Inventory Loading is a key sign of a modern day product-based pyramid scheme.
USANA requires their associates to purchase a MINIMUM of 100 points worth of product every 4 weeks. This comes out to about $120 in product purchases. Each "active" associate made such purchase. But why? Every active associate who I have conversed with on the internet has claimed that they "wanted" the product, so the purchase was okay. But are those claims true, or just something USANA has conditioned these active associates to say to make excuses for these ongoing purchases?
If active USANA associates were just consumers of their own product and is why they purchase about $120 worth of product every 4 weeks, then why is it that Preferred Customers (those who are actually consumers who "want" the product) only purchase on average $70 worth of product every 4-weeks? Perhaps you are wondering where this $70 figure comes from.
According to USANA's latest financial SEC filings 67,000 Preferred Customers were responsible for $15.4 million in net sales, which is 10% of USANA's total net sales (associates accounted for the remaining 90%!). This works out to an average of $70 per preferred customer every 4 weeks. I use a 4-week calculation because USANA requires purchases from their associates on a 4-week cycle (13 times a year).
To me, this is proof that associates are primarily making these ongoing $120+ purchases every 4-weeks so they abide by USANA's rules and remain "commission eligible" for the 4-week period. If the associate fails to make this mandatory purchase, that associate is no longer considered "active", is stripped of all accumulated groups sales volume generated from their preferred customers and downline associates, and unable to collect any commission. That's a pretty severe penalty, especially when upline associates (typically the leaders) are continually pressuring their downline to remain on "autoship" and make those $120+ payments every 4-weeks.
Since most product purchases from USANA are from the active associates (219,000 of them), and each of them has to purchase about $120 worth of product every 4-weeks in order to participate in USANA's compensation plan, and the fact that preferred customers only account for about $70 on average, it is no wonder the primary focus in USANA is to market a business opportunity rather than product. The product is only a disguise as well as "tokens" used in a grand elaborate modern day product-based pyramid scheme.
This mandatory requirement for associates to purchase USANA products is known as "Inventory Loading". That is, the associates are being forced to purchase more product than they can actually resell. Assuming the associate only really consumes at most $70 worth of their $120 purchase, they are left with $50 sitting in their cupboards. USANA claims they can "retail" this product to make a profit. However, preferred customers obtain the product "at the same discounted price as the associates do". This means, there is no chance that any associate can resell their personally purchased product for more than they paid themselves. Unfortunately, the associate is also stuck with a nice shipping charge as well. To top it all off, many USANA associates resort to EBAY to "dump their inventory loaded purchases". These typically auction for 50% less than the associates own cost. Inventory Loading is one of the key indicators of a product-based pyramid scheme.
So if active associates were telling the truth, and that they really wanted $120 worth of product every 4-weeks ($1560 a year), then why does USANA have this "Mandatory" purchase in the first place? What would happen if USANA could no longer be allowed to "force" their associates to make these $120 purchases in order to participate in the compensation plan and be eligible for commissions? I think the answer is obvious. USANA would go out of business in a matter of months because associates would only purchase the amount of product they actually wanted. I would go as far to claim that most associates would not purchase any product at all.
So here's a challenge to USANA. Why not be one of the first MLMs that does not require their distributors to personally purchase the product they are trying to sell? What would USANA be afraid of, reality???
If you are an ex-USANA associate or know someone who is, I suggest filing a complaint to the FTC if you feel you have been cheated out of your money. I have an blog posting that explains how to go about filing a complaint and why it is extremely important to do so. See my Filing FTC Complaint Against USANA posting.