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.

Clearing Up Some Misconceptions

"Autoship is optional, it can be turned off."

Autoship isn't the problem. "Autoship" is often confused for "qualifying purchase," the amount of volume distributors are required to purchase. Even with autoship turned off, USANA will still require you to buy from them monthly.

"3% succeed in USANA, but its ok because 3% succeed in everything else."

Great! So you have exactly the same chances of becoming rich WITHOUT wasting time and money on USANA. Go try something that ISN'T a scam. :)

"Success isn't with the system, it's up to the person."

On the other hand, failure can be built into a system. Look, even to those who don't agree that USANA is a pyramid scheme, you must admit that pyramid schemes do exist. And those pyramid schemes can be considered "systems" where failure is a given.... a known percentage of those involved will get burned.

"What about proof?"

I'm glad you asked, it's all over this site, with links to the FTC and to the USANA comp plan itself. Now if someone is asking you to join USANA, note that they don't have proof of their claims, just hype. In fact, it is plastered all over USANA products that their statements have not been endorsed by the FDA!

"USANA is high priced because of its high quality."

In truth, USANA's products only cost about a fifth of their price to produce. Compare to another manufacturer, NBTY (manufacturer of Wal-mart supplements) who's production cost is more than half the sales price. Even if USANA's supplements are high quality, that doesn't justify the additional markup that has nothing to do with the production cost. I intend to do a follow-up post with more about the economic phenomenon causing this price discrepancy and showing the connection between the price of the products and their role in disguising the pyramid scheme.

In the meantime, don't assume that because something has a high price tag, that it must be high quality.

Usana Report on Facebook

There's now a facebook page for the blog. Spread the word about the pyramid scheme to your facebook friends by becoming a fan.

USANA Report on Facebook

Is USANA a top-rated supplement?

Let's ask google.



Searching for "top rated supplement" on google doesn't even show USANA until the 5th page. The third party that USANA likes to refer to so much is actually a biased editorial.

USANA admits only 3% ever receive a check

Sorry, I haven't had time to update this blog for the past year. Here is a video showing where to find the quote on USANA's website:



"Those earning as little as one check a month equal approximately 3% of all Associates." --Straight from USANA itself

Think you can make it into those 3%? That's just to GET a check in the first place. Once you get there, you have to make AT LEAST $200 per month on those checks in order to pay your autoship. Otherwise the autoship money won't even pay for itself! Not to mention time spent on USANA and additional costs of training and seminars etc. The rest of the statistics on that page make it hard to decipher how many people are capable of paying off their autoship. But it's definitely less than 31% and possibly as low as 2%. And that's OF THE ORIGINAL 3%, not total.

The USANA Cellular Compensation Plan

Here's an interesting article outlining some of the problems with USANA's comp plan.

The USANA Cellular Compensation Plan

To sum it up:

Distributors keep paying into the system in the hope that they'll eventually make enough money to cover their expenses, and those commission payments are always just around the corner. USANA uses the concept of deferred commissions as a carrot to keep their distributors involved.

...

There are several features of a network marketing company that should indicate that there are problems:

• The company is more concerned with their structure than with the product they're selling.
  
• The company's structure does not appear to provide any added value to the customer.
  
• The company's structure has elaborate and complicated rules for no readily apparent purpose.
  
• The company has numerous levels for supposedly independent distributors.
  
• The company spends a lot of time insisting that it's not a pyramid scam.
  
  

USANA has all of these features, and then some. But the worst one is taking advantage of people's enthusiasm, hard work, and ambition, by promising a dream they have no intention of providing.

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.