HerbaLife (NYSE: HLF) is a nutrition company that sell nutrition products, weight-management, skin care and personal care products to millions of independent Distributors in more than 75 countries.
The company was founded by Mark Hughes in 1980. In 2011 the HerbaLife net worth is about $3.5 billion USD.
I am not affiliated with HerbaLife in anyway. It does not matter to me if HerbaLife is a scam or not but it seem a lot of people are searching about “HerbaLife Scam”.
HerbaLife business model
HerbaLife business model is MLM or multi-level marking. In addition to profits from product sales, HerbaLife distributors can earn additional commissions from sales by their “downline” distributors.
What is HerbaLife Multi-level marketing?
Multi-level marketing is a structure that the sales are compensated by direct sale made by the distributor and also the sales commission from other people recruited under the same distributor. This create what you called a “downline” distributor.
If you’re a HerbaLife distributor, the people recruited under you are able to recruit other people, creating multi-levels compensation. It’s kindda like a pyramid scheme but MLM is not illegal like a pyramid scheme.
So the people who been with HerbaLife since the 80′s when the company just starting out would make the most money because they recruited more people.
This is not accurate but an example:
Let’s assume in 2011 HerbaLife Net = $2.3 billion
Number of Independent Distributors = 2.0 million
Simple math states that the AVERAGE HerbaLife distributor sold $1,150 worth of products in that year. That is sales, not profit. Assume a 25% profit margin (which is really high), that is $290 per AVERAGE distributor in that year.
Now, keep in mind that the top 1% of distributors (at the top of the pyramid) account for 85% of the sales.
Why people claim HerbaLife is a scam?
I think people perceive it’s a scam because they didn’t become successful with HerbaLife MLM structure. To attract new distributors companies like to sell the idea of success, the ability to get rich quick, and to enjoy a lavish lifestyle and unlimited income. When that didn’t happen, it’s a big disappointment.
The truth is, you’ll need to put in the work and effort into anything to become successful. While earning potential vary mostly by your sales and marketing ability.
Now, I never used HerbaLife products, I’m assuming it is high quality since there are millions of people using it. I’m not saying the products are good/bad or a scam. I just think that I could not attempt to get other people to join me as a distributor to sell the product as a feasible business model or making a living from it. I think the strongest, most powerful motivational force today is false hope.
But what do you think? Are you currently or former HerbaLife distributor? How was your experience with HerbaLife?
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