Lyconet: Separating AU investment from merchants?
Up until now you had to invest a lot of time building your international shopping network. Networking and making appointments to introduce Lyoness took a lot of effort as well.
These networking contacts had to be updated while taking care of your existing members. This was very time-consuming.
Well, that’s why we’ve developed MyLyconet.
-Lyconet marketing video, official Lyconet website
If one was to take Lyoness’ Lyconet marketing video and website at face value, it’s presented as a backoffice redesign to simplify the network marketing arm of the business opportunity.
Ensure more growth, team-spirit, strength and sustainability! With this many services, MyLyconet is the perfect tool in consistently helping you, expand your Shopping Network.
Be even more efficient and effective in taking advantage of your full Network potential!
What Lyoness don’t tell you though is that, not surprisingly, there’s a bit more to the story.
As reported by Austrian newspaper Kleine Zeitung on February 4th,
On the criminal side (of things), Lyoness has dealt with an investigation into the business for more than a year. The Economic and Corruption Prosecutor’s Office (WKSTA) has cast suspicion of Lyoness running a fraudulent Ponzi scheme; allegations Lyoness has consistently and vehemently rejected.
Confronted with (ongoing) criminal investigations, Lyoness has separated their shopping network from their sales. Over the weekend the new name Lyconet was officially presented.
Turns out that while Lyconet might make it a bit easier for Lyoness affiliates to manage their downlines, the separation is seen to be a move to protect the merchant network from lawsuits filed by disgruntled affiliates:
(The) important part (of the separation) is the elimination of the sales channel (within Lyoness), from which the company has faced lawsuits from disgruntled members who want their money back.
Lyoness wanted to make clear that this was a “multi-brand strategy,” entailing a “Business-2-Business” backend with “Lyconet” presented to the outside world, company spokesman Mathias Vorbach said Wednesday. “Lyoness” is thus only the consumer brand – “where it purely comes to shopping, the customer cards and customer loyalty for the retailer”.
At this point you might be wondering why affiliates are filing lawsuits against Lyoness if it’s free to join and based on shopping with third-party merchants. What money are they demanding Lyoness pay them back?
That’d be their investment into the Lyoness accounting unit investment scheme. According to Lyoness CEO Herbert Freidl, getting affiliates to invest in account unit “positions”, on the promise of a >100% ROI if enough subsequent positions are then bought by other affiliates, is the core of Lyoness’ MLM business opportunity.
Problems arise though when affiliates invest in units, and not enough new units are invested in thereafter. Under this scenario a Lyoness affiliate’s money remains in limbo, and that’s why affiliates are filing lawsuits demanding their money back.
Having used their money to pay off earlier accounting unit investors, this puts Lyoness in a bit of a dilemma. Thus the company is proposing to pay off affiliates with vouchers.
Lyoness has for several months been trying to do away with claims from “legacy” (affiliates). These are affiliates who want a refund of their paid-in capital and, after involving a lawyer, are then paid out by the company.
(Lyoness is proposing that) these affiliates should get back 75 percent of their investment in vouchers or promotional campaigns.
A few dozen affiliates had filed lawsuits against Lyoness. Viennese lawyer Eric Breiteneder has so far obtained seven judgments against the company, (with) two of them still not resolved.
Except for a Klagszurückweisung, Breiteneder has won all cases filed.
And there it is. The real reason behind the Lyconet launch.
The “official fanpage” for Lyoness Canada on Facebook puts it even more succinctly, stating that the ‘split will create stability legally and protect the Lyoness brand‘.
Protect the Lyoness brand (Freidl’s money), and sell Lyconet to the affiliates as a backoffice upgrade.
Lyoness appear to be retaining their MLM business model and compensation plan, so despite the backoffice changes, things are likely to remain just as complicated for affiliates. This is mostly due to the fact that in presenting Lyoness as a business opportunity, most of the time affiliate’s have to skirt the obvious investment-like nature of the pre-loading of account units.
No amount of backoffice tweaking and reorganization will change that.
Lyconet is also being launched as an additional revenue stream for the company, costing affiliates 25 EUR a month. I believe this is primarily due to the previous lack of separation of Lyoness affiliates and non-affiliate shoppers.
What will be interesting is whether or not Lyoness will then disclose the number of non-affiliate shoppers and monthly fee paying affiliates. While they’re at it it’d also be great to see a breakdown of how many accounting units are generated company-wide via shopping versus those directly invested in by affiliates.
Yeah, one can dream.
Update 16th December 2014 – After finally tracking down a copy of the Lyconet US compensation plan, I’ve now published a review of the Lyconet MLM business opportunity.