Friday, April 2, 2010

Bulk of USANA's sales are from Distributor Requirements

Notably, sales to Associates account for the majority of our product sales, representing 89% of product sales during 2009.


The vast majority of sales is to the distributor. This makes it impossible for most of the distributors to be making money, in fact the money is coming from the distributors to pay other distributors, those handful at the top.

And I know someone out there is going to say "but what if the distributors are buying it for their own consumption? Or just because they want to?"

It doesn't work, and here's why. USANA requires its distributors to buy a certain amount of products or PSV (Personal Sales Volume) on a monthly basis. Is that really likely to be exactly how much every distributor wants to buy? Look at this next quote:

Although insignificant to our financial statements, an Associate may earn commissions on sales volume points that are generated from personal purchases that are not considered to be part of their "Qualifying Purchases."


The "Qualifying Purchases" they mention are the required PSV. Most distributors buy exactly the requirement, every time. Does that sound like someone who really wants to buy the products? Or someone who's just doing it because they have to?

But the truth is, USANA doesn't care about selling its products as much as selling its business. They don't want more customers, they want more distributors to rip off! Read the next quote:

The success and growth of our business is primarily based on our ability to attract new Associates and retain existing Associates to sell and consume our products.


USANA only grows by bringing in more people and ripping off the ones they have. Most of their distributors will always be in the red, and they know it. So they only reward those who bring in more and more people. They will put your focus on recruiting because the only people they sell significant amounts to are people in the business, who pay the expensive price because they are required to.

All these quotes can be found on USANA's 10-K annual report summary.