Chances are you’re here because you’ve been approached by somebody affiliated with Melaleuca who has told you about an incredible ‘business opportunity.’
It sounds great – who wouldn’t want to make some extra cash by recommending products you love to your friends while getting healthy at the same time?
However, you’re a little hesitant.
Maybe you think that everything sounds too good to be true, or you’ve heard people saying things like ‘Melaleuca is a pyramid scheme!’ and ‘Melaleuca is a scam!’ and you want to do your research before getting involved.
In this article, we are going to dive into the Melaleuca opportunity and find out what being a Melaleuca Marketing Executive involves, whether you can make money with Melaleuca, and whether Melaleuca is a legitimate business opportunity or just another pyramid scheme in disguise.
Is Melaleuca a pyramid scheme?
Let’s find out.
Is Melaleuca a Pyramid Scheme or a Legit Business Opportunity?
What is MLM?
MLM stands for multi-level marketing, and MLM companies are also referred to as network marketing companies or social selling companies.
MLMs have been around for years, and popular MLMs include Nu Skin, Modere, Arbonne, Color Street and even Avon!
You don’t receive a salary in a multi-level marketing company.
Instead, you earn money from selling products to people you know and recruiting others into the business.
When you recruit a new person and that person begins earning money, you will earn commission from the sales and recruits generated by THAT person.
This continues down in multiple levels (hence multi-level).
Imagine a triangle.
If the person at the very top of the triangle recruits 10 people, and every one of those 10 people recruit another 10 people, and each one of those people recruit another 10 people, you’ll be making commissions from EVERYBODY within the triangle because they’re all in your direct downline (the people underneath you in an MLM are referred to as your ‘downline’ and you’re their ‘upline’).
All you had to do was recruit 10 people and you make money from 1100.
While MLM companies also give you the chance to make money from selling their products, most people in MLMs prefer to recruit others because they stand to make a lifelong passive income from that person, whereas if they sell a product they’re just going to receive a one-off commission.
The ultimate aim of somebody in an MLM then, is to have as many people in their ‘downline’ as possible, enabling them to form large amounts of passive income for little work.
What is Melaleuca?
Melaleuca is the self-professed ‘largest online wellness club.’
It is based in Idaho Falls, Idaho, and manufactures health, home cleaning, pharmaceutical and personal care products such as furniture polish, vitamins, laundry detergent, toothpaste and even essential oils!
Thanks to his huge success in growing Melaleuca, founder and CEO Frank VanderSloot (is that not the best surname ever?) is now the richest man in Idaho, where Melaleuca is insanely popular.
Melaleuca claim on their website to sell over 450 different products, but unless you are a Melaleuca member, you can’t actually see the products on their website, so we will just have to take their word for it!
Is Melaleuca a MLM company?
Something that is very interesting to note is that Melaleuca claims not to be an MLM company.
The reason they say this is because they claim their representatives do not sell products directly to customers, meaning that the point of sale happens directly between the customer and the company rather than a salesperson or distributor.
However, just because a customer isn’t purchasing products from Melaleuca reps, they are still purchasing something – the role of a Melaleuca Marketing Executive is to help customers set up ‘Shopping Accounts’ and then train them to do the same with their own customers.
This means that while you are technically buying access to the Melaleuca Shopping Club rather than physical products, you are still buying something – in Melaleuca, the opportunity to buy products is the product.
The practice of MLM companies making their distributors buy products to resell them, resulting in ‘inventory-loading’ is becoming less and less common.
In Monat, for example, the customer buys their haircare products directly from Monat’s website using the representative’s affiliate link. They are never buying a bottle of shampoo from a Monat representative directly.
Whatever Melaleuca claim, the facts are that reps get paid commissions based on recruiting people who want to build their teams, and this goes on in multiple levels.
It’s interesting to note that despite Melaleuca’s apparently emphasis on product sales over team building, you cannot join the Melaleuca Shopping Club ($19) and purchase products unless you have been referred by an existing member.
You can’t even look at the products without signing up underneath someone in the company!
What’s more, despite how much Melaleuca talk about focusing on customers, everyone signs up as a customer, making it the first level in the Melaleuca business opportunity.
It is almost as it Melaleuca wants to turn every customer into a recruit!
So, is Melaleuca an MLM?
YES. Make no mistake about it – Melaleuca is an MLM company.
Inside the Melaleuca MLM Opportunity
How do you make money with Melaleuca?
How does Melaleuca work exactly?
In order to see how to make money with Melaleuca, I took a look at the Melaleuca compensation plan.
There are two primary ways of making money in Melaleuca.
You earn commissions in Melaleuca through customers that you refer, and customers that your referred customers refer.
The more customers you enrol, the higher commission you receive.
Your ‘Marketing Organisation’ comprises not only the customers that you have enrolled, but those that your customers have enrolled as well.
The bigger your ‘organisation,’ the higher your commission (in other words, the bigger your ‘team’ or ‘downline,’ the higher your commission).
You will receive various bonuses as your team grows and continues to recruit new members.
There are 7 levels, or ‘generations’ in Melaleuca’s compensation plan.
- Product Advocates
- Business Builder (Director 1-2)
- Director 3-9
- Senior Director
- Executive Director
- National Director
- Corporate Director
When you get to the level of Director 3 and above, you will be required to recruit team leaders who will then grow their own teams. The money generated from these teams will trickle up to you, as the teams are in your downline.
According to Melaleuca, ‘Those who have reached these leadership statuses have not only invested enough time to refer several customers, but they have also helped some of those customers start a business and become Marketing Executives.’
To summarise, the best way of making money with Melaleuca is by recruiting other people who wish to build their own teams.
When you do this, your commissions will increase, you will be awarded bonuses, and you will earn far more money.
Just like other MLMs, Melaleuca also has a car bonus, which can be achieved by hitting a certain rank. However, MLM cars are not all they seem, as we discussed in a previous post.
How much money can you make with Melaleuca?
In order to see how much money people are making with Melaleuca, I decided to take a look at their 2021 Income Disclosure Statement.
An Income Disclosure Statement is a document that allows us to see how many people are making money within an MLM company, and how much of it they’re making.
According to Melaleuca, 81% of people who sign up with Melaleuca never go on to make any sales, and have only signed up to buy products from the site.
They consider this a great thing as it shows that the business is customer focused, but who’s to say that these people didn’t just try and fail?
Maybe they were sold on the ‘business opportunity’ but were just unsuccessful in getting anybody to sign up.
Whatever the case may be, 81% of everybody who enrolled in Melaleuca in 2021 made no money.
The numbers below show the mean averages of all the other Melaleuca reps.
Mean averages are not the best way to measure averages in MLM companies as the top earners in each rank can skew the results.
Using median averages would give us a much more accurate picture of how much Melaleuca reps are making, but unfortunately we don’t have this information.
The Melaleuca Income Disclosure Statement shows us that:
- 81% of Melaleuca reps made no money in 2021
- 9% made between $111 and $525
- 10% made between $274 – $31,738, with a mean average of $2116
- 2.6% earned an average of $9021
- 1.6% earned an average of $14,778
- 0.8% earned an average of $25,250
- 0.7% earned an average of $34,279
- 1.7% earned an average of $61,766
- 1.2% earned an average of $158,400
- 0.2% earned an average of $320,400
- >0.1% earned an average of $1,110,286
From this, we can see that most Melaleuca reps are not making any money, and from the ones that are, the vast majority are not making enough money to replace a full time job.
As of August 2022, the average annual salary in Idaho is $51,429, meaning that only about 3.2% of Melaleuca distributors are making above the average annual salary.
But that’s not all!
The more astute among you will have noticed that there is something off about these percentages.
Namely, they don’t add up to 100%.
This isn’t a case of me being bad at math you guys.
I checked these numbers three times, and they still add up to 108.9.
Does it make sense?
No, but that’s what the income disclosure says.
How much does it cost to be a Melaleuca distributor?
These numbers do not take into account the cost of working as a Melaleuca rep.
First, there is the sign-up fee for Melaleuca is $19 plus tax, which admittedly is a lot cheaper than other signup fees in MLM companies.
However, you also have to achieve a certain number of ‘points’ each month in order to receive any compensation and be kept on as an active distributor.
You can choose to commit to either 35 or 75 points per month. If you opt for 35 points then you will receive a 30% discount on products, and if you opt for 75 points then you will receive a 50% discount.
It is impossible to find out how many ‘points’ each Melaleuca item translates to because the products and their prices are hidden to non-members, but various articles estimate that 35 points equates to around $80.
19 + 80 x 12 = $979.
If you don’t choose your own products, Melaleuca will choose products for you and ship them to you automatically.
When you consider that Melaleuca reps have to spend around $1000 on Melaleuca in their first year but 90% of them made less than $525, we can see that 90% of Melaleuca reps likely lost money in 2021.
Is Melaleuca a Pyramid Scheme?
In order to see whether Melaleuca is a pyramid scheme in disguise, we must first outline what a pyramid scheme actually is.
What is a pyramid scheme?
Pyramid schemes are very similar to MLMs, but the main difference is that MLM distributors are supposed to make more of their money from product sales rather than recruitment.
A traditional pyramid scheme takes an initial investment from each member and promises to pay them for enrolling others into the scheme, meaning that people are buying into an ‘opportunity’ to get rich.
However, as members increase, recruiting quickly becomes impossible and so most members are unable to profit or even make their initial investment back.
The Wikipedia diagram below illustrates just how unsustainable this business model is – after just a few levels of recruitment, the scheme would have recruited everybody in the world and there would be no-one left to recruit!
Because it’s impossible for most people to make any money in a pyramid scheme, pyramid schemes are illegal.
However, most pyramid schemes have got wise to the fact that they have to offer a product in order to appear legit, but even though a business may have products, the focus will always be on recruitment rather than product sales.
Because there are so many of these ‘pyramid schemes with products,’ around, the FTC hasn’t quite caught up yet, and so many people believe that just because a company hasn’t been shut down yet, it can’t possibly be a pyramid scheme, which simply isn’t true.
In order to see whether Melaleuca is a pyramid scheme in disguise, we must attempt to answer 3 questions.
1. Are most people unable to profit?
When we looked at the Melaleuca Income Disclosure Statement, we saw that the vast majority of sellers were not making anything close to a full-time wage, and that many of them were likely losing money.
This hugely contradicts the idea that joining Melaleuca is a path to financial freedom or a legitimate business opportunity.
When you consider that 90% of Melaleuca reps are likely losing money and only 3% are making a full time income, it becomes clear that most people in Melaleuca are unable to profit.
2. Do you have to pay to play?
While the sign-up fee is relatively small, Melaleuca representatives must spend a certain amount on products each month in order to qualify for commissions and remain active in the company.
With Melaleuca members spending around $1000 per year, Melaleuca is definitely a company where you ‘pay to play,’ and it could even be said that the real customers of Melaleuca are the representatives themselves!
3. Is there a large focus on recruitment?
The basic commission from a customer buying products is just 7%.
When you consider that Melaleuca products are extremely inexpensive, a 7% commission per product sale equates to just a few cents.
You would have to sell thousands of products every month in order to make any kind of liveable income from this.
Thus, Melaleuca reps are motivated to sign others up, so that they can grow large downlines and their commission percentages increase.
In other words, yes, there is a huge focus on growing a team in Melaleuca, and the only real money to be made is through recruitment.
Why is Melaleuca so secretive?
Melaleuca is a very secretive company.
You will not find product prices listed on their website, and representatives are not allowed to talk about the opportunity publicly or even reference Melaleuca by name on their social media accounts!
In Melaleuca, everything is very hush-hush and discussed in the privacy of direct message and in-person chats.
But just why is Melaleuca so secretive?
Well – and this is only my opinion – Melaleuca want all of their sales pitches to occur privately to minimise their chances of being reported (most social media platforms ban MLMs) and investigated.
The image below shows a section of the Melaleuca Terms and Conditions that expressly forbids reps from even describing the products publicly online!
Whatever Melaleuca’s reasons for being so secretive, you have to wonder why they don’t even allow their own representatives to say the name ‘Melaleuca’ in public!
Although Melaleuca is not affiliated with the Mormon church itself, Frank VanderSloot, CEO, is a devout Mormon.
To cancel your Melaleuca account, you need to submit a signed cancellation form to Melaleuca, no later than midnight on the last day of the month. You can do this by fax, email or letter.
Despite what they claim, Melaleuca is definitely an MLM company.
As the vast majority of people with Melaleuca make very little money (or even lose money), Melaleuca cannot be considered a good company to work for.
Melaleuca isn’t a scam, but as it functions very much like an illegal pyramid scheme and most people don’t make any money, Melaleuca cannot be considered a legitimate business opportunity.
Melaleuca is an FDA-approved manufacturer of over-the-counter pharmaceuticals, but some of the products Melaleuca produce (such as dietary supplements) are not regulated by the FDA.
Is Melaleuca a Pyramid Scheme? | Final Thoughts
Most MLMs closely resemble pyramid schemes and Melaleuca is no different.
With a huge emphasis on recruitment, fees to join and obligation to buy products in order to hit targets, Melaleuca definitely appears to be functioning like a pyramid scheme.
Most Melaleuca representatives are not making a profit, and so the idea that this is a legitimate business opportunity is just not true.
If it wasn’t already clear, Not Your Boss Babe does not recommend joining Melaleuca, or any other MLM!
An Alternative to Melaleuca
If you’re looking for a side hustle or a work from home job, you may find these articles helpful:
Advantages and Disadvantages of Blogging
Easy Freelance Jobs for Beginners
Best Side Hustles for Single Moms
How to Sell Feet Pics Online
Secrets to Selling on Poshmark
Profitable Digital Products to Sell on Etsy
How to Become a Micro Influencer
That’s about it for today, but as always, if you have any questions then don’t hesitate to leave them in the comments section below and I will get back to you!
Until next time,