Founded in 1984, the Nu Skin business model has incorporated direct selling and multi-level marketing methods to create impressive expansion opportunities. Starting with expansion into Canada in 1990, Nu Skin now operates in more than 50 different international markets and has almost 1 million independent distributors within its network.
It is a business model that is not without controversy. The Chinese government announced in 2014 that they were investigating the company for its sales practices. Nu Skin has been sued multiple times in the United States for deceptive marketing practices. It has settled twice with American officials regarding the practices of its business model.
43% of Nu Skin Revenues Go to Independent Distributors
The basics of the Nu Skin business model are pretty simple. Independent distributors are either trained by the company or another distributor about the products that are sold directly to customers. Each distributor can then choose to sell the products through home shows, trunk sales, and other traditional MLM approaches. The retail markup of the products becomes the salary potential for each independent distributor, along with any sales that their downstream generates.
In 2013, Nu Skin was able to generate $3.18 billion in worldwide revenues. Of that amount, $1.48 billion was paid out in commissions. Since their founding, they have paid over $11 billion in compensation and incentives.
This business model helps Nu Skin be able to put most of the risk into the hands of their independent distributors. When looking at their 2013 compensation numbers, less than 15% of active American distributors earned a monthly commission check from their sales activities. The average amount that was paid out in 2013 to those who did receive monthly checks was about $1,200 per month. That means about $15,000 in total revenues – and not all of those revenues are actually profits.
The retail markup is capped at 25%. The commissions come from downstream sales. For many representatives, this seems like the chance to build-up some passive revenues. For about 9 out of 10 independent representatives, however, it means that there isn’t a monthly paycheck headed their way.
Nu Skin Also Makes an Initial Revenue Boost
Independent distributors are also required to purchase a business portfolio that is mandatory to begin operating as a representative. Although there are 100% refund options available for this portfolio, not having one means not being able to sell Nu Skin products. Distributors are also encouraged to sell what is called a “Fast Start Product Package” to new representatives and distributors at a suggested retail price of $375.
As with many other MLM opportunities, there is also a points system in place. New distributors are also required to sign an agreement that they won’t purchase products on their own in order to boost their bonuses. Every distributor must sell 80% of their product and document sales to a minimum of 5 customers before they’ll be able to make another inventory purchase. If those requirements are made, then over time the representative will be considered inactive.
Nu Skin Also Actively Promotes Its Brand
The Nu Skin business model also has it actively promoting itself as a brand so that their independent distributors can take advantage of at least some brand saturation. The company is based in Utah and have sponsored the Utah Jazz Dancers since 1992, a cheer group that entertains during home professional basketball games and at other times throughout the community. They also actively support BYU’s athletics programs and are involved in one of the US’s largest 4th of July celebrations in Provo.
Corporations linked to Nu Skin executives also contributed $2 million to Super PACs that were supporting Mitt Romney’s campaign for the 2012 election cycle. On the other hand, they have also been listed by Forbes as one of the 100 most trusted companies operating out of the United States.
Is it possible to find monetary success with the Nu Skin business model? It can be. With a turnover rate of over 80%, however, most independent distributors aren’t going to make much money at all. This benefits the home company, however, and allows them to continue expanding. What will the future hold for Nu Skin? Much of that depends on the outcome of what China has to say after it completes its investigation.
Until then, it would be inaccurate to call Nu Skin a scam. The company puts all information readily available. It’s up to each person to decide if that’s the kind of business they want to get into for themselves.
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