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Welcome back! Let continues our Herbalife review Coffee Talk.
We have discussed the FTC finding on Herbalife a pyramid scheme, you can follow the link to read our prior discussion.
Now, we are talking about “Is Herbalife a scam?”
In this session, we will touch on the following topics:
- A brief discussion of what is Herbalife? (For those that do not know)
- How to become a Herbalife distributor? We’ll discuss the costs, compensation plan, earnings potential, profitability.
- Last, we’ll discuss the most debated issues, is Herbalife scam, or legit business opportunity? Should you invest?
Tired Of Scams And Pyramid Schemes?
Do you know or heard of Bill Ackman?
Well, Mr. Ackman is the CEO and Portfolio Manager of Pershing Square Capital Management L.P.
What significant was in December 2012, MR. Ackman made a bet that Herbalife will collapse, the company stock will hit zero, Because, Herbalife is a sophisticated pyramid scheme…
Mr. Ackman is, basically, calling Herbalife a scam!
Fast forward today, Herbalife is a Billion-dollar company, and still going strong.
On February 2018, Mr. Ackman conceded his defeat and accepted that “Herbalife is not going to collapse.”
You would have thought this put an end to the debate, “Is Herbalife a scam?”
However, it does not… because Mr. Ackman still contends that “Herbalife is a scam!” and advises people not to invest in the company.
So, what does this say about us as an investor?
Are we not smart enough to see the Herbalife scam? Or
We just don’t care, as long as we can make money, scam or not… who cares?
What do you think?
I leave this to you.
So, What Is Herbalife?
I asked Steven to give me a brief description of “what is Herbalife when he decided to join?”
Back in those days, Herbalife was a great opportunity for people to make money from home, working part-time.
It was also a hot business opportunity, because it was… one of the few companies offered weight loss, or weight management, products…
This was at the start of the “Living Healthy” movement.
It was hot, everyone talked about Herbalife, everyone wanted to get involved… that how I started with Herbalife.
OK, so, Herbalife is a manufacturer and distributor of nutritional and supplement products, like protein shakes, protein bars, teas, aloes, vitamins, energy, and sports hydration,
When you become a Herbalife distributor… you are essentially distributing or retailing Herbalife exclusive nutritional products.
That’s the idea, said, Steven…
But, you are doing this under a Multilevel Marketing (mlm) business model?
That’s correct, Steven replied.
So, when you signed up to become a Herbalife distributor,
Didn’t you know Herbalife is an mlm?
No, I joined… because Herbalife compensation plan seems to be a perfect way for me to get rich, that’s how Herbalife promoted it.
But, you never get rich? What went wrong Steven?
It’s a long story.
I have time for a long story, Steven.
It all begins with me wanted to start my own business.
How to become a Herbalife distributor?
One day, a friend introduced me to a Man, looking for a business partner.
It turned out, he was a Herbalife distributor.
That was the first time I heard of Herbalife, and it mlm business opportunity.
You didn’t know anything about mlm business, back then?
No, Steven answered… It was all new, exciting, and promising opportunity… I don’t know, but the thought of recruiting others into the business seems to be exciting and fun.
So, you joined Herbalife.
Yes, the man sponsored me, and I became a Herbalife Distributor.
Before you continue, Steven… Can I ask, is your sponsor still with Herbalife?
No, he left before me, and I never heard from him since.
Do you have to have a sponsor to become a Herbalife distributor?
Yes, that the requirement, if you don’t have one, Herbalife will find one for you… You can just visit the Herbalife website to request for a local independent distributor… they’ll contact you quick… I promise, Steven smile.
What’s the purpose of having a sponsor?
The sponsor is the person that supposes to help you launch your own Herbalife distribution business, they are your upline, your recruiter.
Well, my sponsor, as I found out… didn’t help me with my Herbalife business. He is just a salesman for Herbalife, and himself.
OK, you have a sponsor, what’s the next step?
I had a face-to-face meeting with my sponsor to go over the business plan.
He supposed to explain to me how the Herbalife distributor business works and my compensations…
BUT, as I remember now, we never talked about any of that, we discussed how I could become rich with Herbalife, what is like to have a lot of money, and how much he loved Herbalife… and more nonsenses.
I ended up signing the paperwork, paid my fee for a starter kit… “I am in business!”
It seems like you don’t even need a sponsor to become a Herbalife distributor.
Like I said, Steven continues, the sponsor is there to sell you some Herbalife products, nothing else.
How much does it cost to become a Herbalife distributor?
Are you asking the cost for a starter kit?
No, I am asking the total, all, costs to become a Herbalife distributor.
I don’t know the cost for a starter kit today, But I can tell you, purchasing the starter kit is just the beginning, your real cost is buying products, more products.
I did some research and here’s what I found:
You have the option to purchase one of the two Herbalife distributorship kits,
- The International Business Pack ($94.10), or
- The International Business Pack – Super Starter ($124.10)
However, if you’re a preferred member, customers who had paid $34.95 to receive price discounts, the cost to become a distributor is $59.95.
You can see, the initial cost to become a Herbalife distributor is not expensive… But, according to Steven, the real costs are in purchasing inventory…
I want to focus our attention on this part of the Coffee Talk because Steven offered exclusive information that only a Herbalife distributor would know.
Steven will explain how inventory becomes a major cost to your Herbalife business. But first, we have to learn about the Herbalife compensation plan.
Let, get to this part of our discussion right now,
Herbalife Compensation Plan
You are telling me… Herbalife compensation plan is the reason distributors end up purchased a lot of products.
Yes, let me give you and the readers an overview of the Herbalife compensation plan, then I’ll explain how the system works.
(You can download a PFD version of the Herbalife compensation plan to follow along.)
As a Herbalife Independent Distributor (HID), Steven continues,
When you’re starting out with no downline, the only option to make money is from,
Retail Profit, it’s basically buying the products at discount wholesale prices for resale… you receive a 25% to 50% discount, depending on your rank,
Here’s how the discounts work:
- Herbalife Distributor: 25%,
- Qualified Producer: 42%,
- Supervisor: 50%
BUT, to get promoted to a higher rank with bigger discounts, you have to meet the Personally Purchased Volume (PPV) requirement.
This means you must purchase products, right?
That’s correct, TQ, Steven continues, you got promoted based on how much you purchase each month:
If your PPV is 2,500 or more, Herbalife promote you to Qualified Producers, all your product purchases are now 42% discount,
to get the Supervisor level, earning a 50% discount, your PPV must be 4,000 in 1 month or 2,500 in two consecutive months.
OK, Steven, let me make it simple for all of us to understand, the more Herbalife products you buy, the bigger the discounts?
So, this is basically, “volumes discount”, I don’t see anything wrong with it!
Wait, TQ, let me continue… Steven smile.
Now, the second income with Herbalife is called, “Wholesale Profit.”
Wholesale Profit is the difference between your discount rate and the discount rate of members in your personal team.
Let me explain if you’re a Supervisor, your discount is 50%… you recruit a new distributor, his discount is 25%… when he purchases Herbalife products, you earn 25% (50-25).
OK, let me put this in dollar terms, to help us understand a little better…
- When a distributor purchases $100 worth of products, he immediately receives the 25% discount, $25… he pays $75,
- from the $75, Herbalife then pays the Sponsor, the Supervisor rate 25% or $25.
Yes, that’s how the system works!
Oh! I understand now, as a Herbalife Sponsor, you want your downlines to purchase more and products… the more they buy, the more money you make.
But, isn’t that how mlm works?
Maybe, I don’t know about other mlms, but the problem with Herbalife is, Sponsors are only interested in selling products, not helping distributors.
But, why distributors have to buy?
I know you’re going to ask, Steven said… TQ, looks at the discount, who doesn’t want to get 50%,
My Sponsor told me, or a Herbalife Sponsor would say to a distributor,
“If you want to make money, you must become a Supervisor, to get the 50% discount… you cannot resell your product when someone else can purchase at a cheaper price!”
It sounds like a smart business strategy… Buy at the lowest price (50% discount) to sell at retail price… Every distributor would follow the Sponsor advice and purchase 4,000 PPV worth of Herbalife products.
It is good business advice, (buy low – sell high).
So, what’s wrong?
Well, Steven took a deep breath, the problem was, I didn’t know where to resell the products, or how to resell them?
Every Herbalife distributor faces the same problem… We have a lot of products with nowhere to sell.
Adding on top of this, every month, distributors must maintain a PPV of 2,500 to continue receiving the 50% discount.
So, we keep on buying more Herbalife products to maintain the Supervisor level.
So, what happens to your Sponsor?
After you became a Supervisor, then you’re on your own, Steven replied, then he continued,
This is because of the Herbalife compensation plan.
After distributors became Supervisors, Sponsors only make 5% commission, max, from the Supervisor purchases. This is called “Monthly Royalty Override Income.”
If you look at the Herbalife compensation plan, a Sponsor makes the most money from the distributors, 25%… When the distributors get promoted to Supervisor, the Sponsor only makes 5%…
TQ, tell me, as a Sponsor, why do you want to help the Supervisors? You want to go out and recruit more? That’s how you make money with Herbalife.
Let me see if I understand you, Steven,
you’re basically saying, Herbalife compensation plan encourages and pays more for new recruits.
Yes, even the FTC agreed with this and fined Herbalife $200 Million.
So, Do you consider Herbalife a scam?
From my point of view, Herbalife is a scam… But who cares what I think.
Nobody listens to Mr. Ackman, why should they listen to me!
From my experience, all I can say, it’s very difficult to make money as a Herbalife distributor.
You have to be a super talented recruiter to make money with Herbalife… Steven said, “The money is in recruiting, not selling Herbalife products!”
I cannot lie to people, and I don’t want to put others in a financial ruing, So, I left Herbalife…
I had to end our conversation with Steven…
I told Steven that I have an appointment to see a house,
“I am planning to buy a bigger house on the lake for my family, and I am looking forward to meeting the Realtor.”
I have to go too, Steven replied, but it was good catching up with you, TQ… You know, I read your blog too!
Oh, thank you, Steven, any suggestion?
No, I want to learn how to become a writer like you, Steven smiled.
It cannot be that simple, TQ!
Yes, if you can write, you can make money online as a writer.
But, will you explain to me more next time we meet, TQ?
I will, promises! It’s very simple… You see.
Ok, bye Steven… Goodbye to you too.
We’ll talk more next time.
Hopefully, you join me and become a writer by then!
So, what do say about Herbalife?