21st-Century Pyramid Schemes
How multi-level marketing companies, especially Herbalife Nutrition, continue to thrive in the modern world
Written by Megan Mullaly
Have you ever girlbossed so hard that you found yourself craving a mega-tea from your local nutrition shop? Yeah, the one owned by a Pinterest Mom you’ve definitely never seen around town. Have you ever stopped in because you were feeling like a good Samaritan that supports small businesses, only for the amateur salesperson behind the counter to say, “If you upgrade to a tea and a shake, you’ll get a dollar off!” Well, if this eerily specific situation sounds familiar, you may have fallen for one of the most prolific “pyramid” schemes to date — Herbalife Nutrition.
While Herbalife is not technically a pyramid scheme (because they are illegal in the United States), it is a multi-level marketing business (MLM), which closely resembles the outdated — and illegal — pyramid scheme model. According to Forbes, multi-level marketing is “a method of selling products directly to consumers using independent sales representatives.” MLMs claim to provide these representatives with independence and financial freedom, but a closer look reveals how these claims are more than a little shady.
MLMs often market themselves to young women and stay-at-home moms looking to “take control of their lives.” They advertise heavily discounted rates as a small price to pay for these women to kickstart their very own small business. However, new MLM representatives quickly find that the promise of independence and wealth may have been too good to be true. MLM products are often priced relatively high, which makes them difficult to sell to people outside of the close friends and family who take pity on you. If a representative is lucky enough to clear out their inventory, they soon discover that they have to pay in order to obtain more products to sell.
In most circumstances, representatives find themselves sinking more money into the startup and product costs than they are able to recuperate through sales. After discovering that selling their MLM products is not as lucrative as they had hoped it to be, many representatives become desperate and veer towards the only other way to make money through the MLM business model — recruitment.
Was your mom ever invited to a Mary Kay party thrown by the stay-at-home mom up the street? How about a Pampered Chef party put on by the secretary of your elementary school’s PTA? Did she come home with a 3-inch introductory binder and a box of samples? Unfortunately, it is likely that she was swindled into starting a small business of her own.
Before social media, MLM consultants often threw parties to sell products and convince their guests to get involved. However, these party guests were unaware that their recruitment was the only way for their friend to recuperate their money lost to the MLM overlords. Following the rise of social media, MLM representatives have been able to reach a wider audience, which is why you’ve been receiving so many Instagram DMs from your old high school classmates saying, “Hey girly — let’s catch up! I have an amazing new business opportunity for you!” They shifted from MLM parties with the few friends that have yet to unfriend them on Facebook to building a social media empire, complete with heart emojis and motivational quotes they stole from Pinterest.
While social media provided MLM representatives with the avenue they’d been craving, it didn’t take long to bring on its own downfall. Many users weren’t afraid to comment on the parallels between pyramid schemes and MLMs when they were protected behind an internet profile. These comparisons spread quickly, as things often do through social media, and MLM businesses became the target of widespread criticism. Many social media users became familiar with MLM companies, such as Arbonne and Scentsy, and were well aware of the warning signs associated with an MLM representative’s social media.
This awareness and mass criticism led representatives from one MLM company — Herbalife Nutrition — to shift from social media selling to brick-and-mortar stores. These nutrition shops have similar names, such as My Town Nutrition, and a generic girlboss atmosphere, even though there is no apparent connection between them. They sell mega-teas with no nutritional value and tempt customers into purchasing $8 shakes, all while customers are oblivious to the fact that they are made with Herbalife products.
While some of these nutrition shops, such as Cleveland State’s very own Downtown Nutrition, are ways for Herbalife representatives to sell their products, others market themselves as “Nutrition Clubs” where the main goal is to recruit new representatives. Herbalife even has a 30-page Nutrition Club Guide that details how to attract new customers and grow your club — ahem, recruit new representatives.
While my disdain for Herbalife Nutrition and other MLMs may be obvious, I do my best to separate the company from those representing it. Most of these representatives were drawn by promises of independence and financial freedom, but wound up trapped in the never-ending money pit that are MLMs. The exact numbers are unknown, but it is estimated that most Herbalife Nutrition Clubs bring in around $2,000 a month. This total does not account for any expenses the club has to pay, such as rent. Unfortunately for Herbalife representatives, this $2,000 is often less than what it costs to run their businesses.
If you genuinely enjoy their products and don’t mind paying the absurd prices associated with them, then Downtown Nutrition and other Herbalife Nutrition Clubs may be the place for you. However, I caution my fellow girlbosses to be aware of the warning signs and do extensive research before getting involved with multi-level marketing businesses, as they are often too good to be true.