The return model is useless because of how the system works. A new recruit who buys say $500-$1000 worth of product is encouraged to 1. self consume (along with family and friends) a ton to really get into the system 2. give away lots of samples 3. sell at discount just to get people started and into the scheme. Now why would a direct sales organization promote these types of "non profitable retail sales" activities? Because the whole point is NOT to profitably retail the product but to get others to become distributors and build your down line pyramid. So if all new recruits are being encouraged to get rid of product as outlined above how good is the return policy? Worthless.
How many cans of Formula 1 would a person have to directly sell to make minimum wage? How many a day? How long does it take to retail a can of formula 1 even at 25% off suggested retail? What is the profit margin when a distributor buys product at 25% off, pays sales tax on full SRP, Pays shipping and handling and then sells some for 25% off, self consumes some and gives away the rest. How much product can he return to hlf corporate after doing those things? Figure that out and you will see why profitable direct selling is OUT of the question.
but, but, but, HLF does not keep any records of what their distributors make or lose. So how could HLF possibly know that? What a web we weave when we we try to deceive!! Now I will admit the number given by the good senator struck me as a wild type number. IMO HLF usually only milks their new distributors for between $500 (smart ones) and $10,000 (dumb and stubborn ones) before they wise up and figure out 1. Impossible to sell at retail 2. I am never going to make it to the "Payable" portion of the pyramid. Really really dumb and stubborn ones might lose $35,000-$50,000 depending on how aggressive they get with their give aways, promotions, etc etc.
that time is on his side. The longer he keeps people looking into this totally corrupt business model the higher the likelihood of serious regulatory intervention. He knows it. HLF management knows it. LULAc knows it. And anyone with at least half a brain knows it. Management and longs can only HOPE that the spotlight dies down and they can return to the shadows and go back to conning millions of new distributors each year in relative anonymity.
is that the longer it stays in the light the more everyone knows how sick their model really is. The total lack of profitable retail sales for a direct selling company is pathetic and is what HLF and other MLM's like them keep trying to hide. They only survive by selling franchises to people that buy a lot of product because they have bought into a false dream of riches. That's why HLF needs constant rah rah meetings and inspirational songs like the one that preceeded the CC. LOL to keep the delusional as delusioned as long as possible as they continue to milk them out of what little money they have. Johnson does not care as long as he can stay at the top of CEO payscales. Top distributors collecting checks off the backs of failed new distributors dont care. Equity longs dont care as long as the stock keeps going up. Does the FTC care?
The only reason one would need a protected territory is IF one was trying to sell the stuff at retail. We all know that is NOT REALLY a part of the money making business model. You don't need a protected territory when what you are REALLY selling are the franchises. They are much easier to sell than the product and if one can climb to the top of the pyramid on the backs of enough failed new recruits can live quite nicely on checks from the mother ship.
NO he is almost in make believe retirement from all his make believe profits buying make believe shares in this REAL pyramid scheme! LOL
Not one franchise sold to an HLF distributor can be proven to make retail profits. This is by HLF's own admission. The only reason some HLF franchises stay open is because they are good at recruiting a pyramid below them. The 99% that cant do that fail. How many cans of Forumula ONe would a person have to directly sell to make minimum wage? Figure that out and you will see why profitable direct selling is OUT of the question. ONly way to stay open is to recruit others who also cant sell at retail.
The 2004 FTC Fraud Survey points out the extent of the overall problem of Of the ten most prevalent types
of consumer complaints received by the FTC, purchasing a membership in a pyramid schemes ranked seventh, with an estimated 2.55 million incidents and 1.55 million individual victims in the preceding year (the 95 percent interval ranged from .8 to 2.3 million individual victims, effecting between .4 percent and 1.1 percent of the US adult population). The amount lost per individual ranked pyramid schemes second among the ten fraud types. Most notably, pyramid scheme victims were the “least likely to complain,” despite recognizing that they had been victims of consumer fraud.
So, the newly conned distributors know they were defrauded but are probably too ashamed to report it.
Arguments that treat internal and external consumption the same blur the nature of the selling opportunity and ignore the potential for ongoing recruitment to be the primary source for compensating participants – a key characteristic of a pyramid scheme. Internal consumption has been argued to be similar to a “buying club” that people join to receive a distributor discount, driving internal consumption above that of external
consumption. The analogy is suspect, as an MLM company may lose eighty percent of its “internal customers” each year; in contrast, Costco, a well-known buying club, retains more than eighty percent of its customers each year (Forbes, 2013). The argument is also suspect since MLM firms ubiquitously promote a business opportunity by which people earn income –a set of facts that make a failed business venture a more cogent explanation for the noted annual dropout rates regarding general MLM participants.
many MLM's are " Nothing more than an elaborate chain letter device"
How can one tell if an MLM is as indicated above by Kosot? Simple: "If there is no relation between recruitment rewards and sales to the ultimate users outside the MLM’s network, the organization is just a
perpetual recruitment chain"
This is NOT hard to understand. IF NO Relationship between RECRUITMENT REWARDS and SALES OUTSIDE THE NETWORK it is a PYRAMID. It is very clear and will be the undoing of this money transfer scheme that has lasted 33 years.
"In a time when tracking the movement of products and
services through the channel of distribution has become easier and more affordable, and
delivering large databases of purchase behavior, no such capacity apparently exists in the
MLM channel, despite numerous court decisions that focused on the lack of such data.
Unverifiable data makes understanding the health of the industry difficult. Many MLM
companies report increasing sales, driven at least in part by international expansion.
Growth within the U.S., however, has been less impressive."
LOL: In other words, in spite of the fact that gathering extensive data has become increasingly easier and affordable, the MLM industry has chosen to not gather this data. ONe can only assume that lack of gathering the data, in spite of increased ease to do so, is because it WOULD SHOW THEY DON'T SELL PROFITABLY TO ACTUAL RETAIL CUSTOMERS. LOL. THIS IS GOING TO BE A SERIOUS PROBLEM FOR YOU MONEY TRANSFER SCHEME INVESTORS. I am very confident the FTC is looking seriously into this and further requirements will be coming forth requiring the collection of this data. In other words, the end of these schemes is forthcoming.
thus looks to retail sales and addresses certain factually based questions about the MLM’s
program, namely whether there are any retail sales (product sales to people outside the
MLM) and what relation exists, in practice, between such external sales and the rewards
paid in connection with recruitment. If there is no relation between recruitment rewards
and sales to the ultimate users outside the MLM’s network, the organization is just a
perpetual recruitment chain; indeed, in Koscot’s words, “nothing more than an elaborate
chain letter device.” Such an MLM dooms the vast majority of participants to financial
failure; concomitantly, Koscot (1975) renders the same organization to be an unlawful
The compensation plan is then accurately described as follows:
upline rewards are based on downline distributor purchases −a compensation structure
that can lead to a number of issues. For one, it can evoke inventory loading, i.e.,
purchases of inventory just to meet volume targets that grant multilevel rewards. In a
related vein, the distributors may not be retailing any significant amount of product,
perhaps pointing to an inability of selling the product at the SRP. In such a case it may
also be that the MLM pays recruitment rewards that are unrelated to actual retail sales.
These issues comprise the most frequent factors in distinguishing between legitimate
MLMs and pyramid schemes.
Constantly recruiting a bunch of new distributors who are conned into thinking they are going to get rich, to purchase over priced product is not retail selling. It is deceptive pyramid selling. If HLF actually had a direct sales model I would be their biggest supporter. But they don't. They have an over priced product based recruiting model and they sell product primarily TO new recruits. Over priced product of which 70-80% or so of the revenues go to the recruiting machine which you are apparently part of.
Product-based pyramid schemes rely on upfront fees and/or high margin products and
services purchased by an ever-churning base of distributors to fund the compensation
paid to participants, with sales to non-distributors playing a minor role (2004 FTC
are probably also the same issues that the FTC overall has been pondering. These are somewhat complex issues and the obfuscation and constantly changing story of managements like HLF attempt to hide the truth. But even though the FTC and other regulators have been moving slowly, rest assured considerable work has been going on behind the scenes and one day, possibly soon, they could announce a major investigation which will get to the bottom of this long term money transfer scheme. It can not happen too soon in my opinion.
One of the authors is Peter J. Vander Nat, Senior Economist, Bureau of Economics, Federal Trade
Commission who fusion was citing as their evidence that the math supplied by Ackman/Dinnen was flawed
Studies of current and former distributors could lend
understanding to the evident process of being first active, then inactive. And the low level
of complaint behavior by victims of pyramid scheme fraud requires additional study.
Unlike motivations associated with traditional direct selling, the MLM industry continues
to present a less understood and at times illegal business model.
And research is surely warranted to determine the nature/extent of discounts: (a) from an
SRP that perhaps no one except uninformed consumers would pay, and (b) with respect
to similar products available via non-MLM channels. Further, if deemed plausible to a
researcher (though at first sounding like a satire), undertake a genuine study of how new
MLM entrants establish a business, earning profit on products available at discounts to
people joining as internal customers. This would render a statistical estimate of the
number of uninformed customers, likely not to be statistically different from zero, who
would form the business entrants’ customer base: customers who do not (yet) know they
could avoid paying a mark-up by becoming internal customers. Regrettably, a study that
documents such foreseen outcomes is apparently needed for an industry now moving
down a very dubious path: i.e., continually replacing retail sales with proposed internal
consumption that, if taken seriously, would demand fundamental changes to the current
MLM model, or failing that, would render a proposal that is economically infeasible.
"As noted throughout, the MLM model operates on the dual premise of retailing through a
network of distributors and recruiting new distributors to do the same. Federal regulators
and courts have consistently focused on the “retail question” – the existence and extent of
sales to consumers external to the distributor network (Vander Nat and Keep, 2002). The
inability to track sales other than to distributors themselves conflates the dual premise,
obscuring the basic role of providing a retail channel. Without a significant external
customer base, internal consumption by an ever-churning base of participants resembles
neither employee purchases nor a buying club. The MLM industry now appears to be
heavily reliant on selling to itself − raising the retail question to ever greater urgency."
THIS IS NOT GOOD FOR HLF. AS I HAVE STATED LACK OF PROFITABLE RETAIL SALES WILL KILL THIS MONEY TRANSFER SCHEME.