The following has been sent to ValueWalk by a very trusted source on Herbalife
An extremely interesting development with Herbalife Ltd. (NYSE:HLF). They have decided to shut down ALL independently run Herbalife retail websites , effective October 8th.
Some background on internet sales – in the past Herbalife Ltd. (NYSE:HLF) distributors were able to sell on the internet with some rules, such as no one can use auction sites or use paid search terms on google. Despite these limitations, some HLF distributors were able to create/design websites that were highly effective at producing sales.
From what we hear, this new rule (which is being enacted to “maintain the integrity of the brand” – noticed attached) will suffocate a number of HLF distributors who have found a way to sell directly to consumers that only have an interest in the product, not the business opportunity. These distributors typically sell at huge MSRP discounts and with no shipping. As a result, we hear anecdotally they account for a large percentage of HLF’s total sales and rake in tens if not hundreds of millions of dollars annually.
Some of the HLF distributors are so upset, that they have created on their own a website to highlight and condemn the change: http://www.herbalhappy.com/. These people feel that they created a successful business through Herbalife Ltd. (NYSE:HLF) and now it is being stolen.
Why would Herbalife want to do this: shut down successful enterprises that sell their products in large quantities? First, these websites would seem to PROVE there is some desire for the product. You would think that HLF would be doing everything it could to promote that people do indeed want to take HLF supplements and shakes. Instead, they are choosing to suffocate these businesses.
This is a bizarre decision and we have our guesses as to why they are doing it. Primarily, it ruins their business model. They don’t want to discourage the uninitiated – they want people to enter the business opportunity and not just buy the products directly. Plus, if mid-level Herbalife Ltd. (NYSE:HLF) distributors succeed like this (which some are), it means that their upline won’t do as well because they get less bonuses/royalties and their downlines are less likely to keep recruiting since they have found other ways to monetize the product. The HLF pyramid structure can’t allow this.
Tellingly this ban ONLY applies to people trying to make retail sales. Unsurprisingly, Herbalife Ltd. (NYSE:HLF) still allows for websites that promote face-to-face meetings (trainings, nutrition clubs, etc.). This makes sense since PSCM’s contention has always been that all HLF care’s about is the recruiting element. You can only really recruit through in-person connections and personal relationships – which is why the other websites are still actively promoted.
Herbalife’s online sales through GoHerbalife.com
To support our Independent Members’ product retailing efforts, Herbalife Ltd. (NYSE:HLF) hosts and provides Members with the opportunity to have their own professionally designed, customizable retail website on GoHerbalife.com. This platform provides Members with the most up-to-date product information, product descriptions, and flexible shopping cart features that enable Members to sell the products at any price they choose – all at no cost to our Members. The websites are designed to be in compliance with applicable requirements about product claims and they provide a consistent brand image for Herbalife® products. Existing customers can shop a Member’s GoHerbalife website using their established username and password, while prospects directed/referred to a Member’s site can apply for an account with just a few clicks and begin purchasing immediately upon acceptance by their Member.
Active GoHerbalife websites are provided free of charge to Members, and help maintain the integrity of the Herbalife brand, allow compliance with product claims regulations, and promote a level playing field for all Members. GoHerbalife websites provide a consistent branded Web presence to customers seeking Herbalife® products, with shopping cart features that include the flexibility that enable Members to sell the products at any price they choose. The Rule, included below for your reference, will help maintain the integrity of the Herbalife brand, facilitate compliance with product claims regulations, and promote a level playing field for all Members. It will be effective: September 15, 2014.
See more in the PDF here.