Is Shaklee a Pyramid Scheme – Sure Looks Like It!
If you were looking to join Shaklee as a distributor and make money with your own home-based business, you may be hesitant to do so because–well–it seems like it could be a pyramid scheme.
But is it? Is Shaklee a pyramid scheme that you should avoid at all costs or is this really the amazing business opportunity that the company portrays it as being? Is this really your chance to live a life of financial freedom and work on your own terms or is this going to be an endless pursuit to achieve the impossible?
In this short article we will be going over what you DEFINITELY NEED TO KNOW if you’re even thinking about joining–because it is NOT the super awesome fairy-tale job that many people claim it is.
Overview of the Business Opportunity
Shaklee is a direct sales company that started out in 1956, which is pretty long ago–by Dr Forrest C Shaklee who supposedly created the first multivitamin in the US over 100 years ago.
When I first came across this business opportunity I thought that the name “Shaklee” was because the company sells different health shakes, but apparently I was wrong–it’s just the guy’s last name who started it.
But anyways…If you’ve got a passion for health and fitness–and are into organic eating–then Shaklee is probably one of the better MLM business opportunities out there for you (but I’m still NOT saying it’s a good opportunity!). Because it is a direct sales company, they do not sell products in stores and instead rely on an independent sales force which consists of distributors running around trying to sell products and recruiting people into the business (the recruitment part is why it looks like a pyramid scheme).
Anyone can join as a distributor or qualified distributor–being qualified gives you access to more tools for growing your business and so on. You can purchase a “new distributor welcome kit” and pay a fee of $150 to automatically become a qualified distributor, or you can join as a distributor and purchase at least one “success pack” in your first month.
The welcome kit will provide you with a product catalog, brochures, a personal website that you can refer people to for purchasing products, digital tools, Etc.
I’m not going to get too into the products here because that is not the focus of this article, but I’ll briefly go over them just so that we know what we are looking at.
As a distributor for Shaklee you’ll be able to sell good quality organic products that fall into the categories of nutrition, weight loss, beauty, sports and green home products…
When it comes to product quality Shaklee really puts a lot of effort into making sure what they are selling is top-notch. They claim to conduct over 100,000 quality control tests per year and go to extreme lengths to ensure the best.
Overall the products are very good and apparently even professional athletes as well as NASA agree–because they were a sponsor of a professional cycling team and provided NASA with a customized version of one of their products throughout the NASA Shuttle program.
The Compensation Plan, like most compensation plans for MLM companies, is full of a bunch of fluff, sparkles, and glitter to make it seem better than it really is. It can be somewhat confusing and look incredible with all its different bonuses and incentives, but don’t get too excited.
The 9 different ways that you can earn money with the Compensation Plan–as the company explains it–are listed below but I will break everything down for you and take a more easy-to-understand approach of explaining it after…
- GOLD Bonuses – Bonus you earn when you sell a GOLD PLUS PAK
- Power Bonuses – Bonuses you can earn when you sponsor someone, aka recruit someone into the business
- Price Differential – The retail profit that you make on sales
- Personal Group Bonuses – Bonus earned from the sales in your downline (from people you recruited into the business and members you got to join)
- FastTRACK Bonuses – You can earn this bonus when you reach the rank of Director within a certain amount of time, and additional bonuses when you move up the ranks more. It’s possible to earn up to $34,000 in these bonuses in a 15 month period, but I wouldn’t be surprised if this has never been done.
- Incentives – You can also earn points that can go toward funding luxury trips and so on.
- Car Bonuses – Just like a lot of MLMs out there, Shaklee offers a car bonus when you reach a 3000 Personal Group Volume, which is the volume of products sold in your downline.
- Leadership Bonuses – This bonus comes into play when you reach the rank of Director and start developing other Directors in your downline. This bonus can be earned down to 6 generations deep.
- Infinity Bonuses – These bonuses are earned based on the volume of all the people in your downline who have achieved Leadership ranks–and are earned down to infinity.
Everything Falls Into 2 Main Categories…Direct Sales and Recruitment
All of the 9 ways to earn money that I just listed above fall into 2 main categories: direct sales and recruitment.
Of course you can earn commissions by selling products directly (taking orders and referring people to buy Shaklee products on your personal website)–after all this is a direct sales company–but the bulk of ways to earn in the compensation plan are somewhat more reliant on recruitment.
- Gold Bonuses
- Power Bonuses
- Leadership Bonuses
- Infinity Bonuses
- …even the Car Bonuses
…are all based around recruitment of other distributors into the business.
Take the Leadership Bonus for example: With this bonus you earn from the sales volume of your downline when you reach the rank of Director and help others in your downline also reach this rank–and you can earn 6 generations deep.
How it work is like this: If one of your personal recruits makes it to the rank of Director or higher, they then form a “Generation”–and since they are a personal recruit of yours they are part of your 1st generation. There can be unlimited numbers of 1st generations. Now when these Directors (or people of higher ranks) in your 1st generation have people underneath them that reach the rank of Director or higher, they then form your 2nd generation–and this continues down and down–branching out further and further.
You will be able to earn from the sales volume going down 6 levels deep here.
Below is a diagram that shows ‘Diane’ earning both Leadership Bonuses and Infinity Bonuses going down 3 generations. It might help you visualize how this all works…
So Is It a Pyramid Scheme?
Like all MLM’s, Shaklee has the same basic pyramid structure as a pyramid scheme. As you climb your way up the ranks, which requires you to recruit more and more people into the business beneath you, you have the ability to earn down many different levels and generations from the efforts of those in your downline.
The money flows from the bottom of the pyramid to the top in the form of commissions…
But just because it has a pyramid structure does not make it a pyramid scheme–there is a difference between legit MLMs and pyramid schemes.
A pyramid scheme in its pure form sells no products and relies completely on the recruitment of new investors–and the new incoming money is used to pay off earlier investors.
The problem is that most pyramid schemes are in disguise. They do sell products, but simply sell them just to be able to operate legally–and place an overwhelming emphasis on recruitment into the business–usually forcing new recruits to purchase products.
While Shaklee does place a lot of emphasis on recruitment and such, they are not nearly as close to being a pyramid scheme as many of the other MLM opportunities I have looked into–other MLM opportunities that have been operating legally for years.
With that said, I wouldn’t call this place a pyramid scheme although it definitely resembles one to some extent!
BUT THIS DOESN’T MEAN YOU SHOULD JOIN!
How Much Are Distributors Actually Making?
Unfortunately MLM opportunities are often misrepresented by a long shot. Distributors are always looking to recruit in other distributors to grow their downline, so that they can move up the ranks and hopefully make more money, so of course they’re going to make the opportunity sound better than it really is.
The problem is that because of the basic pyramid structure that MLMs have, with commissions being sucked away from those at the bottom and flowing into the pockets of those at the top, the majority of people involved are at the bottom and usually struggle to make much of anything–which is why MLMs usually have insanely high turnover rates and very uneven income distributions.
Shaklee’s 2017 earnings disclosure was the latest I was able to find, but really doesn’t provide us with much. As you can see below, It only shows us the annual income for members who reached the “leadership level” ranks…
Sure, these peoples incomes might be pretty good, but how many people are actually at these ranks?
How many people actually reached the rank of “Presidential Master Coordinator” and make an average of $579,520 a year?
Maybe 2? 3 at most? Who knows.
These statistics look great and all, but they don’t tell us much of anything because for all we know 99% of the people who get involved with Shaklee might never even make it to the leadership ranks and might struggle to make $50 a month–which is how it usually goes with MLM opportunities.
The fact that Shaklee is not willing to give us a more in-depth picture of what is going on here leads me to assume the worse–that they are just hiding the full stats because it will make the opportunity look bad.
Conclusion – Worth Joining or Not?
While we here at Legendary Wallet or not particularly fond of MLM business opportunities, because of the ridiculously high failure rates they pretty much guarantee, I’m not going to tell you whether or not you should join–I just want to provide you with a realistic look at what you might be getting yourself into.
Yes you can make money. No, it is not nearly as easy as it probably seemed at first. Yes, most people fail.
Something else you might also be interested in is this program I use to make a living working online for myself–since you’re looking into an opportunity to make money on your own terms and all.
Alternatively you can check out our top picks for making money from home.
What do you think? Is Shaklee An opportunity worth joining? Is it a pyramid scheme? We are always more than happy to hear from our readers and would really appreciate it if you left any comments or questions down below 🙂