Is Herbalife a pyramid scheme?

[Manhattan]

Share your opinions. I'm surprised the company is still around and performing relatively well (on paper). $4.8 billion in net sales and I've never heard of any of their products. :dunno:



Herbalife is a direct-selling company. That means you cannot buy its protein shakes and nutritional supplements in stores. Instead, Herbalife distributes its products exclusively through a network of 3.7 million “members” in about 90 countries. Members buy Herbalife products in bulk, and can then either consume them or try to resell them. They are paid based on a “multilevel-marketing model,” meaning that their compensation comes not only from the products they sell, but also from bonuses related to sales by new members they recruit: the more Herbalife protein shakes that members you’ve signed up buy, the more money you make. There’s a catch, however: you and your recruits need to buy several thousand dollars’ worth of shakes and supplements before these bonuses kick in. The risk is that if you don’t drink or resell the shakes you buy, or return them within a specified window of time (90 days for the first purchase), you will be stuck with them. Herbalife’s net sales last year were $4.8 billion; its market capitalization is about $6 billion.


http://www.theatlantic.com/magazine/archive/2014/06/wall-streets-6-billion-mystery/361624/

[GQBalla]

yes,

[mazdavirgin]

It's not one in the classical sense of the word because they would have already been shut down... Doesn't mean it's not a scam but it is quasi legal just like Amway, Primerica, etc... and the rest of the MLM scam organizations. Pretty much they prey on the stupid and gullible. They all tend to effectively produce the same kind of brainwashed sales monkeys. Very cult like.

[Manhattan]

What's interesting about Herbalife is not that it's a quasi pyramid scheme but it's done pretty well in terms of sales and stock performance. Bill Ackman has called them out and put in hundreds of millions to short their stock since end of 2012 to little effect.

[mazdavirgin]

Originally posted by Manhattan
What's interesting about Herbalife is not that it's a quasi pyramid scheme but it's done pretty well in terms of sales and stock performance. Bill Ackman has called them out and put in hundreds of millions to short their stock since end of 2012 to little effect.

So has primerica. :dunno: There's lots of idiots out there who are just begging to get scammed. Sure it's a business model skirting legality but its not something I would want to touch with a ten foot pole, both ethically and financially.

Amway is your poster boy for this joke of a business. How long have they been at their racket? I mean you are free to support any business you want but personally I find preying on the poor and stupid like this to be so morally reprehensive I just hope there's adequate punishment for their moral bankruptcy if not in this world then maybe in the next...

[Rocket1k78]

Im pretty sure i seen something about them on market place or an investigative show like that.

[A790]

Yup.

[sneek]

Originally posted by mazdavirgin
It's not one in the classical sense of the word because they would have already been shut down... Doesn't mean it's not a scam but it is quasi legal just like Amway, Primerica, etc... and the rest of the MLM scam organizations. Pretty much they prey on the stupid and gullible. They all tend to effectively produce the same kind of brainwashed sales monkeys. Very cult like.

I don't think that they are a pyramid scheme but they are an MLM that uses some loopholes to pump up sales.

Either way, nothing I would want to touch long or short.

[speedog]

Guess I'm the sole 'No' vote so far, probably because my wife has been involved in a few MLM companies and as such, we have an understanding of the differences between a pyramid scheme and a MLM company.

Certainly some MLM's are quite cult-like and the push is more to sign up people into the system as opposed to actually selling the product. Some MLM's also also push all credit card fees, shipping charges, products costs, etc onto the backs of the signed up members while there are others out there that do none of that. Avon, a very old MLM, has the individual members carry the cost of the products they sell to their consumers and I believe the Avon consultants also eat credit card fees and shipping fees - many MLM's are set up like this to pass those costs on to their consultants which makes it more difficult to make money without having to resort to signing up more people beneath you because of the residuals you can earn from them.

But there are MLM's out there that don't shift all of these costs on to their consultants - it is buried in the cost of the items the consumer is purchasing which means a consultant can make decent money just selling stuff without having to worry about signing up other people to keep their income levels up. Amway - my brother-in-law got into that one and they sure had lots of Amway stuff for a very long time.

A good MLM will not push all of the aforementioned fees and costs on to their consultants and they will not have their consultants having to purchase and maintain stock that their customers will be purchasing and they will not be pushing shipping costs on to their consultants. Of course, there is extra money to be made if one recruits into their tree but one has to maintain all of that structure in order to maintain a certain status.

All I know is that the MLM my wife was actively involved in for at least 10 years saw he made some very good part-time money. She did do some recruiting but for the most part, her money was made from the selling of the product. She didn't have to pay credit card fees nor shipping fees nor carry stock that her customer purchased from not have to receive purchased product and then deliver it to her customers - credit card fees were eaten by the parent company, customers paid the shipping at the time of their oprders and all orders were shipped directly to the customer. This was an exception in the MLM world though and we do know of many MLM's where carrying/operating costs for the consultant pretty much could ponly be offset through recruiting and building one's team.

Anyhow, sorry for the TLDR - peruse this WikiHow web page (http://www.wikihow.com/Distinguish-Between-a-Pyramid-Scheme-and-Multi-Level-Marketing) to get a very simple low down on the differences between pyramid schemes and MLM's. All I can say is that if one is going to get involved with a MLM, then do your homework - there are a few good ones out there where one can make decent money without having to browbeat every friend and family member into joining but there are far more where recruitment is more of the game than the actual product you might be selling. Choose wisely.

[speedog]

Oops, double post.

Was going to add to the above...

I also remember going to a introductory seminar with a friend some 20+ years ago back when long distance cards were all the rage - this was such a huge, rah, rah session with no actual information one could read, everything was orated to the group by presenters and the pressure was to sign up to take advantage of the wonderful opportunity.

Of course, once one started asking questions, then you were quickly weeded out and even asked to leave because you were deemed as the opportunity was not fit for you. The basic premise of this particular MLM was almost 100% about signing people up as to the actually selling of any product and truth be told, the rates of the long distance card they were selling were ridiculously high compared to what one could buy elsewhere.

All I know is that if no one is willing to share a MLM opportunity with you with out being critical of you because you maybe ask too many questions or the wrong question (in their opinion), then it's a MLM well worth steeping away from.

[Xtrema]

MLM thrives because it operates in the same principle as religions.

You gotta believe!

:rofl:

[speedog]

Originally posted by Xtrema
MLM thrives because it operates in the same principle as religions.

You gotta believe!

:rofl:

Somewhat true although my wife did not get involved in the hype and still maybe a very nice part-time income. Does she do it any more - no, other opportunities came about and she moved on. Could she have advanced if she had recruited more, no doubt yes but she wasn't into it for that. It was a quality product she was selling and it could stand head and shoulders above many competitor's products and that is how she went about selling it.

Probably because she didn't get involved in the hype, that did restrict her ability to move up - support wasn't necessarily there like it was for the brown nosers but at the same time, she could go to bed with a clear conscience which had more value to her than making promises of a golden rainbow to new recruits. Funny thing is we still know people who my wife recruited who are doing very well in that particular MLM and are doing it through just hard work and the selling of the product, recruitment isn't their focus either.

[A790]

Originally posted by Xtrema
MLM thrives because it operates in the same principle as religions.

You gotta believe!

:rofl:
They can be a tough nut to crack, but if you can crack it... :D

[HiTempguy1]

Speedog, for a scheme to continue, there has to be some winners.

The fact that you can't see that shows just how clouded your view is on the subject.

Its all scams. Just because something is "less" of a scam then something else does not make it less of a scam.

[speedog]

Originally posted by HiTempguy1
Speedog, for a scheme to continue, there has to be some winners.

The fact that you can't see that shows just how clouded your view is on the subject.

Its all scams. Just because something is "less" of a scam then something else does not make it less of a scam.

It's quite possible that I have a clouded view but the one particular MLM that my wife was involved with for years, well I know of a number of people who were the sole provider for their families who have since retired and pretty much relied upon product selling as opposed to recruiting. I guess where I'm having difficulty in calling every MLM scammy is when I know of people who have made a good income and career of selling MLM products without having to resort to recruiting tactics to supplement their income - to me it's scammy if the MLM business/income model can't stand on it's own feet without having to rely upon recruiting as a fair chunk of the compensation that a MLM consultant can realize.

[Feruk]

Not a pyramid scheme, but it is sketchy.

[msommers]

I never understood how all these various companies aren't shut down by now. Not only that, but that people still involved with them.

I guess the prospect of easy money peaks anyone's interest.

[BrknFngrs]

Originally posted by msommers
I never understood how all these various companies aren't shut down by now. Not only that, but that people still involved with them.

I guess the prospect of easy money peaks anyone's interest.

These companies target a very specific demographic in their recruiting and that's key to their survival.

I went along to an "open house" for one of these scams a few years back with a gullible buddy of mine. The earnings information in their presentation was absurd and as soon as I started asking them what assumptions they were relying on in reaching their figures they told me that I "wasn't understanding the potential" :nut: