As we have seen from their own numbers, only a very small number of members will make a significant income. You will need to sell a lot of pills to make back the money you have invested. These royalties are based on total volume point value of downline purchases,regardless of whether those distributors actually sell the product. The first one is more typical than the second. Not the worst place to work.
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In particular, there have been many Latino leaders who have become increasingly concerned with Herbalife's predatory business practices and how the company targets the Latino community in a methodical and calculated manner.
If Herbalife is profitable, why should anyone be concerned? What does it matter if the company is a pyramid scheme , some wonder, so long stock price keeps going up? Aside from the fact that pyramid schemes are illegal, the real problem with a pyramid scheme like Herbalife is that the company's profits are generated by committing massive fraud against the company's own distributors.
From the standpoint of a civil rights organization like the League of United Latin American Citizens, this is wrong no matter what the company's stock price is.
Herbalife's business model is far different than every other legitimate business in America because at Herbalife, a distributor's compensation is driven not by how much product they sell to retail consumers, but on how successful they are in recruiting other distributors into the "business opportunity". The vast majority of income generated by the company is from the products purchased by new distributors duped into buy their way into the business. At Herbalife, the company's end users and distributors are one in the same.
I have spoken to many of Herbalife's Latino distributors, both at the company's recent "Extravaganza Latina" held in Los Angeles for thousands of their Latino distributors, as well as in the Latino neighborhoods that the company's , U.
And the stories they told me present a truly alarming picture. These distributors have told me that the only way a distributor can succeed in Herbalife is to recruit new distributors and that the most successful distributors are the ones that become "recruiting machines. In Herbalife's pyramid scheme, distributors building their downline are incentivized with bigger commissions to lure new recruits to come in at the highest level possible.
The vast majority are not able to sell much at all and most are never able to recoup what they spent to get into the business and maintain their level. Eventually they realize that it is pointless to keep throwing good money after bad and 90 percent quit within a year. Some have lost much more and these figures do not count the hours they spend trying to sell the product and recruit new distributors and the expenses they incur beyond purchasing Herbalife's product.
While it's true that starting your own business is fraught with risk and many if not most small businesses fail, the difference with Herbalife is that the losses suffered by their failed distributors fuel the company's profits because the losses are incurred by company incentives and policies that force their distributors to purchase more product than they can sell.
Ninety-nine percent of Herbalife's distributors will lose money in the scheme. Unfortunately, the few "successful" distributors are those that have learned how to become recruiting machines -- deceiving their friends, family members, co-workers, and just about anyone who will listen to them into paying money to join a "business opportunity" that is destined to become a financial loss for the vast majority.
Herbalife, for its part, refuses to report how much of its product is sold at retail to non-distributors and how much revenue they generate from signing up new distributors.
They refuse to disclose the average net profit or loss of Herbalife distributors. Herbalife runs other promotions, including non-cash promotions that occur regularly throughout the year and are designed to inspire large purchases. Several times a year, Herbalife runs promotions with high qualification thresholds, usually lasting for 3 or 4 months to win a cruise or vacation.
Upline distributors use these promotions as opportunities to pressure downline distributors to buy large quantities of product. Promotions like these reward those at the top of the pyramid by encouraging those beneath them to make product purchases even when no end customer demand exists.
It is complicated, structurally designed so that the only way to make any real money from the company is to sell others on becoming Herbalife distributors. They, in turn, can really only make money by recruiting their own downline and getting them to do the same. The confusing scheme obfuscates the probability of success and makes it easier for the company to recruit. Because the compensation plan is complicated — and rarely thoroughly explained — millions of people every year sign up for an opportunity that will rob them of time and money and leave them far short of becoming the millionaires they thought they might be.
Pershing Square currently maintains an investment position in the common stock of Herbalife Ltd. Pershing Square may change its views about or its investment positions in Herbalife at any time, for any reason or no reason, and at any time may change the form or substance of any of its Herbalife investment position.
The information and opinions contained in the Website are based on publicly available information about Herbalife and other companies. Although Pershing Square believes the statements it makes in the Website are substantially accurate in all material respects, Herbalife and others may dispute the accuracy of such statements.
Pershing Square makes no representation or warranty as to the accuracy or completeness of these statements, and expressly disclaims any liability relating to these statements. The statements Pershing Square makes on the Website are not investment advice or a recommendation or solicitation to buy or sell any securities. Herbalife shareholders and other investors should conduct their own independent investigation of Herbalife and any other companies to which these statements or communications may be relevant.
The Old Herbalife The Perpetrators. The Herbalife Compensation Plan. View the Herbalife Plan. Here is a slide adapted from an Herbalife video explaining the marketing plan.