Just caught the news this morning and saw that MLM company Herbalife is under investigation by the FBI.
Some guy named William Ackman who is a hedge fund manager claims that the company is a pyramid scheme so the authorities are checking it out.
I haven’t reviewed an MLM program in a long time on this blog so I thought I’d make a post about my research on Herbalife so that I could help you make a decision about whether or not you should join Herbalife.
What Is Herbalife All About?
If you were approached by someone about becoming a Herbalife distributor and making money selling their products, here’s what you need to know about the company and it’s opportunity.
Herbalife is an MLM company that sells nutritional supplements, weight loss products and skin care products. The company has been in operation since 1980 and first reported more than $1 billion in sales in 1996.
To become a Herbalife distributor, you must sign up under an existing distributor who will be your upline. This will cost you an initial start-up fee of $49.95 which to me is very reasonable compared to some other MLMs.
From there, you can sell the company’s products and also recruit other distributors. This is how you earn your income.
There are many levels to the Herbalife compensation plan but as a distributor, you start on the very first level which entitles you to 25% commissions on products sold. To get this commission, you have to order products at a 25% discount where you will receive the commission when you make a sale.
As you move up to different levels you can order products for greater discounts earning yourself a bigger commission plus other benefits. To move up and qualify for different levels, you will need to earn points for the amount of products you sell.
Like most MLM, there is a high percentage of people who end up spending more than they make or make very little in profits from their efforts. A lot of distributors end up selling the opportunity rather than the products because it is more profitable. This constitutes the definition of a pyramid (the bulk of income comes from selling the opportunity rather than the product).
Here’s an excerpt from a Reuters News report that contrasts two different experiences by Herbalife distributors. The first one is more typical than the second.
Pershing Square has published dossiers about Herbalife’s top distributors, charging they lure in new recruits with videos featuring big houses and expensive cars even though company statistics show that the majority of distributors never earn any income from Herbalife.
Michael Araujo, a Massachusetts resident who tried to set up his own Herbalife distribution business for a year after having been laid off by Bank of America, said his family lost roughly $85,000 on the scheme. He said he spent about $4,000 a month buying business leads and purchased $7,000 worth of Herbalife products. “They target people who are desperate,” Araujo said in a telephone interview, about the company’s sales tactics.
Meanwhile Tish Rochin, a distributor in Texas who went from driving a truck to saying she became a millionaire thanks to Herbalife, said it is “simple but hard work” to become wealthy by selling the company’s products.
Herbalife has, over the years, been a subject of controversy, from pyramid scheme claims to lawsuits stemming from damages caused by the use of their products.
Is Herbalife a Pyramid Scheme?
Whether or not Herbalife is an illegal pyramid scheme is up for debate. The federal authorities are currently investigating the MLM after William Ackman of Pershing Square called out the company on being a “sophisticated pyramid scheme”.
An MLM is said to be legal if 70% of the company’s sales-generated income comes from RETAIL sales to people who are not distributors, affiliates, or associated with the business opportunity in any way.
So if most of the actual product is being moved when distributor uplines sell products to their downline who end up making losses on these products then this might be a problem and the pyramid accusations might actually hold weight.
With all the investigations going on, if you decision to become a Herbalife distributor depends on whether or not the company is a pyramid scheme (because you don’t ever want to join a pyramid), then it is best to stay away. There are much better opportunities available elsewhere.
The proponents of MLM are going to argue that Herbalife is not a pyramid and they’ll give you reasons that may sound plausible. The critics are going to argue otherwise.
I’m not a big fan of MLM myself and after reading this article by The Verge dealing with some of the ways Herbalife distributors are getting leads and promoting Herbalife, I am inclined to believe that the company does indeed qualify as a pyramid.
Alternatives to Herbalife and MLM
Now if you want to sell health-based products like what Herbalife offers, you can easily start without having to pay to become a distributor, without having to buy and stock products and without having to constantly chase your friends, family and strangers to join your business.
A great alternative that worked for me (I used to be in Quixtar and didn’t make much), is affiliate marketing. Affiliate marketing is an internet based business where you can promote other companies and share a percentage of whatever sales you refer.
To explain the process, lets pretend Herbalife used the affiliate marketing instead of the network marketing model.
In this case, Herbalife would be selling their products through their website on the internet. They would have an affiliate program where anyone could sign up for free and get a special affiliate link or banners to put on their own websites. They would choose to pay affiliates let’s say 25% of the sales they refer.
If their products are great then they could still be doing billions in sales every year. You could make a full time income just promoting Herbalife products if they used the affiliate marketing model.
All you would need to do this is:
- internet marketing training
- a website (don’t worry if you don’t already have one)
- an internet connection
- some free time
- affiliate companies to affiliate with (plenty of those)
Affiliate marketing has a lot of benefits that MLM doesn’t. Don’t be fooled into thinking you’re going to get rich overnight though. Although the income potential is quite huge (even if you never made a dollar in MLM), there is a sharp learning curve and you need to put in work just like any other business.
Once you’ve moved past the initial learning process, you can make a full time income and eventually quit your day job comfortably.
3 Affiliate Programs To Start With (Herbalife Alternatives)
If you’re really enjoy promoting health based stuff and nutritional supplements, here are just three alternatives to Herbalife using the affiliate marketing model to move their products.
Within the health niche, GNC is a brand that people know and trust so it isn’t going to be too hard to get sales for their products. You can promote anything from shakes, weight loss supplements, sports nutrition and beauty care stuff just to name a few.
The company offers 12% commissions on all their products and operates their affiliate program through the eBay Enterprise affiliate network. You just need to become a member of the the network first and then you’ll have access to GNC’s affiliate program materials.
Having a third party involved (in the case of the network) ensures that you get credited for any sales you make and that you get paid on time.
(2) Weight Watchers
This is another big brand that gets a lot of exposure on television and in magazines, has a lot of celebrity endorsements and one that people who have always been diet-focused know or have at least heard about. If they haven’t then they’re the perfect customer to introduce to this well-known brand.
The company pays a flat $10 for referrals and has performance incentives meaning if you make a certain amount of sales, you’ll be entitled to bonuses. Also there are separate websites for other countries like Canada and the UK that have affiliate programs that pay in local currency.
The Weight Watchers affiliate program is accessible through CJ.com, an affiliate network where you can find many other big brand offers.
(3) Market Health
Market Health is an affiliate network that is dedicated to health and beauty affiliate programs. You can find lots of offers here to promote that you won’t find anywhere else.
A lot of the stuff are supplements based on superfoods like Graviola, Yacon Syrup and Garcinia Cambogia – stuff that gets lots of traffic whenever they’re mentioned on television by Dr. Phil and on news stations. The payouts on these supplements can be very good, some going up to $75 per sale. Just imagine selling just 10 of these per day or even in a month to be more conservative.
Market Health pays out twice per month, on the 1st and 16th and you can get your earnings through a check, bank deposit, Paypal or via a Payoneer Master Card.
How To Get Started
The first step to getting started is to forget about the Herbalife and the MLM model. You need to start researching and learning everything you need to know about affiliate marketing.
I’m betting you already know that there are also a lot of scams online and programs that will try to sell you the dream, blinding you with pictures of sports cars, millionaire mansions and yachts. I would hate to see you get mixed up in any of these so I’m going to recommend that you start with the same site that I used to learned about affiliate marketing.
It’s called Wealthy Affiliate and they can teach you everything you need to know about affiliate marketing. You’re reading this article right now, which is proof that their methods work. With access to Wealthy Affiliate, you’ll get step by step, task-based affiliate marketing training and also two free websites – one to build your main business and one you can try stuff out on.
The best part is that I won’t need to harass you to buy into Wealthy Affiliate. There’s no uplines and downlines or cold calling for me to do because you can check out Wealthy Affiliate by getting a free starter account. To find out more about why you really need Wealthy Affiliate, please read my full review where you’ll learn about my experience with the site and also see what other benefits you’ll receive by becoming a member.
In conclusion, with all the investigations and finger pointing going on, Herbalife is probably not the best choice right now to start a business. There are much better choices outside of MLM like affiliate marketing which can be easily learned and is very profitable even for ex-MLMers who have never made anything.
If you have experience with MLM, Herbalife or just want to weigh in on their current situation, your comments are welcomed below. I’ll also love to hear your questions about affiliate marketing so don’t be shy.