants to make retail sales.
The Amway ruling effectively opened the doors for all other MLMs to operate within the law. However we should remember that being legal doesn’t make it ethical. If you knew that more than half the stylists quit each year, and less than 1% earn over minimum wage, would you feel comfortable recruiting friends. If you want to build a downline with Stella and Dot, this is exactly what you’ll need to do.
Even though they have managed to operate within the legal system, there are people who believe that MLMs should be classified as illegal product based pyramid schemes. Of note is Dr Jon Taylor, who identified 5 characteristics of product-based pyramid schemes.
We’ll look at each of these characteristics and see if they apply to Stella and Dot:
1. An Endless Chain Of Recruitment
As we saw in the compensation plan, recruitment plays a key role. The only way to reach the higher ranks in Stella and Dot is to personally recruit new stylists, and have them do the same.
Dr Taylor found that in an endless chain of recruitment, it doesn’t take long before the system hits what he calls ‘de-facto saturation’. By this he means that the system has been offered to so many people within your community that finding new recruits becomes increasingly difficult. He notes that this can happen very quickly.
2. Promotion Through Recruitment
The ranks in Stella and Dot have specific downline and volume requirements. You are promoted for buyiing product and recruiting others to do the same. There is no requirement to make retail sales.
It was Dr Taylor’s opinion that ‘if participants must recruit to be successful, or if the pay plan’s primary rewards are for building a downline, it should be considered a recruiting MLM, and hence an illegal pyramid scheme.’
3. Pay To Play
If you want to earn commission with Stella and Dot, you need to meet your monthly PQV figure of at least $500 per month. This minimum monthly purchase is regardless of how much you actually need or how much you have in inventory. This is what is meant by ‘pay to play’.
These ongoing purchases can add up to thousands of dollars. Dr Taylor warns that when you spend money on pay to play product, you are ‘paying pyramid investment fees to “play the game,” one of the earmarks of a product-based pyramid scheme.’
4. More Than 5 Levels Of Commission
If we look at the Team commissions (including Star+ Team Commissions), we can see 9 levels of commission in the Stella and Dot system. This becomes problematic because all that commission is included in the price charged to Stylists. Having so many levels in the compensation plan makes the products too expensive and therefore not competitive with others in the market.
Dr Taylor explains that having too many levels of commission turns the system into a recruitment based pyramid. This is because people are more interested in climbing the levels than they are in making retail sales. If you have even attended a MLM presentation, you’d probably agree that most of their focus is on recruiting and not on selling products.
5. Most Of The Rewards Go To Your Upline
When you order product form Stella and Dot, 29% of what you spend is paid to your upline as commission. If you decide to make a retail sale (at full price), you could earn up to 25%. What we see here is that the total commissions paid to the upline is more than what can be earned selling to customers.
Dr Taylor found that this results in excessive incentive to recruit, and not enough incentive to make retail sales. Once again he points out that this would identify the opportunity as a recruitment based product pyramid scheme.
Should You Join Stella And Dot
The only way to make money with this opportunity is if you make sales. You are either selling the products to retail customers, or the opportunity to prospective stylists. Anyone who tells you this isn’t a sales job, is mistaken.
Before you join the business opportunity, you should make sure that you like the products. Have a look at the Stella and Dot products. If you’re not willing to buy the products at full retail price, you’ll find it very hard to convince others to.
Even if you like the products and are an excellent salesperson, we suggest you consider this alongside other options. In our opinion, if you have the sales skills to make money with Stella and Dot, you’ll probably earn even more in a regular sales job.
As always, we’d love to hear what you think in the comments section below, especially if you an share your experiences with Stella and Dot
Are you wondering if you can make money in an MLM? Check our our list of mlm reviews before you join. If you find one that’s not on the list, let us know and we’ll do our best to write a review