USA Multi Level marketing Industry Research 2018

0
United States Multi Level Marketing Industry Research and Analysis
Market Insights
2018
Maple Growth Partners
While the full report is exclusively prepared for the said client, we have provided a gist of our overall
analysis to showcase our research capabilities.

1
Table of Contents
1. Typical Performance of an MLM Company
2. First Year Headcounts for Successful MLMs
3. Typical Financial Metric Points / KPIs of an MLM Business
4. Lifecycle of Most MLMs Teammates
5. US MLM / Direct Selling Market Overview
6. Competitive Landscape
These topics are extensively covered in the
full report. Here, we have just combined a
few slides to present our relevant skill-
sets.

2
Primary Objective and Focus of the Document
• We recently evaluated the US multi-level-marketing industry for our client, a US-based private investment
firm. In this report, we provided a typical performance cycle of an MLM company; identified suitable KPIs to
analyze and compare competitor firms; and commented on general MLM market dynamics
• We identified that ‘pop and drop’ is the typical performance curve for a MLM firm. Typically, drop in sales of
the existing markets are usually covered by the gains in sales of new markets. This is pretty much a non-
ending cycle of entering and exiting new markets
• Increasing number of people joined MLM industry in the US during and post 2008-09 recession with the hope
of additional/secondary income but sales dropped as it was difficult to sell (already inflated) products
• Direct selling retail sales per person was the lowest in 2009, peak of recession
• As the number of people involved in direct selling is increasing, direct sales per person has been on a
declining trend
• We also included top 55 companies in the US and compared them using a standard template by populating
data fields such as key products/services, compensation structure, sales method, key geographies, key
financials, member churn rate, business entry fee, % of sales commission, etc.

3
• As per Euromonitor and IBIS World, US Direct Sales industry revenue is projected to contract/grow at a CAGR of -1.0%
and 0.2%, respectively between 2017 and 2022
• Direct selling is a blanket term that encompasses a variety of business forms premised on person-to-person selling in locations
other than a retail establishment, such as social media platforms or the home of the salesperson or prospective customer. Direct
selling consists of two main business models:
• Single-level marketing in which a direct seller makes money by buying products from a parent organization and selling
them directly to customers
• Multi-level marketing (also known as network marketing or person-to-person marketing), in which the direct seller may
earn money from both direct sales to customers and by sponsoring new direct sellers and potentially earning a
commission from their efforts
US Direct Selling Retail Sales ($ billion) and Year-on-Year % Change
26.7
28.7 29.6 29.7 30.5 30.6 30.8
29.6
28.3 28.6
29.9
31.6
32.7
34.5
36.1 35.5
7.5%
3.0%
0.6%
2.5%
0.5%
0.5%
-3.9%
-4.3%
0.8%
4.6%
5.9%
3.3%
5.5%
4.8%
-1.6%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Y-o-Y%Change
($billion)
Market Size ($ bn) Y-o-Y Growth
US Direct Selling Industry Revenue was $35.5bn in 2016 and is Projected to
Remain Flat With a Growth Rate of <1% Over the Next Five Years
Source: Direct Selling Association
Data Source 1 - DSA

4
More People are Selling Less
12.2
13.0
13.3
13.6
14.1
14.6
15.0 15.1
16.1
15.8 15.6
15.9
16.8
18.2
20.2
20.5
2,188
2,207
2,222
2,186
2,161
2,105
2,053
1,960
1,760
1,808
1,915
1,989
1,945
1,894
1,788
1,734
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
10.0
12.0
14.0
16.0
18.0
20.0
22.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USDirectSellingRetailSales/PeopleInvolved(indollars)
PeopleInvolvedinDirectSellingintheUS(million)
US People Involved in Direct Selling (million) US Direct Selling Retail Sales per Person (in USD)
As the number of people involved in
direct selling was increasing prior to
recession, direct sales per person
started declining
More people joined during
and post recession with the
hope of additional income
but sales dropped as it was
difficult to sell (already
inflated) products
Since 2013, there has
been a surge in the no.
of people joining MLM in
the US, however sales
per person has been on
a declining trend
US People Involved in Direct Selling (million) and US Direct Selling Retail Sales per Person (in USD)
US Direct Sales per Person has
never touched the peak of 2003
again in the last 15 years
Note: For this chart, we have considered US direct selling market size numbers from Direct Selling Association, to keep data consistency
Direct selling retail sales per
person was the lowest in 2009,
peak of recession

5
MGP Observation: Lifecycle of a Member in an MLM Company – From Inception of
Membership / Registration to Dropout / Attrition
1. Sales leader or supervisor will try to recruit distributors / downlines by the following approaches:
Face-to-face / individual selling (at home, workplace, fair, exhibition, office / company point of sale centers / clubs); remote selling
(phone, internet, email, mail, fax etc.); and group selling (party plan groups, community centers, etc.)
2. He finally convinces an
individual and recruits
him as his downline
He tries to sell the inventory to his immediate friends and family and to other people by using the above similar marketing techniques. After a lot of
persuasion, he is able to sell only a part of the (inflated priced) inventory and will now have to sell the rest at a loss since he is approaching the
product expiration date. Health and wellness (including nutrition) products typically expire in 2 years and cosmetics and personal care MLM
products expire in 3 years. During this period, he’s been also told that his commissions are directly linked to the product purchases, so he
purchases a lot of inventory later to realize that he won’t be able to sell them. ** A member will likely be a part of an MLM from the inception of
his membership till the time the expiration of the inventory he purchased – typically 2-3 years
Registration
4. Continuous Efforts to Sell Inflated Priced Products Till Product Expiry and Hope to Recruit Downlines
3. New recruited buys the initial mandatory inventory from the company with two objectives:
a) Buy at a discount (products which are already overpriced) and then sell at a high margin
b) Recruit his downline members
Hope and Sustainability
5. Book Losses
Once the inventory is expired, the member will not renew his membership and be forced to dropout reporting losses occurred due to high operating
expenses such as inventory purchases, advertising, supplies, printing and duplication, telephone / computer costs, postage and shipping, and travel.
NOTE: Health and wellness, personal care and cosmetics have longer product expiry dates. This enables a member to be a part of the
MLM for a longer time and make a lot of spending in the hope of earning more money. However, in the case of FOOD/BEEF MLM company,
one can assume that a member participation will be relatively less as the product expiry will typically be around 6 months to a year.
Suffer and Complain
Source: Maple Growth Partners (MGP) Observation and Insights

6
‘Pop and Drop’ is the Typical Performance Curve Experienced by Almost Every
MLM Company, Successful or Not (1/2)
• Pop and drop can be defined as a paradigm when sales massively increase in the initial years and then subsequently
experience a sharp drop right after hitting the peak level
• Reasons for a Pop in Sales: When a MLM enters a new market, distributors begin recruiting to build downlines¹. This often
results in a massive explosion in the sales force, each of which are either required to, or encouraged to, make large product
purchases. New distributors recruit other distributors who then recruit other distributors
• Each level of the endless chain makes a purchase. Sales increase sharply as more people are brought into the system
• Reasons for a Drop in Sales: As distributors fail to resell product or recruit enough people to make meaningful income, they
quit. Most MLM companies see around half of their distributor base churn out each year
• The rise and fall in sales is largely dependent on the structure of the sales organization and the pushy schemes targeted on
recruiting experience
The following charts are the examples of Herbalife performance across all these six markets – Japan, Israel, Spain, France,
Germany, and Russia
Note:
1. Downline refers to the people one has recruited after joining a program and whose sales or own referrals generate income for them
2. Sales numbers for each of these countries were not separately reported by Herbalife after the last year in each of these respective charts
Source: Pershing Square Capital Management 2012 Presentation on Herbalife; MGP Research and Analysis
Herbalife Retail Sales ($ mn) in Japan: 1993 – 2005 Herbalife Retail Sales ($ mn) in Israel: 1991 – 2001

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Herbalife Retail Sales ($ mn) in Spain: 1990 – 2001 Herbalife Retail Sales ($ mn) in France: 1990 – 2001
Herbalife Retail Sales ($ mn) in Germany: 1991 – 2001 Herbalife Retail Sales ($ mn) in Russia: 1995 – 2001
‘Pop and Drop’ is the Typical Performance Curve Experienced by Almost Every
MLM Company, Successful or Not (2/2)
Note:
1. Downline refers to the people one has recruited after joining a program and whose sales or own referrals generate income for them
2. Sales numbers for each of these countries were not separately reported by Herbalife after the last year in each of these respective charts
Source: Pershing Square Capital Management 2012 Presentation on Herbalife; MGP Research

8
Drops in Mature Markets are Masked by the Pops of New Markets (1/2)
Avon Products Historical Growth Strategies – Entering and Exiting Countries Since 1895
There was a spike in the number of markets entered by Avon
Products in the 1990s and 2000s primarily due to the liberalization
policies / opening up of economies in the Asian and African markets
Source: Avon Products Inc. Investor Day Presentation January 2016

9
Drops in Mature Markets are Masked by the Pops of New Markets (2/2)
Herbalife – Number of Listed Contries vs Total Retail Sales
Drop in sales of the existing markets are usually covered by the gains in sales of new markets. This is pretty much a
non-ending cycle of entering and exiting new markets. However, China¹ is the only market where an MLM company can
sustain for a longer time due to the abundance of human capital, a primary driver of chain marketing. In other words,
there is continuous supply of people for the replacement of outgoing members. Not surprisingly, Herbalife’s sales
growth is mainly driven by China and other EMEA markets.
Note
1. India is also coming up as a big market for MLM companies, however, regulations can be challenging here
Source: Pershing Square Capital Management 2012 Presentation on Herbalife; MGP Research and Analysis

10
At the Company Level, MLM Member Attrition Rate is ~50%, However, There is a
Constant Flow of New Recruits Filling Up This Decline Indicating a Net Zero Effect
• Based on the previous 10 years data of Herbalife (shown in the chart below), one can interpret that ~% of members dropout of the
membership each year, however, almost same number of members are again added into the distributor base resulting in a zero sum
situation
• With high attrition rate, constant recruitment is necessary to replace dropouts. This re-pyramiding and constant churning of new recruits is
necessary to prevent total market saturation and collapse by entering new markets and introducing new product divisions
• In effect, collapse is continuous, with losses being born by new recruits. Meanwhile, instead of collapsing, the company continues to
grow, as long as it can continue aggressively recycling new recruits through its system
• Out of 10,000 participating Amway IBOs (or Independent Business Owner), only 414 remained in the business after the 5th
renewal. That’s a 95.9% dropout rate in only five years for the largest of all MLMs
• Over a five-year period, at least 95% typically have left the MLM company; and usually after ten years, nearly all except for those
at or near the top of their respective pyramids will have dropped out. At the very least, one can assume that 90% of participants
will terminate within five years, and at least 95% within ten years
Herbalife – Total Members and New Members Added Per Year (in million)
0.8 0.8 0.8 1.0 1.2 1.5
1.9 1.9 2.1 2.1
1.1 1.2 1.3
1.7
2.0
2.2
2.1 2.1 1.9 1.9
1.9 2.0 2.1
2.7
3.2
3.7 4.0 4.0 4.0 4.060%
58%
63% 62% 61%
59%
53%
52% 48%
47%
0.0%
15.0%
30.0%
45.0%
60.0%
75.0%
0.0
1.0
2.0
3.0
4.0
5.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ChurnRate%
HerbalifeMembers(inmillion)
Members Retained New Members Added Churn Rate
Broadly, churn rate has declined from ~60% to ~50%. However, it is to be noted that the company keeps on changing the
reporting format or tweaks the numbers to make it look appealing.
Source: Multi-level Marketing Unmasked – A Complete and Compelling Case against MLM as an Unfair and Deceptive Practice By Jon M. Taylor, 2016; Herbalife Filings

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1. Volume Points per Capita Penetration (Basically, Total Sales / Population for a Given Area)
Each Herbalife product has a Volume Point value assigned to it that is equal in all countries. To put it simply, 1 VP = $1 Retail Sale
1.6
1.8
2.3 2.5 2.5
2.9
3.2
3.7
4.0 3.9
3.6
3.9
3.4
0.3 0.4 0.4 0.4 0.4 0.5 0.6 0.7 0.7 0.8 0.7 0.7 0.7
0.0
1.0
2.0
3.0
4.0
5.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Volume Point per Capita (North America Volume Point / US Population)
Volume Point per Capita (Total Volume Point / World Population)
• Volume point per capita penetration
for a given country is typically sales
per capita
• Higher the volume point per capita,
higher the penetration in the market
and likely higher saturation to grow.
• To provide a reference, Herbalife
volume point per capita in Korea and
Mexico is ~9.5 and ~7.5, respectively
• North America (mostly US) volume
point per capita increased from 2005
to 2013, but since then has shown a
declining trend
2. Sales per Volume Point – North America and Global 3. Volume Points / Average Sales Leaders with VP
0.78 0.77
0.80
0.85
0.82
0.85
0.88
0.86
0.90 0.91
0.84
0.80
0.82
0.65 0.65 0.64
0.66
0.68 0.69
0.71
0.73 0.73
0.74
0.76 0.77 0.76
0.6
0.7
0.7
0.8
0.8
0.9
0.9
1.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Total Sales / Volume Point
North America Sales / Volume Point
18.4
18.0 18.0
17.4 17.5 17.3
16.3
15.1
15.917.0 17.0
17.4 17.3
17.0
16.7
15.7
14.6
14.8
14
15
16
17
18
19
2008 2009 2010 2011 2012 2013 2014 2015 2016
US Total Herbalife
This increase is most likely
due to a change in
reporting format, excluding
preferred members from
avg sales leaders
Volume points per average sales leader with
VP has been on a declining trend since 2008
for both the US and total company level
10 KPIs / Financial Metrics to Look Into While Analyzing an MLM Company:
Using Herbalife Numbers (1/3)
Source: Herbalife Filings and MGP Analysis

12
Direct Selling Sales per Capita in the US (US$ Bought per Year per Inhabitant)
US Direct Selling Sales Force as % of the Total Population
$93.6
$99.7 $101.8 $101.5 $103.0 $102.6 $102.1
$97.2
$92.3 $92.5 $95.8
$100.7 $103.3
$108.2
$112.5 $109.9
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
US Direct Selling Sales per Capita and Salesforce as a % of Total Population have
been Increasing, Particularly Post the 2008-10 Recession
4.3%
4.5% 4.6% 4.6% 4.8% 4.9% 5.0% 5.0%
5.2% 5.1% 5.0% 5.1%
5.3%
5.7%
6.3% 6.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
CAGR 2009 – 2016: 2.5%

13
Person-to-Person/Individual Selling is Being Increasingly Used as a Sales Strategy;
Rising Share of Full-Time Engagement in Recent Years
90.1% 91.1% 92.5% 91.1% 88.8% 88.9% 93.9%
84.9%
9.9% 8.9% 7.5% 8.9% 11.2% 11.1% 6.1%
15.1%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2007 2008 2009 2010 2011 2012 2013 2016
Part-time (0-29 hours per week) Full-time
US People Involved in Direct Selling - Percentage by Sales Strategy
US Proportion of Direct Sellers by Time Worked (Part-time and Full-time)
64.5% 66.3% 64.3% 63.5% 64.9% 68.3% 70.2% 71.5% 71.0% 72.0%
27.7% 25.7% 25.4% 27.9% 30.9% 27.1% 22.5% 22.4% 20.4% 21.0%
7.8% 8.0% 10.3% 8.6% 4.2% 4.6% 7.3% 6.1% 8.6% 7.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Individual / Person-to-Person Party Plan Others
5.3 million are
building
independent
businesses as
direct sellers in the
US – 800k of these
people are full-time
and 4.5mn
are part time

14
Wellness Segment Share of the Overall US Direct Selling Industry has More Than
Doubled Between 2003 and 2014
US Direct Selling Market – Percent of Sales by Major Product Group¹
Note:
1. Before 2008, ‘clothing & accessories’ was grouped in ‘Personal Care’ category
33.5%
30.5%
26.8% 26.7% 25.6% 25.4% 23.9% 24.4% 22.6% 21.2% 19.6% 17.5% 16.6% 16.6%
15.4%
16.1%
19.1% 20.3% 21.4% 22.7%
22.8% 23.0% 24.1% 26.6% 28.5% 30.1% 33.8% 34.6%
28.2% 30.8% 33.6% 33.7% 32.8%
21.5%
21.3% 19.4% 18.2% 17.1% 16.3% 16.6%
17.2% 16.6%
10.4%
10.3% 11.0% 12.3% 11.9% 10.8% 10.3%
8.3% 7.6%
15.5% 14.3%
15.5% 15.1% 16.2% 16.6% 18.4% 19.2% 20.7% 21.2% 22.9% 23.1% 22.2% 22.0%
7.4% 8.3%
5.0% 4.2% 4.0% 3.4% 3.3% 3.0% 2.1% 2.0% 1.9% 2.4% 1.9% 2.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Home & family care/home durables Wellness Personal care Clothing & accessories Services & other Leisure & educational

15
Sr no. 1 2 3 4 5
Example MLM/NM Amway Avon Products Herbalife Mary Kay Nu Skin
Main Product Category
Health, Beauty, and Home
Care
Cosmetics; Personal Care Health Supplements Cosmetics; Personal Care
Cosmetics; Personal Care;
Wellness
Products / Services
Appliances; Cosmetics;
Food and Beverage; Home
care; Home decor;
Kitchenware; Personal
Care; Wellness
Cosmetics, skin care,
jewelry, fashion and
fragrances
Cosmetics; Food and
Beverage; Personal Care;
Wellness
Skin care, cosmetics and
fragrances
Skin care, personal care,
and dietary supplements /
nutrition products
Compensation Structure Multi-Level Multi-Level Multi-Level Multi-Level Multi-Level
Sales Method Person To Person Person To Person Person-to-Person Party Plan Person To Person
Markets / Geographies 100 70 94 40 50
Primary Market
United States, Mexico;
China; India; Japan; Korea;
Malaysia; Taiwan; Thailand
Brazil China and United States The Americas China
Year Founded 1959 1886 1980 1963 1984
Listed? Private AVP—NYSE Yes (HLF—NYSE) Private NUS—NYSE
HQ Country USA UK USA USA USA
HQ City Ada, MI Northamptonshire, England Los Angeles, CA Dallas, TX Provo, UT
Employees 17,000 28,300 8,300 5,000 1,500
Key Executive(s)
Steve Van Andel and Doug
DeVos
Jan Zijderveld Rich Goudis David Holl Ritch Wood
Est. Members/Salespeople 3 million 6 million 625,000 3.5 million 81,900
Total Revenue $8.6bn $5.7bn $4.4bn $3.25bn $2.28bn
Gross Margin - 61.5% 52.50% - 78.0%
SG&A Margin - 55.6% 39.70% - 65.9%
EBITDA Margin - 7.3% 16.20% - 15.2%
Operating Margin - 5.8% 13.90% - 12.0%
Forward PE - 10.04x 19.03x - 19.64x
Qtrly Earnings Growth - N/M -31.4% - 21.2%
Business Entry Fee <$100 - $15-$35 $100 -
Ininital Inventory Purchase
Required
- $10 $989.00 $200 -
% Commission on Sales ~5-6% - 3.2% ~4% ~4-5%
Ratio of Members in Top X Levels - - 64% - 7.1%
Member Churn Rate - - 26% - ~58%
Website www.amway.com www.avon.uk.com www.herbalife.com www.marykay.com www.nuskin.com
Top 55 US MLM / Direct Selling / Network Marketing Companies (1/11)
Source: Latest available data. Direct Selling News; Capital IQ; MGP Research

16
• This document has been compiled by Maple Growth Partners (MGP) from sources believed to be reliable, but
no representation or warranty, express or implied, is made by MGP, its affiliates or any other person as to its
accuracy, completeness or correctness. Such information may be incomplete or condensed and/or may not
have been independently validated by MGP. MGP expressly disclaims liability for any direct or consequential
loss arising from any use or reliance upon this material or the information contained herein.
• Certain of the information contained herein represents or is based upon forward-looking statements or
information, which may include descriptions of anticipated market conditions and changes, and expectations
of future industry activity. Maple Growth Partners believes that such statements and information are based
upon reasonable estimates and assumptions. However, forward-looking statements and information are
inherently uncertain and actual events or results may differ from those projected. Therefore, undue reliance
should not be placed on such forward-looking statements and information.
Disclaimer
MAPLE GROWTH PARTNERS
+91 9930-206-207
niraj.singhvi@maplegrowthpartners.com

USA Multi Level marketing Industry Research 2018

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