Lyoness 2012 Income Disclosure Statement analysis
The BehindMLM review of Lyoness (US) was written just over a year ago on the 5th of May 2012. Since publication of the review, over 1000 comments have thus far been left with the resulting discussion being largely cyclical in nature.
Typically a Lyoness affiliate reads the review and then proceeds to leave a long-winded comment “educating” myself and readers on the merits of the Lyoness merchant shopping network.
When it’s pointed out that comparatively this pays peanuts to the Account Unit investment scheme, what then follows is either justification of the scheme on the promise of future shopping (which it is argued will one day eclipse AU investment scheme revenue), or claims that merchant shopping generates the bulk of revenue within Lyoness.
Given the absence of proof other than the mere noted existence of customers, this claim naturally fails to hold up to scrutiny.
At this point the Lyoness affiliate either disappears or admits the AU investment scheme is problematic, but chooses to ignore it and focus on the merits of the merchant shopping network instead.
A few weeks/months after this, another Lyoness affiliate stumbles across the review and the process repeats itself.
1038 comments later and to date nobody has been able to justify or explain how the affiliate-funded accounting unit investment scheme is not just a Ponzi scheme with an attached shopping network.
Lyoness recently released their 2012 Income Disclosure Statement (IDS) which, not surprisingly, only raises more concerns and questions about the company’s business model and compensation plan.
For reasons unknown, if I try to access the Lyoness Income Disclosure Statement from a non-US ip address, I find myself receiving a 403 HTTP error advising me I’m “forbidden” from accessing it:
Additionally the Lyoness IDS Policy document states,
copies of the IDS may be printed or downloaded without charge from the corporate website at www.lyoness.us/IDS
But if I try to visit that link (from outside of the US) I just get redirected to the Lyoness US website homepage.
I don’t know what the story is there, given that the IDS is readily viewable from anywhere in the world via Google cache. If Lyoness are attempting to exert control over who can and can’t view the IDS it would seem to be a rather pointless exercise.
With that out of the way, the first thing that should jump out at you when looking at the IDS is the revelation that 86.16% of all Lyoness affiliates are not affiliates (great!), but only generated an average annual cashback of $12.95 (not so great).
Mind you, that’s an average calculated by Lyoness that totally ignores shoppers who didn’t receive any cashback, which the company states is 46% of all “members” (affiliates and customers).
So much for all the crap from Lyoness affiliates about the value the merchant shopping network provides.
Customer wise 46% of shoppers receiving no cashback and the other 54% generating only an average $12.95 a year would hardly justify membership to the company. And when considered comparatively to other cashback schemes, provides a poor basis for any “value to the customer” assertions.
Of the 54% who made anything with Lyoness, the average across affiliates and shoppers was $524.65, with a median of $6 – meaning 50% of the 54% made $6 or less in total (cashback or affiliate commissions) for 2012.
One thing I noticed is that figures relating to the AU investment scheme might even be completely absent from the IDS, with Lyoness stating that
A Member is defined as someone who executed a Member Agreement, and made at least one purchase through the Lyoness LoyaltyMerchant Network.
If I sign up to Lyoness as an affiliate, invest my money in AUs, recruit new affiliates who do the same and eventually generate enough new investments do receive my >100% ROI – which I then re-invest in more AUs to generate even higher returns, technically I’m not buying anything from the merchant shopping network.
In addition to my >100% cash ROI, gift cards are issued which are supposed to be used within the shopping network by myself – but I can do what I want with these (throw them in the bin, use them to lure in new investors etc).
If I was treating Lyoness as an investment scheme, it makes little sense to use the giftcards myself. Thus as I haven’t made a purchase within the merchant shopping network, my ROIs would not be included in the IDS.
At least that’s how I’m reading it.
Furthermore Lyoness are defining affiliates as
a Member who signs up four (4) direct Members that have each made a purchase at any store within the Lyoness Loyalty Merchant Network.
Does that mean the revenue generated by affiliates who don’t recruit shoppers and just focus on the AU investment scheme, even if they make purchases themselves within the merchant shopping network are also absent?
If so, the 2012 IDS is hardly an accurate portrayal of the revenue or incomes generated through Lyoness, given that the vast majority of affiliates generating large incomes with Lyoness do so via participation in the AU investment scheme (in 1088 comments of discussion with Lyoness affiliates this has not been disputed).
I tried to calculate the total affiliate/shopper amounts but with the information provided that doesn’t seem possible.
Lyoness do state that 22,374 members (affiliates and customers) were active at the end of the year, however you can’t use these percentages to reverse-calculate the affiliate/shopper base as
- the percentage totals first exclude certain groups (AU investors who don’t shop and affiliates who don’t recruit) and
- Lyoness state that ‘during 2012, approximately 25% of all Members did not continue with Lyoness after their first year‘.
We have member figures for the end of the year however the percentages are for the entire year, during which 25% of members quit the company throwing of any calculations.
One final point of interest is the revelation that
based on a survey conducted by Lyoness in 2012, the average annual expenses anIBR incurs are $1,294.44.
Ignoring affiliates that may be excluded from revenue calculations, of those included, 94.1% (the first affiliate bracket) of all affiliates earnt an average annual income less than that of the average annual advetising expenses incurred (a difference of -$524.78).
Given the astronomical figures required to generate the hundreds of thousands of dollars of income Lyoness’ top affiliates are generating (at least those whose income qualify to appear on the IDS), it’s quite obvious that there’s a lot of AU investment going on at the top-end of the company.
At the end of the day there’s only so many shoppers per affiliate to generate AUs, with the money thus having to be sourced from affiliates plonking down their money under guise of downpayments, expecting a >100% cash ROI to be paid out once enough new investments have been made after their own.
I know we’ll never see it (at least not from Lyoness) but what would be of far more use from an analytic perspective would be a clear breakdown of revenues generated from all shoppers vs. that of affiliates (total revenues, AU investments and all).
A break down of revenue in the form of AUs (shopping-generated and those created by direct affiliate investment and re-investment) would also prove useful, as I suspect it would reveal a complete dwarfing of the merchant shopping network by the AU investment scheme (remember we’d be comparing the cashback, not the total amount spent at merchants by customers as this has nothing to do with Lyoness).
Still, kudos to Lyoness for providing some insight into some of the income generation happening inside the business. It’s more than most MLM companies tend to bother with and for that they deserve some level of recognition.