Pyramid schemes for the most part, are illegal. However, over the years many “pyramid schemes” have tried to disguise themselves under the moniker of “Multi Level Marketing (MLM)”. Let’s delve into whether or not Nu Skin falls under this description.
We can discuss the differences between an MLM and Pyramid Scheme until the cows come home. However, the principle difference is a Pyramid Scheme is a straight scam where there’s generally no product. While an MLM company will at least be distributing a product, but the general structure is relatively the same.
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Nu Skin: The Biggest MLM Of Them All
Nu Skin isn’t a new competitor in the marketplace. In fact, they have been around for quite a while. They were founded in 1984 in the US. So, they definitely know what they’re doing at this point when it comes to structuring an MLM company and how to run it effectively.
Their general motto is that they will help you “achieve financial freedom, and live your best life” or some generic American Dream-esque tagline. Irrespective of their legal practices or ethics, their whole framework hangs on the premise of attracting people who are desperate for easy money and the dream life….
….If you’ve got a solid job which pays well, you’re not going to be leaving it for this “dream” being sold. Once again, you could debate the ethics on preying on individuals in this financial situation all day.
The problem stems from how the lifestyle is marketed. These days it isn’t uncommon to see people peddling products online showing their glamorous lifestyle and selling some course or product which promises you can do the same.
The simple way the model works is that you make money from the products you sell, as well as the number of people under you. So, the more people you attract to join the team, the more money you make. This leads to many glamorizing their lives in order to attract suckers….sorry….”distributors” to their teams.
Ethical Issues of Nu Skin
Here’s an interesting quote from the Federal Trade Commission in the US:
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money”.
See the similarities?
The fact is, you DO make money from products you sell. However, there is nobody within the Nu Skin structure making significant amounts of money solely on the product. They are making money because they have many people signed up in the layers below them.
The way Nu Skin gets around this is by making their structure so complex that it is difficult to get any specific concrete evidence to argue that they are 100% a pyramid scheme. I personally land on the side that believes most MLM companies are just Pyramid Schemes who manage to dance around the law.
According to an actual Ex-Nu Skin Representative, the way Nu Skin gets around the Pyramid claims is by stating that their structure is only 6 levels deep, and therefore they cannot be considered as a Pyramid Scheme (evidence).
Stats and Facts
Nu Skin currently operate in 52 marketplaces worldwide and they have over 800,000 distributors worldwide.
All sounds very promising so far, right?
Sandie Tillotson is one of the co-founders of Nu Skin who started her business career by starting the Cambridge Diet, another “multi-level marketing company” who eventually went bankrupt. You can see a 1983 article about the demise of the Cambridge Diet here. But, I’ll give Sandie the benefit of the doubt, she might have changed her marketing strategies and ethics.
During the year ending December 31, 2012, approximately 89% of Nu Skin’s revenue came from its marketplaces outside the US, according to the New York Times.
In fact, Nu Skin has a shrinking market in their native United States. Active distributors AND active customers are diminishing.
On a month-on-month basis, only 14.19% of active US distributors actually earned a commission check, and the average commission paid out amounts to $2,112.05 PER YEAR. Yes, that isn’t a typo, the average commissions being handed out by Nu Skin is barely enough to pay your rent for a few months. So, let’s put that figure beside all the luxurious lifestyles being portrayed on Social Media…
Legal History of Nu Skin
Nedra Roney is also a co-founder of Nu Skin, however, you won’t find her name listed on the website. Supposedly this is due to Roney being involved in prescription drug fraud in the 90s which Nu Skin would rather avoid being associated with. Further to this, if you search for Nedra on Google, you will find that in 2013, her husband was charged with sexual assault of an 18 year old (article).
Deceptive Instagram Advertising
I decided to write this whole blog post based upon my experiences of seeing their Instagram Advertising on a daily basis. As someone who used to work in the marketing industry, I find Instagram Marketing interesting. However, there was a girl I went to school with promoting this Nu Skin brand regularly, and some of the claims just didn’t make sense.
I’m not going to claim that all marketing tactics are 100% ethical and truthful. However, some of the claims she was making were just hugely skewed and wrong. This is what led me to do some research on Nu Skin, as I hadn’t really known much about them until I started to notice her chatting about them on her Instagram story.
I worked in marketing for around 7 years, and I currently work in the finance industry. The reason this specific ‘advert’/claim peaked my interest was because it was regarding Nu Skin’s performance on the stock market:
Let’s break down all the different aspects of this screenshot, as there is actually quite a lot going on.
Nu Skin – “Leading Wall Street”
The context behind the article she is referencing in the photo is that Nu Skin was the largest ‘gainer’ on a specific day (May 1st 2019). Their share price had gone up by 25%. So, they aren’t “leading wall street”, they just increased by a significant amount that day.
The reason they increased significantly that day is because that day was earnings reporting day. So, all companies on the stock exchange move erratically depending on whether or not their earnings met/exceeded/under-performed compared to expectations. In Nu Skin’s case, they over-delivered.
However, if we look at a graph showing the past year of Nu Skin’s performance, that impressive 25% gain doesn’t seem quite so impressive:
The area highlighted in yellow to the far right is the 1st of May 2019, where this 25% spike occurred. It closed that day at $64.32 per share. What the distributors won’t mention is that $85.46 was their peak share price in 2018, which means that at the top of this 25% spike, their share price is still down by over 32%.
Now, it is the 15th of May today, let’s take a look at the movement in their share price the past month:
So, their share price closed out at $52.42 per share yesterday. This shows that every day since that spike of 25%, the share price has gone downhill.
This is often the case for drastic changes on earnings reporting day. Many company share prices will erratically change, and then return to normal later in the month. So, this marketing method of discussing of how great their company is based on this 25% jump is complete bulls*** to be honest.
This is where my issue with Nu Skin lies. Your average individual who isn’t financially educated would look at that screenshot and think “wow, that’s impressive!”. They’re simply preying upon and manipulating individuals who lack the education to know any better.
Up there with Apple!
The final part of the Instagram Story post is that Nu Skin is up there alongside Apple, because they happen to both be on this article’s list. I should also add that this screenshot is from an article written by Seeking Alpha, which isn’t an overly reputable source. However, I’ll ignore that.
Let’s compare Apple and Nu Skin and see how similar they are:
- Apple Market Capitalisation: $912.84bn (and this WAS above $1trn at the end of 2018)
- Nu Skin Market Capitalisation: $2.91bn
- Apple September Quarterly Earnings 2018: $62.9bn
- Nu Skin September Quarterly Earnings 2018: $0.675bn
As it is pretty clear to see, comparing these two companies is simply moronic. It is like comparing not even Apples and Oranges, that phrase would be too positive about Nu Skin’s comparisons. However, the marketing ploy here is that EVERYONE knows Apple is huge and successful. Marketing through association. Association through a questionable article source.
Let’s Stick to Stock Market Analysis
Seeing as we are on the topic of the Stock Market, let’s have a look at some more comparable companies. It is silly to compare Nu Skin to Apple, as they’re in completely different markets, with totally different margins etc. So, I’ll give them the benefit of the doubt and compare Nu Skin to two skincare companies who are generally received as legitimate skincare companies: Estee Lauder & L’Oreal
| Company | Nu Skin (NUS) | L’Oreal (OR.PA) | Estee Lauder (EL) |
| Share Price | $52.42 | $236.30 | $167 |
| Market Cap | $2.91bn | $132.68bn | $60.43bn |
| Revenue | $2.69bn | $26.94bn | $14.57bn |
| EBITDA | $0.412bn | $5.88bn | $3.11bn |
| EPS | 2.29 | 6.92 | 4.88 |
I didn’t want to do any deep financial comparison to Apple, as they’re not comparable companies. However, looking at other companies within the same industry, we can see Nu Skin still doesn’t shine. I won’t go into too much detail on the financial comparison. I may do a more in-depth analysis in a later post.
Are the products any good?
It is perfectly reasonable for Nu Skin to actually have good products. I’m not questioning their actual products, just their marketing structure and ethics. However, I did do some research into this as well, as I’d seen a smattering of posts on Instagram claiming they’d won numerous awards.
ConsumerAffairs.com had an average rating for Nu Skin of 3.5 out of 5 stars. This isn’t horrific, but you’ve always got to take these websites with a pinch of salt, as it is very possible that a portion of the reviews aren’t genuine. Here are some of the more negative reviews:
My galvanic spa just quit working. It’s not worth… I got it for more than $400. I called customer service. They said I need to buy a new one. Wow… The life span is so short. I asked for possible repair but none.
This company is deceptive and immoral. I ordered one thing with a certain price and was charged another and was enrolled in an auto pay/shipment plan without my permission. Sad that a company has to lie to get business. Two different phone reps were rude and hung up on me. Additionally the product that was supposed to last 30 days lasted for two days. Shame on this company.
For Three billing periods, now Nu Skin has double charged our checking account causing several NSF charges. I contacted them when it first started and they assured me it would never happen again. Well, it did and it caused more NSF charges.
The issue generally doesn’t seem to be with their products. They do appear to have won some awards (albeit, not as many as they seem to claim). However, once again it is their ethics and bad business practices coming to the forefront.
How the Nu Skin Compensation Scheme Works
There are certain requirements which must be fulfilled prior to being able to receive a commission check. One of these is managing to complete at least $100 in sales per month.
It should be noted that Nu Skin does not disclose the amount of retail sales made by distributors to actual regular customers. This seems like a questionable piece of information to omit for a direct selling company. This means that their sales figures are highly skewed by stock being sold to distributors.
It would be illegal for Nu Skin to disclose the structure of their distributors, as this would show a shape of a pyramid, and therefore imply that it is likely indeed a pyramid scheme. In fact, it is a part of Nu Skin guidelines to not show any illustrative structures and any illustrations should not extend beyond 2 levels deep.
It seems as though the main way for Nu Skin distributors to make money is simply by signing up more distributors below them, and then selling them products. Despite the figures not being disclosed, I’d bet money that very large portion of Nu Skin products end up being passed down the trail to distributors, as opposed to being sold to customers. In fact, I’d imagine most higher level distributors don’t even promote to customers at all, and simply sell stock to the distributors within their “team” below them.
Conclusion on Nu Skin
In my opinion, Nu Skin is likely indeed a pyramid scheme. They have managed to jump through loopholes in order to avoid this label.
Everyone within the structure is making money by paying someone above them, in order to be eligible to sell stock to someone below them.
As a whole, they have historically used diseptive marketing tactics in order to convince those who may be desperate or unaware to join them. Their income claims are questionable at best, and those are the claims that are actually made public.
Over 85% of ACTIVE distributors do not earn a commission. This alone should be a reason to avoid this company.
Are there any other companies you would like me to do an analysis of? Leave a comment below, and I will start researching! Please Note: The viewpoint displayed within this article is simply my opinion, backed up by facts. I always recommend you do your own research prior to coming to any conclusions.
Update: 22/05/2020
So, I’m back to add some more to this post, after quite a long time since initially writing it. My viewpoint hasn’t really changed much, but I have been able to gain some more viewpoints from other people.
There is a Reddit community called “AntiMLM” which discusses NuSkin in quite a bit of detail, so I wanted to touch on some of my findings from there.
One of the posts I found quite funny was by a guy who works in the factory which bottles a lot of NuSkin product (and other similar companies), and the sad reality is that him being paid $16/hour is significantly better than the vast majority of NuSkin affiliates. The fact is if you’re a NuSkin affiliate, you’re not an employee of the company. You don’t get official work hours, or time off, or benefits like a pension etc. Because of his position within the factory, he was able to give some insight into some of the products.
One product (which im not aware of the name of) is claimed to be made from dead sea salt. However, in a 5,000 gallon batch of the product, about 1 gram of sea salt ends up in the mix. I mean, I’ve heard of dramatic marketing, but this seems ridiculous!
NuSkin are mostly famous for their “LumiSpa”. I must admit, I’ve actually tried this, as I was intrigued to see if their products were actually good. It is possible the products aren’t terrible, just the practice behind selling them, right?
Well, I have to admit, it isn’t terrible. But have you seen the price!? It costs a small fortune. So, I did some research, and found the following products on Amazon which I found to be equal, or even superior to the LumiSpa!
I found this video with John Oliver quite funny/interesting, in which NuSkin gets a special mention. It is definitely worth a watch!
It seems to me as though the word Pyramid Scheme has been replaced by Multi-Level Marketing, and I’m still unsure as to how they get away with it. In the same way that I’m unsure how the Church of Scientology gets away with what they do. The only logical reasoning for it is legal power, and they must pay a fortune in legal bills.
I mean, in 2016, NuSkin had to settle for $47 MILLION in a lawsuit which claimed that they had a pyramid scheme acting in China. What makes you think their set-up in China is any different to anywhere else in the world? The simple fact is they’ve managed to become so ingrained within the community in the USA and beyond, that they’re a bit like a cockroach you can’t remove.
During the video with John Oliver, you can see a clip of a man from another MLM style company basically admitting the company is a ‘Pyramid’…but it just isn’t illegal. Which roughly translates into the fact that they’re just jumping through loopholes to get around the law.
In other words…these aren’t Pyramid SCHEMES….they’re just Pyramid Shaped….makes sense…right?
Hello there! This post could not be written any better! Going through this post reminds me of my previous roommate! He constantly kept preaching about this. I will send this post to him. Fairly certain he will have a very good read. Thank you for sharing!
You’re welcome Zack, I hope he found it helpful! Be careful though, often people caught up within Nu Skin and similar schemes don’t act positively towards a lot of the realities of the situation.
Please do yourself a favor & actually do som research on Nu Skin ? It is a direct sales company, we focus on sharing award-winning products. It’s NO different to any other company out there, you are simply removing the middle man, so instead of it going through stores and distribution centres, it goes directly to the consumer using distributors (or in simple terms normal people by using the power of recommendation, word of mouth, social media) instead of companies paying millions for adverts, celebrity endorsements, shop floors > they would rather pay people like you or me to share! SIMPLE!
Hi Daniella,
First of all, thank you for leaving a comment here – it is appreciated.
The key difference between NuSkin and your average company is that the ’employees’ in a general store don’t require to buy their own product in order to maintain their “level”. You don’t need to bring new hires into the company in order to make money. It is this structure which makes it different to most other companies. You won’t find Apple employees desperately trying to get their friends to “sign up” to be an employee at the local Apple store. The key premise of the business model means that the people who are signed up to it need to have people below them to sell the product to. You can’t be successful in one of these platforms without people below you, and people below them and so on. However, compare this to a normal company, and you can indeed be very successful without any people you’ve brought in to the company.
Hello, I was learning about nu skin and I may the other side of the coin from you. Nu skin claim to be a direct sales company, and I kind of agree with it because instead of having a ‘middle man’ it will be easier and profitable to just directly sale the products.
The distributor need to know the products so it is logical if they need to buy and try it before selling it. You know people who works for Apple will have their products. The reason they don’t need to buy it before working there is because they have succeed to pass from layers of selection of thousands applicants.
Nu skin distributor is not require to buy the products for the second time but they have to sell the products with a minimum purchase per month, again we can compare this to people who work for Apple that needs to reach a certain goals each month. The difference is Apple is not all about selling, only the marketing and sales division needs to reach the goal but Nu skin don’t have other division so it is all about selling.
Nu skin did not need to find people below them but partners so they can expand the market, like a franchise the partner need to spend money first right? Apple also need to find workers every year and it was done by the HR. So actually I want to say that Nu skin may be a multi level marketing but to simply put, they did not hire the ‘middle man’ like other company so the distributors need to do it all bye themselves or their team. I am not saying that Nu skin is better than Apple or any other company but maybe not all mlm is a scam or ilegal, they just offer an opportunity to work harder and grow bigger.
Honestly no job is easy, working in Apple may be a safe place but you won’t get anywhere far from where you are right now. Working on Nu skin will have a high risk but also high return if you do it well. It is just a choice but non of the choices are wrong. I am open to any correction or opinion from any of you who read this, let’s learn together 🙂
Wowww. I googled about nuskin just now and had a thorough read through as 1. Products are too pricey for what they are. I’ve used cheaper good brands and seen results. 2. My friend sells for nuskin and does pesture me to purchase products and try to work with her too. I did as a one off but felt pressured. Your right, as opposed to an Apple store employee, you would never get this. My friend bought different products and like Avon, maybe had a few samples to try herself to promote online. I’m not slating the company too much, just my experience. And by reading all this on the website is just what i was thinking but u confirmed it all. There was another pyramid scheme for this health brand (forgot the name) few yeats ago and my friends needed people to work with them too etc, but were being reluctant to explain all the stats, sales etc.
Thanks
Eye opener
Thanks.
Thanks for reading my blog!
Unfortunately the reality we currently live in is that there are many of these ‘pyramid scheme’ style businesses, and it seems each year more and more pop up!
Hii Could you do an article on MTI (mirror trading international) would love to read it and see your take on the company. Kind regards
Hi Andreia,
I haven’t actually heard of MTI, but I will be sure to do some research and a write up on them soon! Subscribe to the blog to get notified when it is released 🙂
Wonderful article. Nuskin is absolutely a pyramid scheme structurally, although distributors would never call it that. Distributors are pushy, manipulative, and find a way to sweet talk you into purchasing/recruiting you to be “under” them in the umbrella. They are a combination of excellent sales people (since many of them just truly believe in the product) and master manipulators. I’ve had Nuskin people tell me: “I had skin allergies, but not with Nuskin products!” “I had eczema, but it all disappeared when I used Nuskin xxx product.” “I had cancer, but the problem went away after taking xxxx Nuskin.” I purchased/became a NS distributor ten years ago and never made a cent or recruited anyone, despite the people above me telling me how easy it would be. Little did I know selling this stuff has more to do with how you can manipulate and convince people that you have something really good, and that it’s urgent, versus making money. Wish this article was available for me to read ten years ago before I purchased. Beware of Nuskin. Plenty of excellent products out there that don’t have a shady, unethical agenda.
Thanks for your input here Tay! I agree, a lot of it is just manipulating people who need money. Unfortunately things seem to be getting worse as the “quick solution” for money is becoming more sought after
So true!! Took words right out my mouth. Its very intimidating I thing too. I mean, i wouldn’t go there again.
Hi, your article was really informative and I would REALLY like to know what you find out or “discover” about herbalife
Hi Bianca,
Great idea! I’ll be sure to start working on this soon – I’ll come back and respond to this comment with a link once I’ve written/researched it.
Glad you liked the post!
Hi Bianca, I’ve now started the article here: http://normanie.com/pyramid-schemes/is-herbalife-the-king-of-pyramid-schemes-full-business-analysis/
I’ll be adding more to it in the coming days! Please share it 🙂
Love this! I know COUNTLESS people that have joined out of desperation (financially) and the Covid pandemic, but they really are just allowing themselves to be exploited while they could be using their time to build something sustainable, valuable and true to who they are.
Please do one of these analysis on Herbal Life – they may be just as annoying as Nu Skin.
Thanks for the comment Bron,
I think Herbalife is a great idea, and you’re not the first to ask! I will come back to you in a response to this comment with a link once I have written the article.
Hi Bron, I’ve now started the article here: http://normanie.com/pyramid-schemes/is-herbalife-the-king-of-pyramid-schemes-full-business-analysis/
I’ll be adding more to it in the coming days! Please share it 🙂
Herbal life is even worse lol!
Also wondering about It Works I have several friends constantly posting about this company sounds very similar to Nu Skin here also call themselves a multi level marketing company!
This is brilliantly written. These fancy MLM companies have a way of louring you with their words and once you join you see that it is not everything they promise. I joined Valentus, it was exactly that, they show people making tons of money, yet I felt that I had to work harder to make some “good-ish” money. Even though you are your own boss, you work way harder to make money that just working for a actual legit business. And it was the same that you make more money by recruiting than from actually selling, and in order to keep your rank you need to generate a certain amount monthly which makes you want to buy products without having sold them just to keep your rank.
Thank you for the article.
Thanks for your input here Jacqueline!
I would love to hear more about Valentus, and maybe do another article similar to this focusing on them!
Hi Pleeeeeeeaaase do an article about crowd 1 if you haven’t already they have been making huuuge headline news in my country and in the world and obviously there is a lot of debate on whether they are legit and I would love your input
Hi Niel, thanks for the heads-up. I will look into them and do an analysis on them soon! I must say, I haven’t heard of them currently.
Next on the hit list is Herbalife!
Hi, thanks for sharing! I’d been feeling burnt out from a high pressure career so opted to take a break since kids need to homeschool. Got approached by an old friend under the guise of something else! What a waste of time. Once I’m ready, I’d much rather work on developing my own legitimate business, learning new languages or upskilling. Glad I have in-demand skills and can afford a break but feel bad for anyone who’d be tempted to get into this out of empty promises selling a dream life. I found the (unexpected) sales pitch quite manipulative and the product claims highly exaggerated. It was also introduced using deceptive terms and I suspect more desperate or naive people might buy into it all. From my end, I bluntly asked if it was a pyramid scheme and got quite a defensive response pointing out this was the way of the future, too. Funny! Thanks for this and I hope you help others make a smarter decision.
Thanks for sharing your experience Grace! I’d love to hear more views (from both sides!)
Hi, brilliant article. I have a friend who is so utterly taken in by NuSkin that it has actually affected our friendship. It seems every time she opens her mouth there is a hidden agenda – all designed to ‘capture’ new clients and recruit her team!! It’s awful to watch..
My other bug bear is Isogenix – would love to see you investigate them – I had an exchange of words very recently with one of their ‘nutritionist’s’!
And ‘absolute collagen’ – although I’m unsure if that’s all part of the Isogenix ‘thing’. It seems that every (wo)man and their dog are pushing the be edits of this at the moment!
Hi Joanne, thanks for your comment.
This, I believe, is the key issue with these Pyramid Schemes, is that unlike a 9-5 job…nobody leaves their work at work. So you end up ruining friendships and family relationships.
I will look into Isogenix & Absolute Collagen and write my findings on them soon! Please subscribe to get a notification when that goes up.