Oriflame is a Swedish based cosmetics company which started in 1967. Over the past 5 decades, the company has grown and now as a global network marketing structure of 3 million consultants ordering their products from over 60 countries. In 2016, Oriflame made sales totaling US $1.4 Billion, which placed them at 15th on the Direct Selling News Global 100.
We decided it was time for a streetonomic review of Oriflame. Here at The Finance Guy, we believe that you can't make money with network marketing, but will still give Oriflame a chance to prove us wrong.
We are in no way associated with Oriflame and have made no direct contact with them or their consultants. Our research is based entirely upon publicly available information from the internet. We will look at what others have said about Oriflame then compare it to our own interpretation of the Oriflame business opportunity
What Is The Internet Saying About Oriflame
The Dermatology Review
This website, praises Oriflame for the quality of their products, then goes on to recommend other products (which we suspect they are selling for commission). They tell us that Oriflame products were developed in line with the 'most advanced cosmetic science'.
We are not qualified to comment on anything relating to 'cosmetic science', but it's good to know that Oriflame makes quality products. Omoge Mura also praised the quality of Oriflame products. What their review lacks in words, is made up for with pictures. I looks like the products are good, but can you make money with Oriflame?
Online MLM Community
Provides a list of 7 tips for 'how to succeed in Oriflame'. As far as we can see, this list of tips could be a cut 'n' paste job for any sales job. Set goals, be persistent, use the product yourself, blah blah blah. This website appears to be trying to promote something similar to Matt Loyd's MTTB, but we already know you can't make money with MTTB
Natural Swedish Beuaty
An active consultant has provided some tips for 'how to make money with Oriflame'. Based on this review, this is a good business opportunity. She explains that you can drop a few Oriflame catalogues around at work then 'watch the orders come flooding in'. It also explains that if you arrange demonstration parties, 'you will see a large amount of sales'. Oriflame sounds too good to be true!
Another active Oriflame consultant has made similar claims that this is a great money making opportunity. This site explains that making money with Oriflame is easy because the catalogue and web service 'sells for them'. This U.K based review explains that with Oriflame, you can earn GBP 2,000 (U.S $2,635 at time of writing) every three weeks from 'just a few hours' of work. This member makes Oriflame sound like an amazing opportunity!
The official company website also purports that this is a great money making opportunity. If you are looking for a 'lifestyle of freedom and luxury', then Oriflame is for you. It's doesn't end at making sales though because you can 'earn even more money by inviting others to join'.
Oriflame recommends that you join right away because 'the Oriflame opportunity puts your dreams within your reach – with minimal investment, no risk and exceptional rewards'. Exeptional rewards with no risk! What could go wrong?
Can You Make Money With Oriflame
The 2015 Oriflame Success Plan explains all the different ways you might make money with Oriflame. One thing we did like, is that like Avon, they encourage consultants to find customers for retails sales even though we believe you can't make money with Avon.
Depending on how far you progress up the Oriflame hierarchy, you can make between 20% and 35% retail commission just from selling products at the recommended retail price. If you can sell enough cosmetics, then you can make good money.
To find out how much retail profit current Oriflame consultants are making, we looked at the 2016 Oriflame Annual Report. As a NASDAQ publicly traded company, Oriflame is legally required to provide audited financial reports, so we believe this is the most trustworthy Oriflame document on the internet.
For us, the highlight of the annual report, was in the Key figures on page 40. One of the key figures was 'sales per active consultant'. It turns out that in 2016, the average Oriflame consultant made EUR 411.90 worth of sales for the entire year.
That's an average of 34 Euros worth of sales per month, which is U.S $39 at the current exchange rate. A retail profit of just over $1 per day is an optimistic view of Oriflame. It is our opinion that they are reporting their own sales figures, which represent the wholesale price.
We want to know what the retail profit was. If every Oriflame consultant earned the maximum 35% retail margin, then average retail profits for 2016 was 221 Euros per consultant. According to our understanding of their 2016 financial reports, Oriflame consultants earned less than $1 per day in retail commission. Our calculation assumes all products were sold for retail profit, if consultants ordered for personal use, then their earnings would have been less.
Fortunately for Oriflame consultants, retails sales are not the only way to earn money. Like all MLMs they can also earn incentives from the compensation plan when they recruit others. We looked at the UK version of the Oriflame Success Plan, which explains how to qualify for different 'titles' which pay progressively more incentives.
Once you have started recruiting others to join Oriflame, you can qualify to earn monthly commissions on any product they order, as well as any product orders by others they might recruit. If you reach the top rank of 'Executive Director', then you can earn commission ranging from 9% to -0.12% from 12 levels of depth in your downline.
You can earn all this money once your team is ordering over GBP 100,000 worth of Oriflame products every three weeks. Recruiters will tell you that this is great because look at what is possible. We see this as a red flag because all these incentives are included in the wholesale price charged to consultants. If all these ranks exist in the team that you join, then we calculate that 40.88% of the wholesale price paid by consultants is paid to their upline.
A study by Multi-Level Marketing Unmasked found that 99.7% of people lose money from network marketing. The reason is because of the overly complex compensation structures used in the MLM business model. In every network there are few people at the top making a lot of money, but every dollar they earn comes out of the pockets of those recruited beneath them in the structure.
We were unable to find a copy of any version of the Oriflame income disclosure statement on the internet. This means that we don't know exactly how much incentive payments Oriflame consults are earning at different levels. We had similar problems when reviewing Avon, but still managed to show that you can't make money with Avon
We were able to calculate the average incentive paid to all consultants using the 128 page the Annual Report. In the consolidated income statement (page 64), we found 'cost of sales', which is reported to have been EUR 366,467,000. We have kindly assumed that the only cost of sales was MLM incentives. This is the total incentives paid to all Oriflame consultants in 2016
We have estimated the total incentives paid in 2016 and Oriflame has told us that they have around 3,000,000 consultants around the world. Using high school division, we calculated that on average Oriflame consultants earned EUR 122.16 in total incentives for the year.
According to our calculations, the average total income earned by Oriflame consultants in 2016 was EUR 343.16. This is shown in the table below
Why is it Difficult to Make Money With Oriflame
We looked at Oriflame using the MLM Evaluation tool provided by 'MLM the Truth'. We believe that it raises all 5 red flags. According to their calculations, this means that Oriflame consultants have a less than 1% chance of making a profit.
The compensation plan, which is similar to that used by most MLMs makes it extremely difficult for new members to make money. This is because they focus too much on recruitment and not enough on building a retail customer base. This means that very little money is coming from outside the network.
The only way to make money in such a system, is if someone else is losing it. People at the top of the pyramid will encourage everyone beneath them to keep recruiting and keep using the products, after all every time you buy more products, someone in your upline makes more money
Is Oriflame an Illegal Pyramid Scam
Even though the Oriflame success plan resembles an illegal pyramid scheme, it is legal because it is backed by products. Pyramid schemes are only illegal if there is no product or service attached to them.
Being legal does not make the system ethical. All companies are in business with the goal of selling goods and services for a profit. Network marketing companies are able to charge a higher price because they create a customer base of loyal members who believe that by consuming these products and recruiting others to do so, they will become financially free.
Should You Join Oriflame
The only reason to join this or any other network marketing system is if you you are already using the products and are confident you can sell them to others. If you are joining because you think it's a good opportunity to make a little extra money, then we suggest you look at some other opportunities too.
If you are planning to build a team with Oriflame, then we should point point out that their annual report shows that in 2016 the total number of Oriflame consultants decreased by 7%. This means that globally, people are quitting Oriflame faster than new consultants are joining. The high attrition rate is a problem which is common to all MLMs we have looked at. If you build a downline with Oriflame, you should expect a high portion of them to quit every year. To grow your team you will need to first replace all the members who have dropped out
As always we welcome your feedback in the comments section below. We'd love to hear what you think about Oriflame, especially if you can share your own experiences with the company
For more posts like this, look at our list of mlm reviews.