HIGH PRICES OF MLM PRODUCTS
Are MLM products overpriced?
Can they be purchased for less?
Are MLM promoters' claims about their supplements valid?
How do prices for products from MLM companies compare with alternative outlets?
Not very well. In spite of the claims of MLM/DSA communicators that most MLM participants sign up to buy the products at a discount or to resell them for “a little extra income,” the facts do not support either claim. MLM products purchased at wholesale prices are so expensive that few persons can be successful in selling them at retail prices for a profit. Also, since MLM sponsors have struck a deal with state tax commissioners, requiring sales taxes to be paid on wholesale purchases, and since shipping charges to one's home must be added, the margin is too slim to provide much incentive for direct selling to non-participants.
To check this out, I asked representatives from ten MLM companies for the prices of their "best reasonably priced formulation of multi-vitamin multi-mineral products, with antioxidant protection." Then I asked ten retailers of health foods likewise to give me prices for their " best reasonably priced formulation of multi-vitamin multi-mineral products, with antioxidant protection." Interestingly, representatives for each of the health food stores recommended a different product. Here are the results:
From MLM sponsors (including Pharmanex, Quixtar, Melaleuca, Shaklee, Usana, Isagenix, Sunrider, Herbalife, Arbonne, and Neways).
Ten separate products from ten separate retail outlets.
Average cost per person per month - retail prices
$61.22 (not much less at wholesale, after taxes and shipping are added)
$11.52 (including shipping)
The same observation could be made for other products and services offered by MLM companies – telecommunications, Internet services, fuel additives, financial services, etc. They must claim uniqueness and they must charge enough to support payments to a bloated organization of thousands of "distributors."
If you really want some specific MLM products, but don't want to pay exorbitant prices, there is another option some people are discovering – ebay. Ex-participants often seek to unload these overpriced "potions & lotions" – or other MLM products far below wholesale! Just click on the "Buy" tab, select the product category (such as "health & beauty"), enter the name of the company, click "search," and see what you get. Here are some examples: For Usana, I found (among a variety of Usana products) Healthpak 100 going for about $34 (US) plus shipping. For Pharmanex (Nu Skin), I found LifePak for $0.99 (US) plus shipping. Melaleuca's Vitality Mineral Complex was going for $2.01 (US) plus shipping.
Opinions of experts about "potions and lotions" typically offered by MLM companies
After studying over 400 MLM programs, it has become apparent that a typical strategy of MLM sponsors is to produce supplements that supposedly cure or prevent every disease under the sun. It seems nearly every MLM company lays claim to the latest and greatest supplement that cannot be obtained anywhere else at a comparable price. They even claim to “bypass the middle man,” when in fact with their endless chain of recruitment, they create thousands of middle men– all hoping for a share of commissions. (See "Typical misrepresentations used in MLM recruiting" and "5 Red Flags of a Product-based Pyramid Scheme" and other reports on this web site.)
I consulted three experts on the validity of typical claims by MLM companies about the superior benefits of their products, which are used to justify their high prices. To protect their professional reputations, I am not publishing the full names of two of them.
The first was Lane, a nutritional scientist and the former vice president of product development for one of the leading MLM's, who told me that the product claims of these companies are overblown and misleading. “The modern version of snake oil,” he called them. He said the supplement industry is rife with people making fraudulent claims, especially MLM promoters. He was very critical of MLM sponsors who promote products with exotic secret ingredients obtained from some remote island, etc. He said the best way to get needed vitamins and minerals is from a healthy diet.
The second was Allen, a nutritional formulator who has manufactured numerous supplements for both MLM companies and standard supplement companies that sell to health food stores. “This is a scumbag business,” he grumbled. He told of his desire to get MLM promoters to buy quality formulations, using top-quality ingredients. He said that In every case, they chose to cut corners so as to allow plenty of margin to pay their many levels of distributors. For example, if a product sold for $50, they would not pay over $5 in production costs.
The third is Dr. Stephen Barrett, a medical doctor who has spent many years exposing all kinds of health quackery. He also recommends a healthy diet as the best source of needed nutrients. However, there are special cases where supplementation is needed, and this should be done in consultation with your doctor. Read his report on Quackwatch. He also has done much writing and research on MLM supplementation. Check out his many articles on MLM Watch.
I have read reports that many nutritional scientists do take supplements, but usually in modest amounts, not megadoses. They often explain their use of supplements as “insurance” to make sure they get what they may be missing in their diet. But they buy reasonably priced supplements and focus on a nutritionally sound diet.
Does anti-oxidant supplementation extend life and improve general health?
A review of dozens of studies delivers blow to popular antioxidants. Researchers found that the popular antioxidant vitamin E doesn't lead to a longer life. Neither do vitamins A or C. But experts are divided on whether that means you should skip the pills altogether. (MSNBC- Associated Press, Updated: 4:18 p.m. MT Feb 27, 2007)
Antioxidant vitamins, including A, E and C, don’t help you live longer, according to an analysis of dozens of studies of these popular supplements. The new review showing no long-life benefit from those vitamins, plus beta carotene and selenium, adds to growing evidence questioning the value of these supplements.
Some experts said, however, that it’s too early to toss out all vitamin pills — or the possibility that they may have some health benefits. Others said the study supports the theory that antioxidants work best when they are consumed in food rather than pills.
An estimated 80 million to 160 million people take antioxidants in North America and Europe, about 10 to 20 percent of adults, the study’s authors said. And last year, Americans spent $2.3 billion on nutritional supplements and vitamins at grocery stores, drug stores and retail outlets, excluding Wal-Mart, according to Information Resources Inc., which tracks sales.
The new study, appearing in Wednesday’s Journal of the American Medical Association, was led by the Cochrane Hepato-Biliary Group at Copenhagen University Hospital in Denmark. The Cochrane organization is a respected international network of experts that conducts systematic reviews of scientific evidence on health interventions.
For the new report on antioxidants, the researchers first analyzed 68 studies involving 232,606 people and found no significant effect on mortality — neither good nor bad — linked to taking antioxidants. Read the full news report. (http://www.msnbc.msn.com/id/17364607/) Read also the report released on the Today Show. (http://today.msnbc.msn.com/id/17717679)
The latest trend in MLM products - exotic fruit drinks.
In recent years, several MLM companies have offered exotic fruit drinks, such as acai, goji, noni, mangosteen, aloe vera, etc. They are usually from exotic rain forests or other out-of-the way places, such as the Himalayas or islands of the South Seas. Typically, they are priced at multiples of prices for similar products from alternative sources. For example, a particular juice drink that may sell for $40 through an MLM company may be available from other sources for $10-$20.
Much of what is written above regarding nutritional supplements applies to these drinks. They are overpriced and overhyped by MLM promoters. Though they may taste great and be as beneficial as any other fruit drink, their promoters' excessive claims of magical health benefits are not supported by research.
To survive, MLMs sell products that are unique and consumable.
Since MLMs are structured with a bloated hierarchy of participating "distributors" ( or whatever they choose to call them), the prices of their products are high to accommodate them. So MLM founders typically select or develop products that are unique enough to make comparison shopping difficult for unsophisticated consumers. And since most purchases are by the participants themselves, and not the general public, products must be consumable - assuring repeat purchases by participants who must buy a specific amount of products on a regular basis to qualify for commissions and advancement in the scheme. These can be considered "pay to play" or incentivized purchases - and are what typically finances product-based pyramid schemes that are dependent upon recruitment of (and personal consumption of) a revolving door of recruits, rather than on sales to the general public.