This review of Melaleuca comes at the request of one of our readers. Based on our research so far, we believe that you can't make money with MLM. That being said, we'll have a streetonomic look at Melaleuca. We want to know if this is an opportunity for financial freedom, or just another network marketing company.
Melaleuca first launched in 1985, out of Idaho. They now have annual sales of US $1.75 Billion from over 400 products. Melaleuca report that they have purchases from over 1 million customers from all over the world every month. There is no doubt that the company is very profitable. What we want to know is: Are people making money from network marketing with Melaleuca
What Does Melaleuca Do
The range of Melaleuca products includes nutrition, personal care, home cleaning and cosmetics. All Melaleuca products are made from natural ingredients and do not contain harmful chemicals. This means that they are better for both your health and for the environment.
We like that the products are natural and do not cause any harm. An online review of Melaleuca products, gave them an average score of 4.4 / 10. The score is based on consumer feedback, and does not include much detail. We assume that part of the reason for the less than impressive score, is because of the price.
How Do You Make Money With Melaleuca
To find out how you earn money, we looked at the Melaleuca compensation plan. This document explains how members of the MLM can earn commission. Here we see that Melaleuca's mission, is to 'enhance lives', by 'helping people reach their goals'.
The compensation plan describes Melaleuca as an 'opportunity for the average person to start a business with virtually no risk and unlimited upside potential'. They go on to tell us that it's a 'proven system where people with virtually no financial investment', can dramatically improve their finances. All they have to do is refer customers to Melaleuca.
We were initially impressed by the fact that Melaleuca has a focus on sales to customers. We believe that the only way to make money from any MLM, is to build a substantial retail customer base. We later found out that everyone signs up as a customer. Customer is the first level of enrollment in the Melaleuca business opportunity.
Melaleuca call their MLM members 'customers', not distributors. Everyone joins as a customer, then has the opportunity to refer others and build a business. In Melaleuca there is no difference between customers and members of the MLM.
The compensation plan claims that you'll never have to sell products because 'all products are sold directly by Melaleuca'. We think this is only partially correct. It is true that customers will place orders directly with Melaleuca. So you won't have to process orders or deliver products. Having said that, you have to find customers and convince them to buy products.
How much Commission does Melaleuca Pay
Like most MLMs the commission you earn with Melaleuca is calculated from the 'product points', from your customers. Every Melaleuca product has a point value assigned to it. When customers you have referred buy product, you earn commission based on the point value of what they have ordered. To qualify for commission you need to personally order at least 29 points worth of product per month.
The product points means that you will get the same commission regardless of what the customer pays. For example customers who sign up for a monthly supply of Melaleuca will qualify for the 'preferred member price'. Even though they are getting a discount, your commission will remain the same. This can be seen in the US Melaleuca price list.
The amount of commission you are paid is calculated from a combination of the product points purchased and the number of customers you have personally enrolled. The amount you can earn and the customers needed are shown in the table below:
You can also earn commission from customers enrolled by others in your Melaleuca marketing organization. You can earn 7% commission on the points ordered by customers in your downline. Depending on your 'status' you can earn this commission on between 2 and 7 generations.
In true network marketing fashion, there is also a variety of other ways to earn with Melaleuca. These include;
Advancement Bonuses - Paid when you qualify for a new status. This doubles with the pacesetter bonus if you achieve rank advancement fast enough
Mentoring Bonus - When people in your marketing organization advance, and get paid the advancement bonus, you get a mentoring bonus.
Leadership Growth Bonus - Only available at the ranks of 'Senior Director' and above. Paid based on leadership points
Monthly Car Bonus - Senior directors and above can have a car leased for them by Melaleuca
How Much are People Earning With Melaleuca
We looked at the 2016 Melaleuca Annual Income Statistics. We were not surprised to find that very few people are earning a substantial income from the Melaleuca business opportunity. The table below summarizes the commissions paid to each rank by Melaleuca in 2016:
As we can see from the above table, in 2016 99.58% of 'customers' earned less than $32,000 in commission from Melaleuca. In other words only 0.42%, or 1 in 238 earned a full time income from Melaleuca.
Like all MLMs, Melaleuca explains these results with excuses. First is the claim that 'the majority who join are only interested in being customers', then there's the 'very few decide to build a business'. These statements could be true, but they could also be an attempt to spin the truth and make the Maleleuca opportunity seem better than it really is.
For the sake of the review, we'll give Melaleuca the benefit of the doubt, and we are talking about a serious level of doubt! We'll assume that 66% of active members in 2016 only joined to be customers. With this adjustment, we now see that of those who joined Melaleuca to be more than just customers, only 1.23% earned a full time income.
Let's go a step further and believe that only the 12% who make it to the director levels are building a business. Now things really improve as we can see that 3.5% of those who choose to build a business are earning a full time income. We see that only 1 in 28 people are earning significant income from the proven system with virtually no risk and unlimited upside potential.
Why is it Difficult to Make Money With Melaleuca
One of the main reasons it is difficult to make money with any MLM is that they claim you can be successful with 'duplication'. Which is their way of telling you to follow their instructions without asking questions. The problem is that it simply does not work.
If you join Melaleuca they'll tell you how much money you can earn by recruiting customers to buy through your personal link. The internet makes is so easy that anyone can do it. That means that all the existing Melaleuca members in the world can also share their own online link with all of your customers.
When you try to sell Melaleuca, you are competing with the 'more than 1 million', existing customers who have already joined before you and also have their own referral links. Let's not forget that you are also competing with the corporate website. We discovered that it is possible to sign up with Melaleuca directly. We assume that when customers join directly, they are placed in the MLM downlines of top Melaleuca performers. This is part of the 'incentives' which are only paid to those near the top of the pyramid.
Another challenge is that the products are overpriced. The reason for this is because all those generous commissions from the compensation plan are included in the price you pay for the products.
If we look at the 'preferred prices' of Melaleuca products, we can see that the relationship between price and product points is not as straight forward as we'd hope it would be. This is shown in the table below:
As we can see from our very limited sample, there is some difference in the points per dollar from different Melaleuca products. This means that the commission you earn will be influenced by which products your 'customers' order. We adjusted the table to show the maximum commissions:
We looked at the 2017 US Melaleuca price list, and found that the adjusted personal customer commissions and organization commissions varied from product to product. We found it interesting that the commission earned on the price paid is always less than the rate paid on the points. Melaleuca says they'll pay up to 20% and 7% commissions, but this is based on points, not dollars. This could be an honest mistake, or another attempt to make the Melaleuca opportunity look better than it really is
If we look at the commissions paid on Melaleuca products, we can see that there is a substantial mark up to finance the mlm compensation plan. Keep in mind that there are 7 layers of organizational commission payable (totaling 49%), and customer commissions of up to 20%.
These mark ups are based on product points, but they still represent a substantial portion of the 'preferred' price you pay for Melaleuca products. This is shown below:
If you join Melaleuca and buy products at the 'preferred' price, then between 36% and 53% of the price you pay will go directly to the people in your upline. This includes the person who directly introduced you to Melaleuca, and 7 levels of directors above them. This does not include costs of production, Melaleuca profit, or any other incentives paid to top MLM members
MLMs use their compensation plans to lure members in with the dreams of financial freedom. Unfortunately only a small fraction who join will ever climb the pyramid and earn all these incentives. For everyone else, they are just an added cost. We have found evidence that people have quit Melaleuca because of the inflated prices
Is Melaleuca An Illegal Pyramid Scam
Even though MLMs closely resemble pyramid schemes, they are not illegal. The reason dates back to the 1979 case of Amway vs the FTC. After 4 years in court Amway was found to be offering a business opportunity, rather than a pyramid scam. The technicalities came down to wording in their paperwork. One example requires consultants to make retail sales.
The Amway ruling effectively opened the doors for all other MLMs to operate within the law. However we should remember that being legal doesn’t make it ethical. If you knew that less than 1% of people had a chance of generating a real income, would you feel comfortable recruiting new consultants?
Another issue, is that even though these rules may be in the paperwork, they are difficult to enforce. For example, several people in MLMs have said that they have cupboards full of product. This is because of the minimum monthly purchases they need to make to remain active in the system. Even though stockpiling is against the rules, there is no way for the company to monitor it.
Should You Join Melaleuca
We believe that Melaleuca products are free from harmful ingredients, and we applaud them for this. Having said that, Melaleuca is not the only ethically responsible company in the industry. Before you join Melaleuca, you should try some of their products and compare them to other environmentally friendly products being sold by competitors.
For years the Finance house has been using cleaning products by a company called Earth Choice. In Australia these products are sold on supermarket shelves and are priced in line with their chemical based competitors. Like all products, they even go on special from time to time so they can be cheaper than the harmful alternatives. Being happy with these products, we have no incentive to change.
If you find that Melaleuca is better quality or better value than similar products, then maybe you can make money selling Melaleuca. Remember at the end of the day you won't make money unless you make sales. If you find that other products on the market offer the same environmental benefits but at a better price, then it's quite likely you'll have a hard time selling the products. It's also important to remember that there are already over 1 million people trying to sell Melaleuca, you will be just another one.
Our Final Say
Network marketing is a very profitable way for companies to sell products. If you are considering joining Melaleuca, or any MLM, just remember that their goal is to sell you products, not to make you rich.
We believe that that MLM is business model designed to turn you into a customer. It is not designed to offer you a business opportunity. This opinion is based, in part, from research by Dr Jon Taylor, of MLM The Truth. He found that less than 1% of people who join any MLM will turn a profit.
These have been our opinions of Melaleuca, we'd love to hear about yours in the comments section below. Please share your thoughts, especially if you have personal experiences with Melaleuca
For more posts like this, look at our list of mlm reviews.