Editor’s note: This article was first published in January 2013, and all the figures it gives on Herbalife distributors’ earnings are from 2011–2013. Herbalife later reached a settlement with the US Federal Trade Commission over its business practices in 2016.
Yesterday we reported that Herbalife is under scrutiny in the United States. The reason is none other than a loss of 4 billion dollars in business volume, which has inevitably opened a debate about whether multi-level marketing systems are really sustainable over time, and about the likelihood of their model collapsing.
There are more than 200 direct-selling companies in the United States that use the well-known multi-level marketing (MLM) system, with combined sales of around 30 billion dollars, and it is estimated that in the United States alone 15.6 million people work for these companies within these systems, according to figures from the Direct Selling Association. But… how much money do salespeople at these companies really make? The figures are striking, to say the least.
How much do Herbalife distributors earn?
In its promotional videos, Herbalife offers potential distributors a unique international business opportunity. The reality, according to CNN, is very different: most distributors have very modest monthly earnings, if they earn anything at all. Some distributors even end up losing money because of other expenses that come up once they are in the system, on top of the initial outlay. In addition, some of these companies require you to make minimum purchases at regular intervals if you don’t want to lose the chance of receiving your “commission check”.
According to Herbalife’s own documents, which CNN has seen, only 25% of distributors have achieved “leader status”. These are the most active distributors (the ones who sell the most), and they received average annual earnings of 637 dollars. Meanwhile, at the other end (at the higher levels), 0.6% received average annual earnings of 336,900 dollars.
Note: Bear in mind that this is average income, which means some may have earned 1,500 dollars while others earned only 150.
Herbalife is not the only multi-level company where this happens
Herbalife is not the only company where this happens: only 12.7% of Nu Skin’s 80,613 active distributors in the United States received a commission check, and more than half of the 114.2 million dollars in commissions went to 1% of distributors, known as “Blue Diamond executives”.
These are the figures hidden behind presentations of incredible business opportunities, and they are the figures anyone should know before jumping in, especially if it requires an outlay of money that could put the family finances at risk.
It should be said that a large part of these poor figures is due to distributors who try their luck and give up, others who believe they will succeed part-time (when a great deal of effort and perseverance is required), and those who have no sales experience or skills. Even so, part of these companies’ success lies in the constant turnover of distributors, since before becoming distributors they have bought a batch of the company’s products. When one distributor fails, others take their place.
Featured image: Sandstein, CC BY 3.0, via Wikimedia Commons.
