Why are USANA products expensive?

There are 4 possible answers to this question:
1. USANA has superior products
2. Their direct selling form of marketing takes advantage of relationships founded on trust to convince customers to pay a higher price
3. Each sale results in several levels being paid, so the cost of selling is higher
4. Many people buy the products with the intention to join the business, and this adds value to the product

The only reason that says anything good about USANA is 1. 2 makes USANA an example of deceptive marketing. 3 is good for the distributors who have a big downline, but does nothing for consumers. And 4 makes USANA clear cut pyramid scheme, according to the FTC. Product sales become a de facto fee for joining the business. The "fee" earns the recruiter a commission just for recruiting. That is known as pyramiding.

So are USANA products really superior? How much are their products actually worth? If you search USANA on ebay, you can find products for a fraction of the price. (As mentioned in my Pyramid Scheme article) So you can certainly find USANA products for a cheaper price. It makes sense that people buy the products because they have to when they're in the business(also explained in the pyramid article), and those distributors try to make back at least some of the money spent by selling on ebay. This cannot be considered retail sales, because the price the distributor bought the products is higher than what they are selling them for. The large volume of people doing this has driven the price down to about 2/3 of what it had been. This would indicate reason #4.

So what are USANA's claims to superiority? Inclusion in the PDR doesn't hold water. The apple test doesn't tell us much about Usana's effect on the human body. Preservatives make food last longer, should we all be guzzling those? The claims on their labels have been described as pseudo-science. I even tried taking Usana products for a while and got symptoms of vitamin overdose and exploding head syndrome, something I had never experienced before. From personal experience, I can tell you that most of Usana's contents go straight through you. If you've ever taken them, you know what I'm talking about.

So are we paying extra for all that stuff that's left over? Doesn't seem like a good deal really. I'd rather buy a cheaper supplement that actually had the right amounts of stuff in it.

USANA vandalizes their own wikipedia article

This one has been pointed out by someone at the Anti-USANA facebook group. As can be seen with wikiscanner, the USANA IP address has been used to remove content from wikipedia describing acusations (not even actually accusing) USANA of being a pyramid scheme, among other things.

Wikiscanner search for USANA's IP

Wikipedia article history showing USANA removing "pyramid scheme allegations"

In this case, USANA was actually careless enough to use their own internet connection to edit Wikipedia. Who knows how many edits they may have made through proxies, alternate accounts, etc., not to mention edits made by reps from their home computers. Also note, USANA seems to have outsourced the discussion-suppressing spam on their Yahoo finance board.

Update(12/12/2008): The link to wikiscanner seems to be broken. However, the records of Usana's vandalism still exists in the wikipedia article history:

http://en.wikipedia.org/w/index.php?title=Usana&diff=147293679&oldid=147291762

USANA is in the PDR... So what?

USANA often likes to parade it's inclusion in the Physician's Desk Reference as a claim to superiority over other products, a justification of it's inexcusably high prices. The Physician's Desk Reference (PDR) is a reference book used by physicians and has a section on supplements.

As it turns out, being included in the PDR doesn't really mean anything. The company that makes PDR doesn't do any analysis whatsoever of the information included. Any manufacturer of supplements can simply buy their way in.

Here's a quote from the Thomson Reuters Healthcare TOS. That's the company that makes the PDR.

TRHC does not warrant or guarantee any of the products described, prices supplied, or medical device information contained, and does not perform any independent analysis in connection with any of the product descriptions. TRHC does not assume, and expressly disclaims, any obligation to obtain and include any information other than that provided to it by its third party sources. It should be understood that by making this material available TRHC is not advocating the use of any product described in this site, nor is TRHC responsible for misuse of a product due to typographical error. Additional information on any product may be obtained from the manufacturer.

As you can see, TRHC simply takes whatever information is given by the manufacturer and publishes it. They do not endorse the product or make any claims about it's superiority over other (not included) products. So any USANA rep using a product's inclusion in the PDR to support claims of superiority over other products is clearly a violation of false advertising.

Myron Wentz selling off his stake in USANA

Insider Cow: USNA

Gull holdings is owned by USANA's founder, Myron Wentz. Through Gull, he owned part of USANA, but as you can see in the above link he is selling it off quick. He doesn't seem to have much faith in USANA's future. Recently he tried to buy it off and make it go private. Seems that if he can't run his company out of public view, he'd rather bail out on it entirely.

Is USANA unsustainable?

One of the key factors in determining whether a business is an illegal pyramid scheme is that it is "unsustainable." This means that when enough people know about the scheme, it collapses. Market saturation is said to reach a critical point and the business no longer functions.

In a typical pyramid scheme, new members pay a fee to enter into the pyramid. This is what fuels the payment to those above them. This system collapses when the number of people trying to recruit grows to a point where there simply aren't enough prospects to go around. At this point, the source of payment has disappeared and the pyramid stops functioning and collapses, leaving all the investors who were at a loss, well, at a loss.

But USANA is different. In USANA, members do not only pay a one time fee to enter, they are charged for auto-ship, about 100-200 dollars per 28 days. This means there is always a source of currency, as long as USANA members have another source of income and are paying that into the system. USANA would appear to be a dynamic sustainable pyramid scheme, and this is much worse. Instead of collapsing at the critical point of market saturation, USANA's growth will slow down greatly. It will become nearly impossible for anyone who joins to get promoted. But they will still be required to pay the same amount they always have every month. They are paying in the hopes of being promoted to a position where they can make up their losses, but it has become increasingly difficult with each level. The USANA recruit of today has more competitors and less prospects than yesterday.

The people who join around the time that this critical point occurs will have no chance of getting their money back. They may keep paying and paying for months or even years, being led on and on by USANA members of higher rank who had it easier, telling them to just stick it out. (I was told several times at USANA meetings that the only thing you had to do to be successful was to stay in the business longer than those who quit) But these people will be paying for nothing. In the end, they will have to give up, either by choice or by running out of money.

So this is how USANA can extend its sustainability. But it is ultimately not sustainable. Eventually, those hopeless members will give up. It is theoretically possible to sustain USANA if they have another source of income which they feed into USANA, but this will not benefit them because they will have no way of making it back. And that would be much worse than a classic unsustainable pyramid scheme, where the loss occurs only once instead of recurring monthly.

Why retail won't sustain USANA

First, USANA makes only a minority of its revenue through retail. If you go to a USANA meeting, the successful members won't tell you to retail at all. They emphasize recruiting above all else.

Second, let's think about this. Let's say the number of people buying USANA products through retail is X. The number of distributors is Y. The average distributor has X/Y customers.(Number of customers divided evenly) But Y is increasing exponentially, while X is not. As Y gets bigger, the number of customers per distributor gets smaller. There will come a time when the amount of money coming from customers will simply not be enough to support the entire system.

Please note, this last paragraph assumes that the customers already support the body of distributors. In fact, this is not the case. We are already far beyond the point where distributors cannot be support just by the number of customers buying retail. That's why they get paid to recruit.

Usana Corporate viewed my blog

Here's an image from my stat counter featuring USANA's IP address:

It's about time USANA has taken notice. If you like any of the content on this blog, better save it now. They seem to have a real knack for suppressing their critics.

USNA Yahoo Finance group: Usana's monopoly on discussion

For anyone out there who thinks that Usana has nothing to hide, please explain this for me. The yahoo finance message board for Usana are constantly flooded with copy-and-pasted pro-Usana propaganda several times throughout the day. The members who post this content do not participate in conversation. They are serving a singular purpose: making sure nobody says anything bad about Usana, and if they do, it gets buried deep under all this spam.

Any and all posts that are critical of Usana, even those that simply quote Usana in order to display a contradiction, get deleted. Yahoo doesn't review posts before deleting them, their only criteria is that enough people flag it, so anyone who has enough hiring power has a monopoly over all discussion.

So someone please tell me, what reason could a legit company possibly have for suppressing freedom of speech?

Hardly a surprise with their cultish attitudes and deceptive techniques.

Pyramid Scheme

If you don't feel like reading all of this, just read the quote from Usana and the last sentence from the FTC.

Read this paragraph from a page on Usana's website.

The income you receive from USANA will be in direct proportion to your ability to retail USANA's products to your customers, as well as your ability to build an organization of Associates who, like you, retail to their customers and build an organization of Associates.

Now read the definiton of pyramid scheme from about.com.

Typically, new recruits pay a sum of money to join the "program" and become a distributor of a product or service, and are told that they'll make money based on the number of new recruits they in turn bring in. The basic idea is that the higher up on the pyramid you are, the more money you'll make.

You have to buy products to get into Usana, which is the same as paying to get in, because there is no way to guarantee that people are buying products for their own good. If people are told they can make money by buying these products, they will.

Notice where I've added emphasis, in Usana you're paid to recruit, same as in a pyramid scheme. But Usana retails a product, right? Read on.

Now the FTC's

Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements.

Again, Usana's payment for recruiting matches up with the definition of pyramid scheme. And now we've covered pyramid schemes that have a product. The product is a disguise. The way to verify this is that the prices are inflated, and new recruits are forced to buy them. You have to buy 100 pts worth of Usana product every 4 weeks or else you don't get any commision. Usana products are inflated, just check ebay, you will find the same exact products from Usana at a much lower price.

Okay, but MLM's can look a lot like pyramid schemes right? We haven't shown for sure that Usana isn't a legit MLM. Well read the next quote from FTC.

Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing.... MLM's may pay commissions to a long string of distributors, but these commission are paid for real retail sales, not for new recruits.

Usana claims it's not a pyramid scheme, but they openly admit they pay distributors in proportion to their ability to build an organization. They pay you to recruit, which according to that last sentence from the FTC, is the quality that distringuishes MLM from pyramid schemes.