USANA Allows Their Top Distributors Dictate Which Rules and Foreign Laws are Followed. USANA Sends Three Confusing Letters To Their Chinese Distributors.

It is clear to me who really runs USANA; The top 1% of distributors.

I have received a series of letters from an anonymous source that USANA sent to their Chinese distributors. I believe these letters might shine some light on the recent executive resignations. What transpires in these letters is USANA trying to put an end to the underground recruiting of Chinese Nationals into USANA's business opportunity in Hong Kong. However, when USANA's leaders (top distributors) complain, USANA caves and changes their mind. As a reminder, it is against China's direct selling laws for their citizens to participate in a Multi-Level Marketing scheme. 

USANA has recently admitted to recruiting Chinese Nationals in one of the recent conference calls. However, USANA claimed these citizens from mainland China only signed up to consume the product (even though they joined as DISTRIBUTORS and not Preferred Customers). Here's the transcript & quote:

we have a large group of Asian Associates who are involved with USANA only because of the products and are buying in Hong Kong for consumption only. We expect many of these consumers will begin purchasing USANA products through BabyCare and either remain consumers or become entrepreneurs and build a BabyCare business.

So the following first two letters sent to their Chinese Distributors try to set rules to prevent this illegal recruiting. The third letter tells their Chinese distributors to cancel the effects of the first two letters! The first letter was sent before the 4 executive's resignations. The last two letters came after the resignations.

The letters were sent in English and Chinese together. For the purpose of this blog, I only included the English version. To view the three letters in their Chinese & English form, you can view the following PDF documents: Letter 1, Letter 2, Letter 3.

My Emphasis in Bold Red:

LETTER ONE – Sent May 8, 2011

USANA and BabyCare: 3 Steps to Long-term Success

Dear USANA Family,

The Management Team, Board of Directors, and I all eagerly looked forward to the day that we could announce that BabyCare and USANA would be working together to realize my vision of a world free from pain and suffering. After the indirect acquisition of BabyCare was finalized last year, we were incredibly excited to tell the world that the USANA family now had an opportunity to help even more individuals attain improved health and better wealth. The partnership with BabyCare has brought my vision one step closer to reality by allowing USANA to recommend the finest nutritional products and direct selling opportunity to China in a way that meets all local laws and regulations.

When Dave became aware of BabyCare, he was focused on the prospect of having a license to operate in China and thereby share the USANA products with the People’s Republic of China. After thoroughly reviewing the management, culture, direction, values, products, and performance of BabyCare, he and I came to the realization that we could take an even larger step forward by making BabyCare a part of our family. Today, we are confident that BabyCare is the way for Distributors in China to share in the success of USANA. To realize this ambitious dream, however, we have to complete several steps:

1. Provide the highest quality, science-based products to consumers in China. As I stated during the Asia Pacific Convention, BabyCare’s products are exceptional, and something we can proudly add to the USANA product line. Additionally, we have product approvals underway to expand the variety of USANA products offered in China throughout 2011.

2. Offer an excellent direct selling plan to Distributors in China. As many of you know, a binary multi-level plan is not allowed in China. Yet, USANA remains committed to ensuring that we offer the richest opportunity for everyone, regardless of the market. As such, I had Dr. Fred Cooper evaluate the direct selling plan offered currently by BabyCare to see if he could make any improvements to the commission-earning potential of current and future BabyCare Distributors while adhering to the Direct Sales Regulations in China. After careful consideration, I am pleased to announce that while the Integrated Sales Program (ISP) has remained unchanged, modifications have been made to enrich BabyCare’s current plan. So we encourage all Achievers and above who have not yet received their ISP certification to do so. A meeting for Gold Directors and above will be held in Beijing on May 21 to explain these changes.

3. Ensure full compliance of all market regulations. USANA enjoys a great reputation all over the world where we do business. We want to make sure that in China we have the same reputation with all governing bodies. To secure that reputation—and thus the long-term success of our products and direct selling plan—we must add some changes to the rules for those Distributors doing business in Hong Kong. Therefore, the following changes have been established and are effective for all Distributors:

Beginning May 21, 2011

New enrollment

1. New Hong Kong Distributors will be asked to prove their compliance with our residency requirement by presenting their original Hong Kong Permanent Identity Cards, or Hong Kong Identity Cards, in person. They must also provide a Hong Kong bank account matching the main applicant’s name for enrollment and payment.

Common address

2. A limit of only five (5) Distributorships will be allowed to enroll using any single Hong Kong address for any new enrollments.

Credit card usage

3. Distributors may use their credit cards for purchase on another distributorship only at the time of enrollment. Continual use of a credit card for multiple distributorships is not allowed.

Existing Hong Kong Distributors can continue to purchase products and participate in the USANA compensation plan, but restrictions will apply to those who fail to prove their Hong Kong residency.

Beginning June 4, 2011

Limit on ordering and collection

1. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only (1) place orders, and (2) pick up products, up to a total of 250 sales volume points in any given rolling four-week period. This includes Autoships, orders placed online, or orders placed over the counter.

Personal pick-up

2. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only pick up orders in person. They will no longer be allowed to authorize third-party pick-ups, nor can their orders be shipped to a designated address.

Restriction on new Autoships

3. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements will not be allowed to initiate a new Autoship.

 

Photo identification

4. All Hong Kong Distributors must produce photo identification when picking up their orders. USANA reserves the right to place a Distributor’s account on hold if he/she refuses to provide photo identification.

I know that change is difficult. We certainly do not want to add unnecessary rules or cause inconvenience to our valued Distributors. However, the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business.

On behalf of all of USANA, I want to thank you for all you do to share USANA’s opportunity for true health and true wealth. With these changes, we will embark on a future for USANA that I feel is brighter than ever! To our new prospects and soon-to-be partners through BabyCare, I welcome you on behalf of both USANA and BabyCare to join the healthiest family on earth.

Sincerely,

Dr Myron Wentz

Founder & Chairman, USANA Health Sciences

“直銷商" refers to “distributor” as defined in USANA’s Policies and Procedures. The English version of this communication will govern in case of dispute or confusion due to translation.

For any enquiries, please contact us at our hotline (852) 2162-1812.

It seems very clear to me that this letter is directed towards Chinese Nationals (not to be confused with residents living in Hong Kong) who joined USANA's business opportunity in Hong Kong. The most important line out of "Letter One" was "the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business." This line validates my ongoing claims that USANA has been illegally recruiting Chinese Nationals into their Hong Kong territoty and is responsible the explosive growth in Hong Kong. This letter was sent before the Executive Resignations. Now for letter 2.

LETTER TWO – Sent May 11, 2011 (after 4 executives resigned)

A Message From Deborah Woo & Dave Wentz

Dear Distributors,

I am honored to be appointed USANA's President of Asia Pacific.

I understand the responsibility that comes with this position, and promise that I will dedicate myself to helping all our Asia Pacific Distributors in USANA and BabyCare Distributors in China achieve true health and true wealth.

Dave and I received some feedback from leaders on the challenges which some Hong Kong Distributors will face in adhering to the new requirements we announced recently. Therefore, we are pleased to announce the following changes to the requirements which were due to be implemented on June 4:

For Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements,

(1) The 250-point limit for every rolling four-week period will still apply to order-placing, but no longer to order-pickup

(2) The requirement to pick up orders in person will be rescinded. This means that all Hong Kong Distributors will continue to be able to authorize third-party pick-up, as well as have their orders shipped to a designated address

However, the restrictions on new Distributor enrollment to those with Hong Kong Identity Cards, common address, and credit card usage from May 21, 2011 will remain.

Dave and I will continue to work to improve the BabyCare compensation plan to ensure that both BabyCare and USANA Distributors will enjoy a fair and lucrative way of building their future with the USANA family.

We look forward to working with you.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

____________

A Short Summary of the Important Messages (Revised on May 11, 2011)

Beginning May 21, 2011

New enrollment

1. New Hong Kong Distributors will be asked to prove their compliance with our residency requirement by presenting their original Hong Kong Permanent Identity Cards, or Hong Kong Identity Cards, in person. They must also provide a Hong Kong bank account matching the main applicant’s name for enrollment and payment.

Common address

2. A limit of only five (5) Distributorships will be allowed to enroll using any single Hong Kong address for any new enrollments.

Credit card usage

3. Distributors may use their credit cards for purchase on another distributorship only at the time of enrollment. Continual use of a credit card for multiple distributorships is not allowed.

Existing Hong Kong Distributors can continue to purchase products and participate in the USANA compensation plan, but restrictions will apply to those who fail to prove their Hong Kong residency.

Beginning June 4, 2011

Limit on ordering

1. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only place orders up to a total of 250 sales volume points in any given rolling four-week period. This includes Autoships, orders placed online, or orders placed over the counter.

Restriction on new Autoships

2. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements will not be allowed to initiate a new Autoship.

The English version of this communication will govern in case of dispute or confusion due to translation.

For any enquiries, please contact us at our hotline (852) 2162-1812.

So it appears that "leaders" or those distributors who are Gold Directors and up (you know, the special ones who found out 4 executives resigned a day before shareholders found out) are upset with Myron Wentz's plan to ensure they are abiding by foreign laws. Now that Fred Cooper has jumped ship, Deborah Woo and Dave Wentz have begun erasing the necessary rules to abide by China Direct Selling Laws. Lets find out what Letter 3 is all about!

LETTER THREE – Sent May 13, 2011

Dear USANA Family,

It is a new era of growth and opportunity for USANA. Our success as a family relies heavily on our ability to listen and respond to feedback from our leaders and Associates. As a result, we have reassessed previous decisions in regards to Hong Kong policies announced last weekend that were attributed to Dr Wentz. We would like to formally announce that all policy changes that were recommended are being canceled.

There is a bright future for the USANA family through USANA China and BabyCare. We were gratified for the feedback and great suggestions we received from our leaders and those that took time to meet with us in person on how to complete this transition successfully.

Our strategy going forward will be to work with leaders individually to help them transition their teams when they are ready. The leaders have told us they understand the need to transition to China for the long term benefit of their Distributorships, but we want to allow each of them to have the necessary time and training to make this transition smooth and rewarding.

We apologize for the confusion and concern this has created. We remain focused on securing long-term success for you and your business.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

Wait a minute! Didn't Myron Wentz's first letter state "the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business." So because USANA's top distributors complain, USANA decides to scrap the rules for Chinese Nationals?

From the evidence I have seen, USANA has knowingly allowed citizens of mainland China to join USANA's Hong Kong territory for several years. They even admit that a LARGE SUM of USANA product ends up in mainland China (long before they even owned Babycare Ltd) as stated in this internal memo. They finally admit it in a recent conference call. And these three letters add to the evidence that USANA is fully aware of the restrictions mainland China has on their citizens joining a Multi-Level Marketing scheme, even if they cross the border and join in Hong Kong. 

How much longer will USANA get away with this? Shareholders should be demanding answers from USANA. Questions USANA should answer to shareholders are:

1) How many total mainland Chinese citizens joined USANA's business opportunity in Hong Kong?

2) How much of USANA's revenues came from the underground recruitment of Chinese Nationals into their Hong Kong territory over the past several years?

3) How much commission is paid to USANA "Leaders" (Gold Distributors and up) that came as a result of these Chinese Nationals who joined USANA's business opportunity in violation of China's Direct Selling Laws?

USANA forgot to mention Riley Timmer's resignation until after markets closed. Can they do anything right?

None of USANA's press releases today regarding the resignation of their executives ever mentioned Riley Timmer's resignation. It wasn't until USANA's 4:00 PM conference call did a caller ask when Riley Timmer's resignation was given. USANA took a while to respond and admitted his resignation came the same day as all the others.

When the President & Chief Operating Officer (Fred Cooper), Chief Financial Officer (Jeffrey Yates),  Vice president of Sales (Mark Wilson), and Vice President of Finance (Riley Timmer) all resign on the same day, then there is something much more serious that USANA is not willing to admit. I have a feeling it has more to do with the issues I have raised on this blog regarding their overpriced products, saturated markets, underground China recruiting, and the fact 99% of their distributors don't make a penny worth of a profit while enriching the top 1%. And to top it off, USANA told this top 1% of distributors (Gold Directors and Up) about their executives resigning 1 day before announcing it to their shareholders.

It amazes me how USANA can get away with so much questionable activities like giving away 3 iPads to distributors who purchase Myron and Dave's book "The Healthy Home" (violates lottery laws), or the underground recruiting of Chinese Nationals into their Hong Kong distributor market (MLM is banned in mainland China). When will stock analysts start asking tough questions and demanding answers to those questions? One caller asked when USANA was made aware of these resignations. After dancing around the question, USANA finally answered "Recently"... Well, Recently could have been 4 weeks ago. Then, instead of the analyst demanding a specific date, this analyst just accepted USANA's answers. I'm starting to believe USANA writes the questions for the analysts to ask...

I feel sorry for anyone who invests in USANA. How can anyone invest in a company that makes its money off the backs of 99% of their distributors who are all losing money because they are forced to purchase the overpriced product just to participate in the scheme.

I have several questions that I believe USANA should answer:

1) How many "Professional Packs" were sold to new associates and distributors?

2) How many starter kits were sold to new associates including those that were free during promotional periods?

3) How many associates have or had a subscription to USANA's DownLine Management software?

4) How many associates and distributors renewed their membership?

5) How much of the net revenues came from associates and distributors maintaining their Personal Sales Volume?

Too bad USANA would never answer these questions. It would reveal too much...

USANA executives Fred Cooper, Jeff Yates, Mark Wilson, and Riley Timmer send in their resignations to USANA.

USANA has a little shake up taking place. Fred Cooper, Jeff Yates, Mark Wilson, and Riley Timmer have given USANA their resignations.

*** UPDATE - 05/10/2011

USANA sent out a memo YESTERDAY to all their their Gold Director distributors and up. These special individuals were privy to important information before USANA released a press announcement to their shareholders. The SEC should investigate to see if any Gold Directors and up sold their shares yesterday before the public announcement was made.

USANA's 2011 First Quarter Earnings - A look Into The Active Associate and Preferred Customer Trends

USANA's first quarter earnings release reveals major drop in active associate numbers from prior quarter. I do not recall any mention of any quarter to quarter information in any press release. I have put together a 2 year trend of Active Associates and Active Preferred Customers by region. What I notice is a downward spiral. USANA lost a total of 22,000 of their Active Total Customers (Associates and Preferred Customers), yet their stock price actually went up from $35.70 to a high of $38.50 and closing at $36.30... I will break down each of USANA's regions and discuss the various situations in each.

USANA's United States Active Associate and Preferred Customer Results

figure 1 - USANA US Active Associates

 

figure 2 - USANA US Active Preferred Customers

USANA's United States territory lost 2000 active associates and gained 2000 active preferred customers.

Seems clear to me where the US is trending. USANA constantly blames the bad economy in the US, yet there are several leading distributors who claim that a down economy is good for MLM business opportunities because more people are out looking for work and are more likely to join MLMs. USANA has also blamed this downward trend on the rampant recruiting in their Greater China territory. USANA claims that US distributors are focusing their attention on business in China, which is hogwash. USANA distributors cannot recruit Chinese Nationals into their downline. Chinese Nationals can only be recruited into BabyCare in a single level marketing compensation plan, which I believe will fail USANA miserably because the incentive to recruit an endless chain doesn't exist. Perhaps USANA is referring to the underground recruiting of Chinese Nationals into USANA's Hong Kong territory, which violates China's Direct Selling laws. I believe with the help of Utah's Attorney General Mark Shurtleff, USANA is above the law.

USANA's Canada Active Associate and Preferred Customer Results

figure 3 - USANA Canada Active Associates

figure 4 - USANA Canada Active Preferred Customers

USANA's Canada active associates and preferred customers remained unchanged.

Canada too has been suffering a decline in active associates and preferred customers. I guess this must be because of the bad economy in the United States. At least that is what USANA might claim. I believe USANA's reputation of being a recruiting scheme with over priced products that are almost impossible to resell have more to do with this decline than USANA would ever admit. Saturation has also kicked in.

USANA's Mexico Active Associate and Preferred Customer Results

figure 5 - USANA Mexico Active Associates

figure 6 - USANA Mexico Active Preferred Customers

USANA's Mexico territory lost 1000 active associates and 1000 active preferred customers.

I never thought Mexico was a serious territory for USANA. I think this territory has more to do with having Sanoviv there than having USANA associates running around recruiting each other. It was interesting though during the Swine Flu hysteria because USANA's "Poly C" was being marketed by many distributors as a preventative measure against the Swine Flu. I guess if people simply "believe" something will work, then it probably will - Placebo Effect. Perhaps USANA should simply produce a sugar pill, call it Usanebo™ and give their poor distributors a break and only charge them $0.99 for a 28 day supply.

USANA's S.E. Asia/Pacific Active Associate and Preferred Customer Results

figure 7 - USANA South East Asia / Pacific Active Associates

figure 8 - USANA South East Asia / Pacific Active Preferred Customers

USANA's South East Asia / Pacific territory lost 1000 active associates while active preferred customers remained unchanged.

This territory includes: Australia, New Zealand, Singapore, Malaysia, and the Philippines. Unfortunately, USANA no longer breaks down these territories individually. This is a shame because it gave a much more detailed view of how bad these territories are actually doing. USANA prefers to through around unspecified percentage growths and declines making it difficult to effectively analyze those territories. Either way, the declining trend of active associates is yet another sign of a saturated market, bad reputation and (cough) the bad economy in the United States. Seriously, the US economy has nothing to do with Australia and New Zealand's declining trends. I can only wonder why analysts don't question USANA on their answers. Instead, analysts simply accept whatever answer USANA gives, as if it satisfied the question. However, most of the time it paints an even more ambiguous picture. So far, USANA's latest quarterly report shows a continued decline of members.

USANA's Greater China Active Associate and Preferred Customer Results

figure 9 - USANA Greater China Active Associates

figure 10 - USANA Greater China Active Preferred Customers

USANA's Greater China territory lost 11,000 active associates and 8000 active preferred customers.

This territory includes: Hong Kong, Taiwan and Mainland China. Are the lemmings jumping overboard?  As I have written many times now, USANA has been recruiting people from Mainland China into their USANA Hong Kong territory. This is in violation of China's direct selling laws, but don't let that stop anyone. Chinese Nationals are not allowed to join MLM companies. USANA has finally come around and started to mention the recruitment of Chinese Nationals into USANA's Hong Kong territory. However, USANA has a very interesting way to define these distributors. USANA claims that they are simply people who joined solely so they can personally purchase and consume the product. Really! Why then did they not simply join as preferred customers? I believe USANA is full of crap.

These Chinese National USANA distributors joined so they can participate in the endless recruiting scheme in hopes to make money by recruiting other Chinese Nationals under them. Since everyone is forced to purchase USANA product to participate in USANA's compensation plan, distributors are essentially paid to recruit. Mainland China is a fresh market and that is why USANA witnessed an explosive growth in their Hong Kong territory over the past couple years.

Now we have a huge decline over the previous quarter. USANA claims it is because of the Chinese New Year, which lasts a couple weeks. If this is true, then it reveals how desperately associates must continue to recruit more associates into the endless chain just to maintain the same number of active associates! However, I believe it has more to do with the fact that most associates realizing they are never going to make a dime and how difficult it is to endlessly recruit people. With the product prices so high and having to import the product from the US, why waste their time and money in actually retailing any product. China has more vitamins brands than Carter has pills. Not to mention the skin care market in China.

And Babycare associates will learn quickly than making money retailing USANA product is not worth their time and energy. Since Babycare associates cannot recruit new associates into a downline (Single Level Marketing is China), there is no way for them to make money off the backs of hundreds below them. The USANA fad in China will wear off unless USANA brings down the distributors cost for the product by a substantial amount.

USANA's North Asia Active Associate and Preferred Customer Results

figure 11 - USANA North Asia Active Associates

figure 12 - USANA North Asia Active Preferred Customers

USANA's North Asia active associates and preferred customers remained unchanged.


This territory includes: Japan and South Korea. This is another joke of territories as was Mexico. Why USANA even bothers to publish these numbers is beyond me. We may see that the next quarterly release, Japan might go up 1000 associates. I believe this could be from USANA associates pushing the sale of potassium iodide as a preventative measure against the nuclear radiation caused by the earth quake and tsunami. But again the amount would be insignificant. This territory is saturated and not going to help USANA in the long run.
 
These are my opinions based on my research and analysis of USANA Health Sciences. As always, I welcome the harsh criticism. If there are errors, let me know as I finished writing this at 1:30 AM.

USANA's First Quarter Results for 2011 Reveal Falling Interest For USANA's Business Opportunity.

USANA released their First Quarter Earnings Statement and it shows that all over the world USANA's active associate numbers fell except China, which I believe cannot be trusted.

Year over year, USANA's active associate figures yield:
United States: from 56,000 to 49,000
Canada: from 25,000 to 24,000
Mexico: from 13,000 to 10,000
Southeast Asia/Pacific: from 44,000 to 40,000
North Asia: from 9000 to 8000
Greater China: from 57,000 to 82,000

USANA uses the excuse that the bad United States economy is responsible for the declining figures, but this decline is world wide. However, China is an exception. Hong Kong and mainland China numbers are sky rocketing, but as I have mentioned many times now, I belive this is because USANA is allowing illegal recruiting of mainland China persons into USANA's Hong Kong territory, which violates foreign laws. Not to mention mainland China is not a "USANA" territory. It is a Babycare territory. There is a difference.

I believe USANA stated last quarter that they expect the Hong Kong distributor numbers to start falling because a handful of USANA products are now sold through Babycare Ltd. This was due to the expectation that mainland Chinese distributors signed up as USANA associates in Hong Kong would leave USANA and sign up as a Babycare associate. Not only does this validate my claims that USANA has been recruiting mainland Chinese nationals as USANA associates in Hong Kong, but also raises a serious question: Those associates who left USANA's Hong Kong distributorship and signed up as Babycare associates, are they counted twice? The answer should be "NO", but it would not surprise me. Perhaps there are those that hold both a USANA distributorship as well as a Babycare distributorship; count them twice!

Of course this begs the question, where are the millions of retail customers that should come from having hundreds of thousands of USANA sales reps? Unfortunately, after distributors pay a premium price for the USANA inventory, why would anyone pay even more? Distributors pay $110 for a USANA Healthpak100 which only lasts 28 days which makes it a $3.93 per day multivitamin supplement. View the USANA Price List for yourself. Who in their right mind would fork out $1430 per year for vitamins, and that's the distributor's cost! And don't expect any ethical doctor or nutritionist to recommend such a product either. Since only USANA distributors can sell the product, the doctor or nutritionist would have to be a USANA distributor. In other words, some doctors peddle USANA product to the patient they would have to peddle the product to their patient, which violates their code of ethics.

Yet, USANA's Healthpak100 is one of their most commonly sold product. Why is that? Simple. USANA attaches sales points to each of their product. Most distributors have 1 business center and are required to personally purchase 100 sales volume points every 28 days. The Healthpak100 is 100 sales points, so only 1 product would have to be purchased. Plus, it is the best value for the number of sales points awarded. Purchasing other products and meeting the minimum 100 point requirement would usually put the order over 100 points, which further wastes the distributors money. So a 100 point product easy much easier to deal with. Sadly, USANA distributors also have to pay a pricey shipping and handling fee on top of it.

Knowing all this, it is obvious why there is a serious lack of retail customers. One can go down USANA's entire product line and see how over priced it is. More and more people in the United States are becoming aware of MultiLevel Marketing schemes like USANA and are distancing themselves from the cultish behavior. USANA has reached saturation in the United States and other areas, and without the shenanigans in the China region, USANA would have a single digit stock price.

These are my opinions and I welcome harsh criticism.

Don't be Fooled! Editorial Reviews on the Back Cover of The Healthy Home are USANA Affiliates

 

Who's who on the back cover of The Healthy Home?

On the back cover of Myron Wentz and Dave Wentz's latest book "The Healthy Home" are three editorial reviews. Lets take a look.

“Dave and Dr. Wentz have conspired to create an innovative and imaginative approach to living simply. As a physician, I would offer one bit of advice: heed the constructs, sentiments, and words written in this book. We cannot wait for the scientific method to verify the claims made. As individuals we must act now! We should follow our intuition and adhere to The Healthy Home.” - Peter W. Rugg, M.D., FACEP

Missing from Peter Rugg's title: USANA Scientific Advisory Council Chairperson, USANA distributor (ID# 3079662)

Interesting that Peter implies the book is full of unverified claims that the scientific method has yet to prove.

“The Healthy Home is an amazing revelation of 'truths' on everyday products that parents use for their children. This book will empower parents to take measures to protect their children from toxins that may threaten the health of our future generations.” - Christine Wood, M.D., pediatrician and author of How to Get Kids to Eat Great & Love It

Missing from Christine Wood's title: USANA Scientific Advisory Council member, USANA Distributor (ID# 348)

Amazing revelation of 'truths' on everyday products, yet Peter Rugg implies the scientific method has not verified them yet. Can they really be called truths?

“I have met few individuals more generous, more approachable, and more caring than Dr. Wentz. He believes in true health and is seeking to discover its secrets with a passion that is as spiritual as it is scientific. In this brilliant collaboration with his son, Dave, we are able to witness the passage and expansion of simple truths from generation to generation.” - Denis Waitley, Ph.D., bestselling author of The Psychology of Winning

Missing from Denis Waitley's title: Former member of USANA's Board of Directors, chairman of USANA's Athletic Advisory Council, USANA Distributor (ID# 1069)

The problem with these editorial reviews is the fact each member is financially tied to the authors of the book. Interesting that Myron and Dave chose to leave off the fact these members not only worked with USANA, but each hold their own distributorship as well. Why was this conveniently left off the back cover? I believe it was so it gave the appearance of third party credibility. 

It reeks of the same problem that the Third Edition of the Comparative Guide to Nutritional Supplements has. Written by Lyle MacWilliam (who was also on USANA's Scientific Advisory Council), the book ranked vitamins and ranked USANA #1. On the back of its cover were all USANA affiliates giving their review without ever disclosing such USANA affiliation. In fact, Christine Wood and Denis Waitley were two of the editorial reviewers on that book as well!

USANA's Use of "The Healthy Home" Book as Entry Into Company Run Nation Wide Lottery May Violate State & Federal Laws

"The Healthy Home" hits 5 best seller lists during first couple weeks of book release. However, ...

Screenshot of USANA's website showing The Healthy Home

It appears USANA is currently violating both Utah State and Federal gambling laws. USANA's requirement for distributors to purchase Myron Wentz's book "The Healthy Home" in order to participate in a lottery to win an iPad may land USANA in a heap of trouble. State and Federal Regulators need to be made aware of this potential crime currently taking place. The lottery runs from March 27, 2011 to April 15, 2011.

According to PRNewsWire, USANA has made the Best Sellers list for The New York Times, USA Today, L.A. Times, Publisher's Weekly, and Amazon.com for the book's extraordinary sales.

According to Utah State Laws for gambling

     76-10-1102.   Gambling.
     (1) A person is guilty of gambling if he:
     (a) participates in gambling;
     (b) knowingly permits any gambling to be played, conducted, or dealt upon or in any real or personal property owned, rented, or under the control of the actor, whether in whole or in part; or
     (c) knowingly allows the use of any video gaming device that is:
     (i) in any business establishment or public place; and
     (ii) accessible for use by any person within the establishment or public place.
     (2) Gambling is a class B misdemeanor, provided, however, that any person who is twice convicted under this section shall be guilty of a class A misdemeanor.

According to Federal Laws regarding lotteries:

    * The federal lottery statutes made it illegal to transport lottery materials across state lines, or ship them to other countries
    * The Interstate Wagering Amendment of 1994 made it illegal to procure a ticket for someone in a different state than that in which the lottery was held

Let this also be a reminder to the general public that Myron and Dave Wentz's book "The Healthy Home" made it to several Best Sellers lists solely because they used their book as $13.19 raffle tickets for USANA distributors and USANA preferred customers to purchase and have the right to participate in a company run lottery to give away 3 iPads. The "general public" as Dave Wentz calls it, has virtually nothing to do with the sales of his book.

Myron Wentz's “The Healthy Home” makes NY Times best seller list by being sold as raffle tickets in lottery drawing held by USANA.

Myron Wentz (founder of USANA) and his son Dave Wentz (CEO of USANA) authored a book called “The Healthy Home” which was released on March 22, 2011. Their book made it to number 7 on the NY Times best selling book list for “Hard Cover Advise and Misc”. What is not mentioned on any press releases is the fact the book is being sold as raffle tickets to win an iPad in a lottery operated by the authors.

USANA is currently running a lottery drawing exclusively for their distributors and preferred customers to win iPads. In order to participate in this lottery drawing, the USANA distributor or preferred customer must purchase Myron Wentz's new book “The Healthy Home” from Amazon.com for $13.19. Distributors can enter as many times as they wish, but are advised to do so during different weeks of the contest to help bolster the book's best seller rankings.

USANA explains this contest in a document on their Ask Andy website which is used by their distributors to access important information regarding USANA: http://obs.usana.com/UPLOADS/usana/2011/87/87-1_CAA.html. (A copy of this document is provided in full at the bottom of this blog entry)
 

"Here’s how it works—Purchase a copy of The Healthy Home on Amazon.com between March 27 and April 15 and e-mail a copy of your electronic receipt to contest@myhealthyhome.com. Not only will you receive a special Healthy Home pin at USANA’s 2011 International Convention, but your name will also be put into one of three special drawings for a chance to win one of three iPads!

…

* Week 1: March 27–April 2 (we need to sell 1,000 copies of the book this week)

* Week 2: April 2–9 (we need to sell 1,500 copies this week)

* Week 3: April 10–15 (we need to sell 2,500 copies this week)

...

Q. Who can participate in the drawing?

A. This drawing is only for USANA Associates or Preferred Customers living in the United States."

Distributors interested in participating in the lottery to win a $500 iPad only need to purchase a $13.19 raffle ticket from Amazon.com called “The Healthy Home”.

Amazingly, USANA's CEO Dave Wentz made the following statement regarding their position on the NY Times Best Seller list in the following article:

"The response to our book has been incredible," says Dave Wentz. "Although the book was released less than three weeks ago, we have gotten calls from reporters and TV and radio stations from all over North America. We have received over 3,000 'likes' on Facebook in a short time and gotten a lot of great feedback from our readers. Clearly, the topics we address in The Healthy Home are a huge interest to the general public." (my emphasis in bold)

What GENERAL PUBLIC is Dave Wentz referring to? Dave knows that the book is primarily being sold to USANA distributors who purchase the book in hopes of winning a $500 iPad in a lottery drawing. The general public has nothing to do with the purchases of The Healthy Home. Clearly, the statement made by Dave regarding "interest to the general public" was an attempt to mislead the general public.

I believe the authors are conducting a highly unethical method to appear on Best Seller lists. It would be very interesting to find out what Amazon thinks about this lottery system. Also, what about the other outlets that sell the book? What do they think about the fact the authors are holding this lottery exclusively with Amazon.com?

Below is USANA's Lottery Information found on their Ask Andy website: http://obs.usana.com/UPLOADS/usana/2011/87/87-1_CAA.html

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Amazon.com Contest

The Healthy Home launched with a bang, but we're not done. Our sights are set at the top of the best-seller lists, and we need your help. Purchas at Amazon.com, and you could win an iPad!

 
Buy Copies of The Healthy Home at Amazon.com by April 15

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Participate in USANA’s efforts to help make The Healthy Home a best seller and you could win an iPad!

The Healthy Home launched on March 22 with incredible success, but the journey is just beginning. To make this book a truly powerful vehicle for spreading Dr. Wentz’ vision and for building your business, we need to make it a best seller. To do so, we need you! And in case you need a little extra incentive, we’ll be awarding incredible prizes to those who help.

To become a best seller, we’ll need to sell a certain number of copies of The Healthy Home on Amazon.com within the next three weeks.

Here’s how it works—Purchase a copy of The Healthy Home on Amazon.com between March 27 and April 15 and e-mail a copy of your electronic receipt to contest@myhealthyhome.com. Not only will you receive a special Healthy Home pin at USANA’s 2011 International Convention, but your name will also be put into one of three special drawings for a chance to win one of three iPads!

There will be an iPad drawing at the end of each of the three weeks during which Amazon.com will be reporting sales of The Healthy Home for possible inclusion on the top best-seller lists. 

• Week 1: March 27–April 2 (we need to sell 1,000 copies of the book this week) 
• Week 2: April 2–9 (we need to sell 1,500 copies this week)  
• Week 3: April 10–15 (we need to sell 2,500 copies this week)

The number of books we need to sell is not impossible. We can do it, and any help from you will make a big difference. So talk to your Preferred Customers (because they can participate, too), talk to your downlines, and talk to your uplines—spread the word and create a strategy to determine the best week for each of you to make your purchases. And if you plan on purchasing more than one copy of the book from Amazon.com, buy them one at a time and during different weeks to help bolster our chances of making the best-seller list and your chances of winning an iPad.

Together, we can make a difference. Many of you have already bought copies of The Healthy Home, and your efforts are reflected in the early success of the book. But with a little more help—even the purchase of just one more copy through Amazon.com by April 15—you can help make The Healthy Home an even greater sales tool than it already is. Let’s spread the vision of Dr. Wentz to the world together.

FREQUENTLY ASKED QUESTIONS

Q. Who can participate in the drawing?
A. This drawing is only for USANA Associates or Preferred Customers living in the United States.

Q. What do I win?
A. Anyone who purchases a copy of The Healthy Home from Amazon.com between March 27 and April 15 will receive a special Healthy Home pin at USANA’s 2011 International Convention. The name of each entrant will also be placed in a drawing for one of three iPads.

Q. Can I enter the drawing multiple times?
A. Yes, as long as you have more than one receipt. Multiple copies of the book shown on a single receipt will only be entered into the drawing once. Therefore, it is important that you purchase each copy of The Healthy Home separately during this period.

Q. Where do I send my receipt?
A. E-mail an electronic copy of your receipt from Amazon.com to contest@myhealthyhome.com.

RULES

1. This is an individual-based promotion.
2. Participants must reside in the United States.
3. Only one Healthy Home pin and/or iPad will be awarded per distributorship.
4. No purchase necessary. Participants can be entered into the drawing by mailing a postcard with their name and Associate or Preferred Customer identification number to the following address:
   
   Healthy Home Contest
   c/o USANA Health Sciences
   3838 W. Parkway Blvd.
   Salt Lake City, UT 84120
5. Employees of USANA and their family members may not participate in this promotion.
6. Any manipulation of this promotion, i.e., sponsorship manipulation, downline purchasing (placing a sales order in a Business Center other than where the sale was generated), forgery of receipts, etc., will result in disqualification from this promotion, in addition to any sanctions under the Associate Agreement.
7. By entering, each entrant accepts and agrees to be bound by these rules and by the decisions of USANA, which shall be final and binding in all respects.
8. Taxes, if applicable, are the sole responsibility of the prize winner. The fair market value of all prizes will be reported to the IRS pursuant to IRS regulations.
9. Prizes are non-negotiable and cannot be redeemed for cash.
10. No substitutions or transfer of prizes is permitted. USANA reserves the right to substitute a prize for one of equal or greater value in the event that an advertised prize is unavailable.
11. USANA is not responsible for lost, late, or misdirected online entries or transactions for incorrect, inaccurate, or incomplete entry information whether caused by a contestant, equipment, or technical malfunction or for any human error, technical error, or malfunctions. USANA reserves the right to halt or modify the promotion at any time during the promotion period if events beyond their control compromise the promotion's fairness or integrity.
12. USANA, in its sole discretion, may disqualify any entrant from participating in the promotion, refuse to award prizes, and require the return of any prizes if entrant engages in any conduct USANA deems to be improper, unfair, or otherwise adverse to the operation of the promotion or detrimental to other entrants. Such improper conduct includes, but is not limited to, falsifying personal information required during the promotion.
13. USANA reserves the right to modify these rules for clarification purposes without materially affecting the terms and conditions of the promotion.
14. This promotion may not be used for any form of gambling.
15. If for any reason the Internet portion of the program is not capable of running as planned, including infection by computer virus, bugs, tampering, unauthorized intervention, fraud, technical failures, or any other causes beyond the control of USANA which corrupt or affect the administration, security, fairness, integrity, or proper conduct of this promotion, USANA reserves the right, at its sole discretion, to disqualify any individual who tampers with the entry process, and to cancel, terminate, modify, or suspend the promotion.
16. USANA assumes no responsibility for any error, omission, interruption, deletion, defect, delay in operation or transmission, communications line failure, theft or destruction, or unauthorized access to, or alteration of, entries or transactions.
17. USANA is not responsible for any problems or technical malfunction of any telephone network or lines, computer on-line systems, servers, or providers, computer equipment, software, failure of any e-mail entry or transaction to be received on account of technical problems or traffic congestion on the Internet or at any website, or any combination thereof, including any injury or damage to participant's or any other person's computer related to, or resulting from, participation or downloading any materials in this promotion.
18. USANA reserves the right to use names, images, and likenesses of promotion winners for printed and online media to market USANA products and promotions.

USANA's distributor Hall of Fame reveals their elaborate recruiting pyramid scheme

USANA's October 2010 Distributor Hall of Fame
Compiled and Analyzed

By: USANAWatchDog

October 2010

Click For FULL SIZE

USANA Health Sciences, Inc. does not publicly publish their distributor figures. So I must take it upon myself to compile and publish the information. It becomes very apparent why USANA refuses to disclose the distributor numbers; almost everyone is unable to make a profit!

Of course if this information were made available to prospects before they join USANA's business opportunity, the outcome may be very different. Who would join a failed business where 99% of USANA's sales representatives lose money? It is easy to see how bad the failure rate is when comparing the leadership levels in this diagram to USANA's last average distributor earnings figures: USANA's 2006 North American Distributor Earnings Statement. USANA has not published a relevant report since then.

In the diagram, I represent USANA's distributors in a pyramid chart. The pyramid on the lower left represents all of USANA's distributors that have at one time or another received a commission check. Since the higher ranks represent such a small percentage of the total, the middle pyramid is a zoomed-in representation of the lower left pyramid's tip. The same goes for the upper right pyramid, which is a zoomed-in representation of the middle pyramid. The diagram does not even include the other 600,000+ distributors that have never received a commission check! USANA also only considers what is represented in the upper right pyramid as "Full Time" distributors (Gold Directors and up). Everyone else are just part timers according to USANA.

So what is USANA's response to this? I would love to know. USANA cannot claim that most distributors join only to receive discounts on the product because USANA's Preferred Customers pay the same price as distributors. All of USANA's distributors joined with the intent to "Make Money" (otherwise they would only be preferred customers). Distributors are forced to purchase over $100 worth of product every 4 weeks in order to receive their commission check. Just imagine each level of distributors making these required product purchases. Those purchases pay commission to the higher levels. What we have here is a very elaborate pyramid scheme.

The Security Exchange Commission, Federal Trade Commission, Stock Analysts, Shareholders, Distributors and Prospects should all be aware of the information presented in the diagram.

How is USANA a Pyramid Scheme? Prospecting Associates Should Read This Before Joining.

How is USANA a Pyramid Scheme?

In short, I believe USANA Health Sciences, Inc. is a pyramid scheme because associates can recruit an endless chain of new associates into a downline and are paid commission from the required product purchases made by each of the associates in the downline. Retailing USANA's products are unachievable due to the associates's exorbitant cost for the products. USANA associates resort to recruiting more sales representatives as their primary focus instead of retailing the product for a profit margin. The product is overpriced in order to fund the top recruiters in the pyramid scheme. As a result, 99% of USANA distributors never make a profit and lose a lot of their time and money.

   Required Product Purchases

The following is a statement from USANA's SEC filings regarding the requirement for associates to purchase product:

"To be eligible to earn commissions, an Associate must purchase a certain amount of product each month ("Qualifying Purchases"), which they may resell to consumers or use personally. Associates do not earn commissions on these Qualifying Purchases. Associates only earn commissions on the purchase of products by Associates in their down-line organization and Preferred Customers." - USANA's 10-K SEC Filing

First of all, the SEC Filing states that a certain amount product must be purchased each month, which is false. A certain amount of product must be purchased every 4 weeks, which happens 13 times a year instead of 12. USANA calls the amount of products associates are required to purchase as the "Personal Sales Volume" (PSV). It is very interesting that USANA chose the term "Personal Sales Volume" when in fact it is a "Personal Purchase Volume". The upline associates receive commission from the associate that makes these required purchases even in the product is never retailed to a customer. However, if the associate chooses to retail the product, that associate is not paid commission on the sale. Because the product is over priced, retailing for a profit margin is practically unheard of. What is actually happening here is that every associate is required to purchase about $110 worth of inventory every four weeks (13 times a year) and those inventory purchases pay commission to the associates who joined earlier.

What was left out of the SEC filing are the consequences of failing to purchase a certain amount of product every 4 weeks.

"If, at any time, an Associate’s PSV falls below the minimum requirement to remain active, the Associate will no longer be eligible for commission checks or bonuses or to advance in rank. The Associate will also lose any Carryover Volume, and he or she will not carry over any volume until re-activating the BC(s). The Carryover Volume will start again at zero." - USANA's Ask Andy

This rule threatens associates to continue purchasing inventory. A real business would not have such ridiculous hoops to jump through. Put it this way, if an associate were to sign up 10,000 preferred customers who purchase product on a regular basis, this associate will not be paid a single penny for their work unless the associate purchases $110 worth of inventory every 28 days. Why should a USANA associate be forced to purchase their own product if they don't need to? USANA would collapse if they did not force their distributors to purchase product every four weeks.

   Recruiting Associates Instead of Retailing Product

Associates can make far more money by selling the dream of becoming rich rather than selling USANA's vitamins or skincare products. In fact, as long as you sell the dream, the product sells itself!

USANA Pure Rest™

Example: USANA's Pure Rest(TM) melatonin product

Costs USANA associates $14.95 and retails for $17.94.

Each bottle Contains 56 tablets and each tablet contains 2 mg of melatonin.

So USANA's melatonin product costs associates 13.3 cents per milligram.

Most melatonin products retail for less than 3 cents per milligram - See for yourself!

All of USANA's products are overpriced like the above example!

However, when taking all of USANA's perks into consideration, USANA associates can potentially receive $20 in commission every 28 days from each associate in their downline simply from the required product purchases! Of course, what gets left out of their promotional material are the vast amounts of rules that prevent most all associates from making a dime. This is why is pays to recruit instead of retailing USANA's products.

   Endless Recruiting is How it Works

Most distributors do not remain in the pyramid scheme and drop out after only a few months. This is because reality sets in and they soon discover that nobody wants to purchase overpriced vitamins or skincare product. Not only that, but most of their family members, friends, and co-workers do not support their venture after being asked to join their downline. Because of this, there is a very high dropout rate for new associates in USANA's business opportunity. In fact, an estimated 81.5% of new associates drop out within their first year!

USANA knows that most associates drop out soon after they join and has developed a means to extract most of the money from the associate before they drop out. They do this two different ways. 1) in order for new associates to initially activate their business center and be eligible to collect commission, the associate must personally purchase about $220 worth of product. 2) Alternatively, a new associate can purchase one of four special enrollment packages ranging from $300 to $1250, which contains product and recruiting material.

   What Does The FTC Say About MLM and Pyramid Schemes?

In 2004, the Federal Trade Commission wrote a letter in response to a question the Direct Selling Association's president Neil H. Offen asked. The letter is titled "Staff Advisory Opinion - Pyramid Scheme Analysis". Mr. Offen requested a staff advisory opinion regarding the FTC's analysis of pyramid schemes.The response does not bode well for Multilevel Marketing companies like USANA. I recommend reading the memo for yourself.

"A multi-level compensation system funded primarily by such non-incidental revenues does not depend on continual recruitment of new participants, and therefore, does not guarantee financial failure for the majority of participants. In contrast, a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." (My Emphasis in Bold) - FTC Memo

USANA makes most of their net revenues from the money distributors pay in order to participate in the business opportunity. According to FTC's statement, it is very likely USANA is conducting an illegal pyramid scheme. 89% of USANA’s net revenue comes from distributors who purchase product and services from USANA.

"The Commission’s recent cases, however, demonstrate that the sale of goods and service; alone does not necessarily render a multi-level system legitimate. Modem pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions. While the sale of goods and services nominally generates all commissions in a system primarily funded by such purchases, in fact, those commissions are funded by purchases made to obtain the right to participate in the scheme. Each individual who profits, therefore, does so primarily from the payments of others who are themselves making payments in order to obtain their own profit. As discussed above, such a plan is little more than a transfer scheme, dooming the vast majority of participants to financial failure." (My Emphasis in Bold) - FTC Memo

According to this quote, simply because USANA has a product to market does not mean render the company legitimate. It goes on to explain that Modern Pyramid Schemes require a certain level of monthly purchases to qualify for commission and these schemes call the required purchases a "sale of goods". The majority of USANA's commissions paid out comes primarily from the associate's required inventory purchases. If an MLM company makes the majority of their net revenues from the payments made by distributors to qualify for commissions, then the company is an Illegal Pyramid Scheme.


   Conclusion

Based on the information I have provided above, I believe that USANA conducts an illegal pyramid scheme. 99% of USANA distributors lose money due to this scam. The FTC needs to investigate USANA and put an end to the fraud. USANA currently operates this pyramid scheme in Australia, New Zealand, Canada, the United Kingdom, the Netherlands, Hong Kong, Japan, Taiwan, Korea, Singapore, Mexico, Malaysia, Philippines, and the United States. I recommend any prospecting distributor from these countries to consider what I have written above and do your own research before making a decision whether to join or not.

USANA'a Hong Kong active associate numbers may begin declining because of BabyCare Ltd.

Now that USANA Health Sciences owns BabyCare Ltd in China, will USANA continue to recruit Chinese Nationals into their Hong Kong market?  Currently, China has outlawed Multilevel Marketing because they consider it to be a pyramid scheme. Only Single Level direct selling is allowed. Distributors are not allowed to recruit additional distributors.

It appears that USANA and their distributors have been recruiting people from mainland China into their Multilevel Marketing business opportunity through their Hong Kong market. As I pointed out in a previous blog posting regarding USANA's active associates per territory, USANA's Hong Kong territory reveal that 1 in every 135 Hong Kong citizens are active distributors in USANA's business. That's very suspicious when you consider that USANA's United States market has 1 in every 5436 American citizen as an active Usana distributor.

So if USANA's Hong Kong territory has been used to funnel profits to USANA through illegal means (recruiting people from mainland China), and now USANA owns BabyCare Ltd, will those mainland Chinese distributors who joined USANA illegally leave USANA and join BabyCare Ltd instead? I believe this may be the case. This would mean that USANA's Hong Kong active associate figures will begin to drop. Keep in mind, people living in Hong Kong would not be able to join BabyCare Ltd because Hong Kong is not part of mainland China. Now if USANA believes their Hong Kong active associate numbers are going to decline as a result of BabyCare Ltd, then USANA has a responsibility to inform their shareholders since it is a material matter.

Regardless, I firmly believe there is sufficient evidence for a SEC investigation of USANA's distributor recruiting in their Hong Kong territory. I believe this is a SEC issue because if illegal distributor activities within a foreign country such as China is confirmed, it may account for a very substantial amount of USANA's net revenues and gross profits. If this is truly the case, then shareholders may suffer massive loses in their investment in USANA's stock. Another consequence will be a damaging blow to the auditing firm PriceWaterHouseCoopers' reputation since they have been notified of this matter almost a year ago.

I would ask that anyone with additional information or evidence please email me. Your identity will not be revealed.

UPDATED September 21, 2010 at 7:47 PM:
If USANA's management HYPOTHETICALLY told an investment firm that they are expecting Hong Kong active associate numbers to be lower because of BabyCare Ltd, but did not make this statement publicly to all shareholders, does this violate SEC laws due to insider trading?

USANA Purchases BabyCare Ltd for its Direct Selling License in China for $62,716,000

USANA recently purchased a company based in Beijing China that has been unprofitable. However, this company had something USANA has not been able to obtain; a direct selling license in mainland China. USANA paid a whopping $62,716,000 for a company that only had $15,000,000 in annual net sales and $19,000,000 in total assets. The transaction took place in the Cayman Islands, so it is questionable whether or not either party had to pay any US or Chinese tax.

USANA Health Sciences, Inc. is successful for one reason, Multilevel Marketing (MLM). USANA distributors can recruit more distributors, and because any distributor who wants to participate must personally purchase over $100 worth of product every 28 days, there is no need to retail product. Commission is paid to upline distributors from those mandatory product purchases made by their downline. So in MLM, selling the dream of making money and recruiting new distributors is what makes 1% of distributors a lot of money and make USANA very profitable. However, mainland China does not allow MLM compensation plans!

Mainland China only allows single level marketing compensation plans. So the only means for a distributor to make any money would be to retail product to real customers, which is really what direct selling is suppose to be about. For USANA to bring their product into China, USANA must at least drop the price of their product line in half (or more). This would allow its distributors in mainland China to retail the product and make a “Profit Margin”. This profit margin in currently unheard of with USANA's products around the rest of the world because the distributors already pay a premium retail price for the product and cannot resell it for more than they paid. Also, USANA's preferred customers pay the same price as the distributors. USANA would also have to reward those Chinese Nationals that actually retail product unlike those around the rest of the world which are rewarded for recruiting more distributors instead of retailing product. In case this isn't clear, distributors in mainland China would not have a downline! These distributors would also only be recruited by USANA's corporate office (or BabyCare for now) and not by distributors inside or outside the country.

There are good reasons for USANA to make this move however. They will try to use it to encourage the rest of their markets to recruit like crazy. USANA can put in their promotional material that they are only 1 of 25 companies in the world that have a direct selling license in mainland China, which is now the second largest economy in the world. If USANA distributors thinks USANA will be able to grow a large distributor base in China and maintain those distributors, then those distributors are in for a surprise. Again, what incentive is there for Chinese Nationals to join a distributorship with BabyCare/USANA? Unlike MLM where distributors think they work as a team, single level marketing means that each distributor is a competitor to one another. So the more distributors in a single level marketing plan, the less each distributor has to potentially make. Because of this, the number of Chinese distributors not rise as much as some believe. If the numbers grow too big, Chinese distributors will not last very long and will drop out even quicker than MLM distributors do.

Goodluck to USANA though. If USANA brings their product line into mainland China, they'll be forced to drastically lower the price of their products. Then the Chinese National distributors will pay about $50 USD or less for a USANA HealthPak100 and resell it for about $70 USD and make a $20 profit from each box sold, unless USANA refuses to lower the price. Oh, and if you think the product sent to Chinese Nationals would only be resold in China, think again. USANA has been unable to police Ebay and other auction sites for USANA distributors who have been reselling massive amounts of product at half the price that it costs distributors to purchase; all for the sales volume points (MLM point game)! What would stop Chinese Nationals from using ebay to resell all their product world wide and do it for a real profit while still reselling it for a cheaper price than any other USANA distributor elsewhere in the world could even buy it for.

Bottom line, MLMs have not been successful in mainland China and that is because MLMs were never about retailing product. MLM's like USANA are in business to sell the opportunity to make money (the dream). China is smart because they know a pyramid scheme when they see one; MLM. Companies in mainland China with a direct selling license can only succeed if the product is very affordable and competitive against those on store shelves. With a LIMITED distributor base, the product line can make the company and its distributors a lot of money. But if the product is too expensive, customers will not buy, and distributors will leave.