Usana is multilevel marketing
Who will benefit from multi-level marketing?
Not only Professor Zacharias conducts studies on MLM, also Dr. Jon M. Taylor, President of the Consumer Awareness Institute and Director of Pyramid Scheme Alert, studies Multi Level Marketing through surveys.
While Mr. Zacharias uses an anonymous online form that is accessible to everyone, the MLM dealers and others. asked about their income (of the roughly 500,000 German MLMers answered "over 2,000", the "representative" 'Network Marketing in Germany 2004 study' conceals the exact number of participants and describes this participation as "overwhelming!"), Mr. Taylor interviewed the very same people who know the income of MLMers in detail by profession: 200 accountants and tax auditors from the states of Utah and Idaho, real homes of MLM. In Utah, the US state with the highest concentration of MLM companies, household surveys were also carried out.
Dr. Jon M. Taylor kindly allowed us to publish a summary of his study, which was published at http://www.mlm-thetruth.com/tax_study.htm.
Summary of the study by Dr. Jon M. Taylor
- Direct sales to customers by MLM "dealers" (in quotation marks, because these are primarily Buyer and not Dealer are extremely rare, even in Utah. Contrary to what they claim, almost all MLM companies are not direct selling companies. Instead, most sales are made to recruits who are led to believe that MLM is a "business opportunity" and that through aggressive recruiting and continuous product sales, they will qualify for increasing commission levels.
- The recruitment takes place mainly outside the state of Utah, probably because the market saturation in Utah de facto declines entry into the MLM. That's why MLM recruiters go to other countries and move from one country to another to keep the system running.
- The commissions paid by the companies to the "dealers" are insufficient to cover their expenses, so that - with a few exceptions at the top of the hierarchy - almost everyone loses money. Based on an extensive analysis of publicly available documents, around 99.9 percent of all participants below the top of the pyramid lose money. Big commission checks are only given to the people at the top of the pyramid, many of whom live in Utah.
- In countries where no MLM companies are located, the participants in MLM programs did not report any significant profits to the auditors and tax auditors, which is why many auditors see MLM as a scam, ultimately achieved in any serious industry a fair percentage of those involved make a profit.
- Prospects are taught that they can make significant income and that they will gain "temporal independence" by investing in this continuous product sales program.
- Combining nutritional supplements with MLM as a marketing system doubles the chances of cheating on consumers. Consumers (at least in Utah) are not adequately protected from "recruiting MLM companies" by law enforcement and are therefore prone to exploitation in the sale of nutritional supplements, also because of the liberalization of legislation.
- MLM companies that are traded on the stock exchange, when they claim to sell directly to end customers, represent their core business in a misleading way: in fact, they mainly sell to "dealers" - at a lower rate Hushing up a profitable "business opportunity".
Are MLM companies (multi-level marketing or network marketing companies) serious? Or is it pyramid systems in disguise that make a few at the top of the pyramid rich - at the expense of many ignorant victims in the downline? If the latter is the case, then consumers, the press, consumer protection associations and investors (in the case of listed companies) have been duped into gaining legal and moral acceptance when this is in fact not justified.
Who makes money with Amway / Quixtar, Nu Skin, Usana, and the myriad other MLM programs, anyway? Until recently, there were few reliable numbers to support claims, for or against. Previous attempts to get MLM companies to publish reliable numbers met with little approval , while published data were often misleading . However, there is a group of experts who know exactly who is currently making profits: the auditors, accountants and tax auditors.
In a phone call, we interviewed more than 200 tax auditors in Idaho and Utah, a stronghold of MLM. We also conducted surveys of randomly selected households in the Utah district, which has the densest population of MLM businesses in the country. The results lead to the following summary:
In the revenue-generating districts, the success rate for MLMers has been so miserable that the chance of making a profit at the Las Vegas roulette table seems like a safe bet by comparison. Even with clearly illegal pyramid schemes without product sales, the chance of success is higher!
Look over here: "WHAT'S THE GREATER EVIL?"
Chance of winning in%
Chance of loss in%
Average chance of making a profit on a clearly illegal pyramid scheme with no products
Chance of a roulette win when wagering on an integer in Las Vegas
Average chance of making money among the 6 MLM companies for which data was available
No. of tax preparers
Aggregate total tax returns in 2002
Approx. no. of clients in MLM in 2002 (@ 6%) 5
No. of tax returns which showed a profit in MLM
Counties with NO MLM HEAD-QUARTERS (all tax preparers)
Tooele County (western Utah)
Uintah County (eastern Utah)
Grand County (southeast Utah)
UTAH COUNTY - county with highest concentration of MLM companies in the country
Reported by (non-CPA) tax
preparers in Utah County
TOTAL Utah County (includes both CPA s and non-CPA s)
1. "Network Marketing Payout Distribution Study," Consumer Awareness Institute, 1999. Available from the author.
2. "Report of Violations of the FTC Order for Nu Skin to Stop Misrepresenting Earnings of Distributors," filed with the FTC, Jan. 2003.
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