Losing Money in Herbalife

I talk frequently about how almost everyone loses money in multi-level marketing schemes. Companies like Mary Kay, Herbalife, Amway, and Avon want you to believe that money is being made from retailing the products. They say they are not pyramid schemes because they have legitimate products that can be sold for a profit.

Unfortunately, almost no one profits from MLMs, and certainly not from the sale of MLM products. Why? Because there is only a tiny market for bona fide retail sales. Very little actual retailing of products occurs. The vast majority of the “product sales” are from the MLMs to their distributors, rather than third-party consumers.

But the companies have a vested interest in getting consumers to believe their lies. If consumers didn’t believe the products were being retailed, they’d never sign up as distributors. Oh sure, some retailing goes on. But it is a very small amount, and is usually not at full retail price. Mary Kay says it’s simple: Buy a product for $1 and sell it for $2. You’ve doubled your money! But it’s nearly impossible to sell at full retail pricing, especially when tens of thousands of products are being dumped on eBay at or below wholesale pricing.

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