Round Table editor warns of Cutco and Vector Marketing’s exploitation of student labor
Are you a college student in need of work? Vector Marketing wants you to sell Cutco knives. Vector Marketing boasts sales positions with flexible hours and high wages, perfect for the student lifestyle. Unfortunately, the job is not what it seems. Haunted by a series of conspicuous labor lawsuits, Cutco and Vector are pyramid-shaped corporations built to exploit student labor.
At first glance, most all the information available about Cutco and Vector appears contradictory, confused and opaque. Here are the basics. Cutco Corporation and Vector Marketing are sister companies working exclusively in tandem with one another: Cutco creates the kitchen products, Vector markets them.
Vector is classified as a multi-level marketing corporation. Multi-level marketing is a controversial business strategy where the revenue of the MLM company in question is derived from an unsalaried workforce (“participants” or “sales reps”) who sell the company’s products. Their earnings are sourced from a pyramid-shaped commission system, the exact nature of which varies from company to company.
According to Amanda Sahawneh, a Vector campus recruitment manager, Vector classifies itself differently. “We’re a single-level direct sales company. Our products are marketed through direct sales. There’s no multi-level ways of making income,” Sahawneh says.
“Vector Marketing offers entry-level sales representative positions,” Sahawneh explains. New recruits are given the option to do an in-person or virtual presentation to customers. They are given a base rate of pay for every completed demonstration, regardless of whether or not the customer decides to purchase any Cutco products.
“They even have the opportunity to earn commissions based on their performance as well,” she says.
What does one make of these contradictory classifications? Typically, multi-level marketing operations argue that all corporations are pyramid-shaped. Most employees in any corporation occupy lower-paid positions, they argue, while a select few operate in the upper echelons of a company.
However, what actually defines a pyramid scheme isn’t the particular arrangement of its management, but that of its revenue. Simply put, if you want to figure out whether or not something’s a pyramid scheme, follow the cash.
Nearly all multi-level marketing operations have two potential “revenue streams.” The first stream of compensation can be paid out from direct sales between a participant and their customers. The second, more lucrative stream can be paid out from commissions based on the sales made by other distributors below the participant, who has recruited these “down-line” distributors into the MLM and entered a management position.
This incentivizes sales reps to recruit others to join the company so that they can become their down-line distributors and accrue more revenue. The cash is funneling upward while the pyramid is growing downward.
Despite promotions, no one is actually moving anywhere. The vast majority of the money moves past everyone, gradually snowballing until it reaches the very top of the pyramid, where a select few can cash in.
Sahawneh’s own description of the company’s structure does not stray far from that of an MLM.
“Most of our managers have all started as sales representatives,” Sahawneh says. “They move up through promotions by assistant managers in their current office. Most…have the opportunity to run a small sales team in a smaller territory over summer break as a branch manager.”
This is part of a management-training program that teaches new branch managers how to recruit and train sales reps, grooming them for future long-term management and recruitment positions at Vector, where they will help build the pyramid downward.
Digging deeper, Vector’s identification as a single-level direct sales company is more complicated than it seems. Vector is a self-professed member of the Direct Selling Association, a trade association composed primarily of companies that use multi-level compensation plans.
On behalf of its member companies, the DSA engages in public relations and lobbying efforts against the regulation of the multi-level marketing industry. In 2012, the DSA successfully lobbied against the inclusion of multi-level marketing companies in the Federal Trade Commission’s “Business Opportunity Rule.” Had they not been exempt, MLM companies would have been required to comply with onerous and limiting disclosures. Thanks to the DSA, multi-level marketing companies have continued to operate unchecked.
A History of Lawsuits
Vector Marketing’s behavior has not gone unnoticed. In June 2016, U.S. District Judge Edward M. Chen granted preliminary approval of a $6.75 million settlement between Vector Marketing Corporation and sales representatives for alleged violations of Illinois, Florida, Michigan and New York state wage and hour laws, and the national Fair Labor Standards Act. The lawsuit surrounded three-day training periods for which new recruits were not paid. Vector agreed to pay $6.75 million to the plaintiffs in February 2017, but has no plans to start paying for training.
Vector was sued again this past September, this time by a division manager who alleged that the company was engaging in unfair labor practices because, despite his position, he was still classified as an independent contractor, thus denying him access to overtime pay. According to the suit, which is still in its early stages, division managers are the highest-ranking class of workers who are not officially classified as Vector employees.
In 1996, Vector stopped recruiting from Wisconsin because of growing concern from authorities with regards to whether or not the company misled recruits about its hourly rate. Many who have worked with Vector point out that sales reps are not paid $15 an hour, but $15 per sales appointment, regardless of how many hours it might have taken to set up said appointment.
Up until 2011, new recruits were even required to purchase their first set of Cutco knives on a loan, which was paid back to Vector through sales or out of pocket. Sahawneh says the company no longer uses this practice.
Teachable Sales Reps
So who are these recruits?
“We mainly work with college students because our program is designed mainly for college students,” Sahawneh says.
Sahawneh cites Vector’s flexible schedule, which allows students to make their own hours and work around their classes and exams.
Vector also teaches young people skills for getting by in the professional world. Vector offers scholarships to its participants, some of whom have the opportunity to earn internship credit from their college or university.
“We work with non-students as well, but most of our sales work is [with] students.” According to Sahawneh, Vector finds students are “easier to teach” and “more willing to learn.”
Notice that Vector’s ideal demographic for recruitment is an inherently vulnerable one: young people in dire need of cash.
“I think college students are vulnerable to multi-level marketing [because] they are just starting out on their own, making decisions independent of their parents for the first time, in many cases,” Charles Westerberg, a professor of Sociology at Beloit College, writes in an email.
“This is an excellent opportunity for marketers to engage in predatory behaviors with customers who have yet to encounter their methods,” Westerberg says. He explains that college students are especially financially vulnerable, likely to incur debt to pay for their education. Companies are frequently successful in getting such students to incur more debt for costs related to their education. “As you can imagine, there’s a wide range of what’s being offered and what’s actually necessary.”
As a corporation, Vector isn’t incentivized to invest money in training young, inexperienced workers en mass unless it’s going to ultimately profit them and, as an MLM corporation, it does. Train a ton of young people to sell and recruit and the pyramid will grow downward, funneling up more and more cash. The hours are flexible because none of the sales reps are technically full-time employees. Like an anglerfish, Vector has constructed itself to suit the student lifestyle in order to lure more people towards it.
When asked if Vector preferred to hire eager young people seeking entry-level jobs because it’s more profitable, Sahawneh’s description of the program changes drastically.
“I think that any company is looking for people who are excited [and] motivated to work with them,” she says. “We do work with all different types of people, it just happens that the type of position that we do offer attracts more college students.”
A program that’s “designed mainly for college students” and one that just so happens to attract college students are two very different things. Regardless, selling Cutco for Vector does have perks.
“Like most sales companies…we do like to treat our people right,” Sahawneh says. “There are always different incentives.”
Sahawneh says that it’s possible for reps to win products and go on “incentive trips” based on their sales performance. Whether or not reps travel expenses are paid for by the company also depends on sales.
“There are different levels,” she explains. “There are levels for them to qualify for the trip and there are levels for the company to pay their entire way. It would depend on their level.”
Should You Sell Cutco?
Is Vector’s behavior illegal? No. Though its strategies are highly controversial and (as evidenced by its history of labor lawsuits) frequently contested, Vector is currently operating within the boundaries of the law.
Is it possible to make money selling Cutco knives at Vector? Of course, but you will have to work very hard at it, and the pay-off is unlikely to be worth it in the long term. In order to succeed at Vector, a self-professed flexible and student-friendly employer, students have to give up a great deal of their time and energy setting up and making their own sales, training to become branch managers and recruiters, all while Vector continues to classify them as “independent contractors.”
Should you sell Cutco knives for Vector? No. Vector Marketing is a predatory corporation that has displayed little to no interest in doing anything but profit off of its workers. It’s presentation as a company that’s compatible with the student lifestyle is highly manipulative and purposeful. Don’t start, or continue, to waste your time peddling knives for them. The blades are as sharp as advertised. Don’t get cut.