What is Retail Sales for MLM Companies?
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Imagine reading the 10K of a retailer like Sears, Walmart, or K-Mart and trying to make sense of the following language, from the most recent 10Q from Herbalife:
"A key non-financial measure we focus on is Volume Points on a Royalty Basis, or Volume Points, which is essentially our weighted unit measure of product sales volume.
It is a useful measure for us, as it excludes the impact of foreign currency fluctuations and ignores the differences generated by varying retail pricing across geographic markets.
In general, an increase in Volume Points in a particular geographic region or country indicates an increase in local currency net sales."
What is Herbalife trying to say here? I have no idea, but then I only have a PhD in decision theory and a law degree.
Now imagine that you read further in the 10Q and discovered that Sears, Walmart or K-Mart sold to their customers at $X, but called it a "wholesale" price, expecting that their customers would then re-sell what they just bought for $2X.
That would be odd.
Next, you found out that neither Sears, Walmart, or K-mart actually kept track of whether their customers could, would or actually did engage in re-selling, but insisted that they were selling at a discount to retail. Even though they had no idea who sold retail and for how much.
Again, that would be very odd.
This the picture of Herbalife, according to Robert Fitzpatrick's recent report for Minkow's FDI.
Robert writes:
"Herbalife announces at the very beginning of its 10K and repeats this statement throughout about selling its products "through" 1.7 million "distributors."
Does it?
In fact, almost not at all. The claim of having "independent distributors" is a ruse.
It is a cover-up of the reality of an endless chain recruiting scheme. The distributors do not distribute.
They just purchase, and some recruit. Herbalife does not sell "through" them, because there is no end-user base.
If one exists, it is not described in the 10K. Indeed, as noted earlier, Herbalife claims that more than 500,000 of the "distributors" are just "discount buyers". How many consumers are Herbalife retail buyers?
No one knows. Herbalife does not track its own end-user customer base!"
Robert claims that Wall Street analysts have not asked the correct question: how many retail customers are there for your product? How many distribute the product at the full retail mark-up? Are you only selling primarily to your distributors, engaging in the marketing fiction that you are selling to them at a wholesale price?
Advertising that a good is 50% off, when it is never sold at the 100% price may be grounds for a false advertising claim, in either Canada or the US.
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Read More From BizOp News
June 25, 2008
How You Can Solve Your Work Life Balance Problem
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" Lopez, twenty-nine, lives in Springville, Utah, with her husband and two children. She's got a college education and a full-time job as a manager at a flexible-packaging manufacturing company.In 2004, when she was a sales assistant for her company, she started to really hate the grind. She missed her kids, who were home with her mother-in-law all day, and she almost never saw her husband, who was still in school and working nights.
So she did that thing we've all done when we don't know where else to turn for help: She went online.
She found a site that asked all the right questions and offered all the right answers. Tired of working that dead end job, need extra income or want the financial freedom to stay home with your kids or take a vacation? reads one site that Lopez pointed out is similar to the one she saw four years ago. There are a million work at home opportunities ... and you need no prior experience to be successful. "
The article is unfortunately vague on how Lopez found the website; I am assuming that she wasn't googling "work life balance", or she might have found a useful website like this one describing the work life balance problem for Canadian women.
Having found out that the solution was Herbalife, I am also assuming that she didn't google "herbalife scam" to find out about the real earnings of the average Herbalife distributor - whether her goal of $1500k a month was reasonable. Well, oddly it is not a reasonable goal.
I also assume that she didn't google "FTC New Business Opportunity Rule", where she would have found a wealth of information which would have alerted her to the dubious sales pitches that she was listening to. Found out the front-loading is not legal.
So what was Lopez thinking?
The answer to readers of this blog is obvious: the commitment to the phantom dream.
Listen how Lopez explains it:
"It was a baby step, but one that led her into a sophisticated web of lies and deception. "I wanted it so bad," she says."I wanted to be able to help support my family and to be able to raise my kids myself and not have someone else do it."
No amount of regulation, government oversight or laws can prevent you from engaging in self deceit. But you first have to spot that you are fooling yourself.
In this particular case, the husband was still at school. Alright, that isn't going to last forever -unless he is pursuing a PhD in Philosophy on his way to becoming an attorney.
What discussions did Lopez and her husband have before having the children about work life balance?
What could have made work more interesting, satisfying or more useful?
But dreaming of having "it all" is a the classic sucker's pitch. (Do read the entire article, and comments.)
