Herbalife’s Misleading Lesson About The Collapse Of Qualification Buying

In an article posted by Seeking Alpha:

Over the last several years, Herbalife Ltd. (NYSE:HLF) has been telling investors about a significant and positive change in its business: Fewer distributors are signing up and immediately purchasing the 4,000 volume points worth of products. Instead they become Supervisors more gradually, taking three to 12 months to purchase 4,000 volume points as they build a sustainable base of retail customers.

Nothing could be more important to the survival of Herbalife’s business than proof that so-called “qualification buying” is vanishing from the company’s business. The Federal Trade Commission is pursuing a case against competing multi-level marketing company Vemma and has criticized that company’s reliance on qualification buying. Vemma requires distributors to make an upfront purchase of $500-$600 worth of products and then to sign up for auto-shipments of $150 worth of products every month in order to earn commissions.