The more 2020 fades, the more it looks like an outlier. Multilevel marketing is a good memory. If the industry is treated as an outlier, it will look like a piece of lettuce.
We can do the numbers. For me, tracking margins is more important than EBITA. Large margins are a hallmark of multi-level marketing companies. For example, let's compare these to a company called P&G. P&G's gross margin percent usually falls in the high 40s to low 50s range, with operating margin running around 20%, give or take, and net margin 4%- 5% lower. Herbalife, Nu Skin, USANA, and Tupperware have gross margins that are higher than net margins.
The gross margins and operating margins at these four public companies have all fallen since the end of the year. Two of the four had net margin decline. The percent change in the three margins was shown in the chart. Changes in gross margin and operating margin will be reflected in net margins sooner or later.
Let us give EBITA its due. The percent change in revenue and percent change in EBITA is shown in the chart. Even though revenue increased, EBITA declined in each company.
I don't know why I bring this data up right now. The Direct Selling Association (DSA) doesn't release industry data for the year of 2022. What's the reason? Is it possible that the entire multi-level marketing industry in the US is declining as a percentage of retail sales? I think so because the UK DSA is already reporting and because of the data above.
- A 20.7% decline in “direct sellers” in the UK from 2021 to the start of 2023
- A 9% decline in “economic contribution” in the UK during the same period
- An expectation that “The Direct Selling and Marketing industry is expected to perform poorly in the coming years. Industry revenue is anticipated to decline.”
Vemma, Advocare, and Neora were the first two to leave the industry after being sued by the FTC. Success by Health is not a DSA member. The State of Washington was successful in prosecuting LuLaRoe and the Department of Justice succeeded in prosecuting I2G. The people who founded and promoted I2G had a long history with the industry.
There is a growing chorus of anti-MLM activists. If you pick any social media platform, you will find critics from within the industry. Someone who lived the story is the epitome of a good story teller.
We will wait until the DSA is done massaging before releasing the data. We will have to watch how public MLMs perform.