Product Name: Herbalife
Product Owner: Herbalife International
What is it?
A ‘business opportunity’ that involves purchasing products and attempting to sell them to others, as well as recruiting others into the system.
Update 2016: As a business opportunity, I still don't like network marketing and don't recommend Herbalife as a way to make money online. However, I recently had a chance to try their chocolate mint meal replacement and it was pretty damn tasty.
Too pricey for me to buy on a regular basis, and the health benefits are way overblown, but I can't deny that the consistency and flavor was pretty amazing.
Herbalife is often called a pyramid scheme, with good reason. Distributors purchase products from the person that recruited them, while earning commissions from sales and from the people that they recruit. For the majority of people, this system results in a substantial loss of money, and the only real way to earn money is to be unethical and misleading. Even then, actually earning money is far from guaranteed.
Before You Buy
Be aware that Herbalife is actually much more expensive than it seems, particularly if you just plan to sell products, rather than to recruit people. The expenses for this system can add up quickly and you are likely to have to spend a considerable amount of money before you have the potential to make any money.
What I Liked
The only thing I really like about Herbalife is the products that the company offers. Even then, the products are overpriced and available on both EBay and Amazon, making them even more difficult to sell.
What I Didn’t Like
Herbalife has been the target of a number of articles by newspapers, and online news sites, including The Huffington Post and NBC News. This should be a really big indication that there is something major wrong with the structure of the business and the potential to make profit.
Any money making product that requires a significant amount of investment up front is something you should approach with caution. Investing is often needed to improve your own business or to develop a business further, but spending a lot of money before you even know whether a system works is a risky move.
Herbalife technically costs around $60 to get started with the company, but this figure hides many additional costs. For example, distributors are encouraged to spend $4,000 to reach supervisor level – which offers better discounts and more profits (in theory). Distributors who operate at that level, must pay an additional $2,500 purchasing products each month to continue to get their discounts.
The Huffington Post article on the company estimated that distributors lose anywhere from $1,000 to $10,000 investing in the system, with the average loss being around $3,000 – in addition to the loss of time.
This makes Herbalife a huge risk and one that simply isn’t worth it.
MLM, Pyramid Scheme or Legitimate Business?
Herbalife has often been compared to a pyramid scheme or a multilevel marketing scheme, although the organization claims that it is a legitimate business.
One of the most significant things to consider is that Herbalife really does sell actual products, and some of these products are popular. This is a bit different than a pyramid scheme, because a pyramid scheme generally doesn’t involve actual products.
However, this doesn’t stop Herbalife from being a MLM – far from it, because what is significant about a MLM is its structure.
If you were a distributor for Herbalife, you wouldn’t be interacting with the company, you would be interacting with the person who recruited you, and they interact with the person that recruited them and so forth). Likewise, if you recruit someone to the company, they interact with you.
This is significant, because for Herbalife, you get your product from the person above you, who makes a commission from the sale. Then you are responsible for selling the product you have purchased. Because of this, you need to actually purchase products to begin to make sales, and there is no guarantee you will actually make any sales.
With the amount of people trying to sell Herbalife products to start off with, actually making sales can be quite similar. As the NBC article pointed out:
Most people who actually make money from Herbalife do so by recruiting other people to the company, which is a typical MLM structure.
It is also very unethical.
How would you feel about recruiting people to a company where the only real way of making profit is to recruit others? It’s also an impractical system, because the further down the list you are, the less profit you are going to make.
In time, systems like this will run themselves out, because making profit requires a steady supply of new distributors. As more and more people struggle to make money with the system, its negative reputation will increase, and this will act to dry up the pool of potential distributors.
An indication that this is already happening comes from the Huffington Post article on the company:
This strongly suggests that Herbalife is not actually a good business opportunity at all.
Herbalife versus Affiliate Marketing
As business opportunities go, a much better option is an approach called affiliate marketing. Like Herbalife, you are selling someone else’s products and earning a commission, but this is where the similarity ends.
With affiliate marketing, there is no upline or downline, and the initial investment needed is much lower. In fact, it is even possible to succeed at affiliate marketing with no investment at all if you are prepared to teach yourself.
You also don’t need to purchase any of the products you are selling. This means you don’t have to manage physical products, and you don’t lose money if no one purchases them. In fact, the only real risk in affiliate marketing is that you will lose the time you put into it.
Even then, success at affiliate marketing is much more likely, as the market is not saturated – because there are so many different markets that you can compete in.
Schemes like Herbalife are only ever effective for people who got in early to the company. If you were a seller and anything ever happened to Herbalife (such as government intervention or customers drying up), you would completely lose your business. Sounds like a regular job to me! Being successful at your own business really involves being independent and developing a business that can withstand any dramatic changes.
This is why I recommend affiliate marketing, because you have complete control over your own business, and you can invest as little as much as you like. With affiliate marketing, your potential to make money isn’t dependent on anyone else, which means that your growth potential is pretty much unlimited. There are a lot of different ways to get started in affiliate marketing, but this is my personal favorite.
Whatever type of product you decide to promote, it's important to own your own website to grow your business.
Parties only work if you have a network of friends with money in their pockets. Network marketing only works if your friends are interested in joining business opportunities.
With a website you can reach the entire world, and only promote great products to people interested in what you have to say. Plus, you open up doors to multiple streams of revenue like affiliate sales, ad click revenue, paid advertising, and even selling your own digital products.