Is Cutco a Pyramid Scheme or MLM? Cutting Through the Hype

If you’ve been approached by a Cutco representative trying to recruit you, you may be wondering — “Is Cutco a pyramid scheme?” Cutco knives are extremely popular and many people rave about their quality, but others allege aggressive recruitment practices and unfair pay.

At Business2Community, our experts dive deep into Cutco and its owner Vector Marketing to give you all the information you need to make an informed decision. Keep reading to find out if you should become a Cutco sales representative or if this famous cutlery brand is worth investing in.

The Cutco Business Model

Cutco is owned by the Cutco Corporation. The company has headquarters in Olean, New York, and earns its money through the selling of cutlery, mostly knives.

It works with Vector Marketing, founded in 1981, to sell knives and recruit new sellers. Most people’s awareness of the brand is because they have someone in their lives who has tried to sell to them or they’ve seen the booths sellers have set up at fairs.

Its distributor, Vector Marketing, recruits thousands of sales representatives to sell Cutco products. It often targets students as representatives of the company.

Cutco has faced plenty of legal trouble and scrutiny over its recruitment practices and failure to pay representatives for training hours. However, it hasn’t been ruled legally to be a pyramid scheme. Its business model does, however, strongly resemble that of multilevel marketing companies (MLMs).

Has Cutco Been Legally Determined to Be a Pyramid Scheme?

Cutco has not been legally determined to be a pyramid scheme. A pyramid scheme is an illegal business that makes its money primarily by recruiting people, and not through the actual sales of its products or services.

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Cutco has also faced lawsuits about its recruiting practices, unpaid training, and complaints regarding wages. That being said, none of this ended in Cutco being declared a pyramid scheme. ClassAction.org completed an investigation into the company in 2022 regarding the complaints, the process is laid out below.

In the class action lawsuit for the lack of training compensation, it was alleged that Vector Marketing violated the Fair Labor Standards Act and state laws when it didn’t pay employees for their initial training sessions.

Is Cutco an MLM an SLM, or a Network Marketing Business?

It depends on where you look and who you ask how to define Cutco’s business style. While Cutco has a lot in common with an MLM, it technically isn’t one, since as a seller, you don’t recruit other sellers to work underneath you. In other words, sellers don’t have a downline through which they make a majority of their profits as they would in a typical MLM.

Cutco is most likely a single-level marketing company and is definitely a network marketing business — using the network of its sellers to sell products.

What It’s Like Working at Cutco

While not hitting a lot of characteristics of an MLM, working with Cutco isn’t like a regular retail job. Here, we break down what you’d expect to find when working at Cutco.

Recruitment and Onboarding

Most Cutco representatives are recruited through Vector Marketing, many of whom are students or young people (including minors) who want flexible schedules and to earn decent pay. These reps are hired as independent business contractors, or business owners, and must attend training sessions, (unpaid) before they begin. This way, Cutco doesn’t have to provide them benefits or pay into their Social Security.

Cutco encourages its representatives to sell the products to people within their own social circles, like friends and families.

It’s worth noting that one difference during the onboarding process between Cutco and many MLMs is that there is no requirement to purchase your demonstration kit or starter kit — as these are loaned to them by the company. However, there are varying accounts about this, including one from the New York Times, which states you have to purchase your kit for $150.

Sales representatives for Cutco also have a base pay — quite rare for a direct-selling company. Thus, the commission is a bonus and the representative still gets paid even if they don’t make a sale.

However, and as we’ll discuss more below, when representatives sign up to sell for Cutco, they may be confused about how the payment system works. One student, who found the company’s posters advertising the pay rates was confused about the hourly pay.

He thought the pay was per hour, not per appointment. Even then, he thought that the company would facilitate making the appointments (what Cutco calls the “knife demonstrations”) so that there would be many appointments and opportunities to make money on commissions.

There are also varying accounts of how the commission works. Some people report that even if they sold hundreds of dollars worth of product they got only around 5% commission.

Earnings and Costs

Sales representatives make a base hourly amount between $16 and $22 for each presentation they give. It’s not an hourly rate, however, which many people on the internet are getting wrong. Obviously, this is very low pay, explaining why Cutco mostly hires young people.

The reason people are under the impression that Cutco representatives make a base hourly pay is that most demonstrations last around an hour.

If Cutco salespeople are only paid per appointment, not hourly, and also paid a low commission, you can see that it’s hard to make much of a profit.

At first, it may be easier to make appointments with people in your close inner circle, however after you’ve presented to all of them, the likelihood of a stranger agreeing to a demonstration is slim.

That’s why more income is made from the commissions on sales than the actual sales, but even that isn’t a lot. Sources online report that if you sell up to $1,000 worth of merchandise, you get 10%, and if you make from $6,000 to $10,000 you get 25%. If you make $20,000, you get 30%.

That means that if, during a demonstration, you sell $1,000 worth of products, you make just $100. And if you don’t sell anything, you only make a maximum of $22 per demonstration. To make that same $100, you’d have to do between 4 and 6 presentations.

Some people do make money from Cutco, but to make it worth it, you probably need to be an expert salesperson (and not a regular highschooler).

Are Cutco Knives Any Good?

MLMs and direct selling companies in general are notorious snake oil peddlers, but Cutco knives actually do seem to be decent quality. Reviewers claim their knives are still in great shape after 20 years; some people even have inherited their knives from their parents — technically making Cutco knife sets an heirloom item.

In the following video, a reviewer who isn’t a Cutco sales representative, but rather an Amazon affiliate, talks about what he likes about Cutco.

The comments under the video also show widespread appreciation for the quality of these knives.

Most of the reviews from amateur cooks are positive, however, professional chefs have a different take. Many of them said they would never use a Cutco knife. It’s not clear if this is simply an opinion that comes with wearing the tall white hat, or if it is a criticism that holds merit.

Is Cutco an MLM?

Cutco is technically a single-level marketing company or single-level direct sales company, but it does share various characteristics with a typical MLM. Some examples are its recruitment strategies, reliance on representatives to sell products, and compensation structure.

Have a closer look at these characteristics of MLMs and how Cutco compares to the MLM business model:

Key Traits of an MLM

• Recruitment: MLM businesses put a greater emphasis on recruitment than they do the actual sales of their products. The sellers recruit other sellers to work beneath them, creating a downline from which they make profits. The higher up you are in the MLM, the larger your downline and the more money you make.
• Commission-based pay: Representatives in MLMs typically make more money from commissions from their recruits than on products sold. Bonuses are also offered for team performance or recruiting success.
• Low selling rate: Most MLM members don’t make enough money from sales to earn a livable income. Many even go into debt and according to the Federal Trade Commission, 99% of people in MLMs lose money.
• Network selling: Representatives for MLMs are encouraged to sell to the people in their close social circles, including to recruit them.
• Hidden costs: There are hidden costs in many of these types of businesses, including marketing materials, training, conferences, inventory, and starter kits.

How Cutco Matches Up

• Recruitment: Cutco has a very aggressive recruitment strategy for getting new cutlery salespeople to join its team. It also targets students, sending its representatives to university campuses and hanging up flyers with vague information on the compensation system. Additionally, reps are encouraged to sell to the people in their close networks — another thing it has in common with MLMs.
• Commission structure: Reps earn commission based on how much they sell. Unlike an MLM, the emphasis is put on individual sales instead of sales from the downline, but the pressure to sell is still very high.
• Low earnings: As noted above, around 99% of people lose money in an MLM. Similarly, according to accounts from Cutco reps, earnings are very low and commissions on sales can be as low as 5%.
• Network-based selling: Just as in an MLM, Cutco reps are encouraged to sell to the people inside their personal network. Indeed, many reps find it easy to set up appointments with their families, but once that source is used up, they have a hard time setting up further demonstrations.

Additional Factors

Cutco does share various traits with an MLM, but it is technically a single-level marketing company. The difference between the two is that representatives with Cutco earn their income from their own sales, and not from their downline, as they would in an MLM.

It would be more accurate, then, to describe Cutco as an “SLM” instead of an MLM. Cutco would also be accurately described as a network marketing company, the same descriptor we apply to MLMs.

The Verdict: MLM or Not?

Cutco lives in the gray area between MLMs and regular businesses. That’s because it doesn’t rely on building a downline for increased earnings as does a classic MLM. However, there are many aspects of how it works that do align with MLM practices. These include its recruitment strategies and network selling.

While the Cutco business model isn’t an exact match for an MLM, it does have the negative characteristics of an MLM. These include reliance on a personal network to make sales, aggressive recruiting, and low overall success among its salespeople.

You can take a deeper dive into Cutco and what it’s like to be one of its sales representatives by listening to the Life after MLM podcast episode “Stitch” where someone who previously ran a Cutco office gives up insider secrets, including the scripts used for recruiting.

Is Cutco Safe and Legit?

Cutco is a legitimate direct-selling company that sells kitchen products, especially kitchen knives. It recruits its representatives through a company called Vector Marketing, which has been accused of using aggressive recruiting techniques among economically vulnerable populations — especially students.

While Cutco is not an illegal operation, the success rate for its salespeople is low — most of them struggle to make minimum wage.

If you are considering joining the Cutco salesforce, you should proceed with caution. If you do want to make money selling Cutco products, then you should have the personality to do it and be willing to hustle, while understanding the economic risks involved.

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