Solavei collapses, discontinues MLM opportunity
Mid 2014 saw Solavei drowning in $63 million dollars of debt, which in turn lead to the company filing for bankruptcy.
Initial vendor costs and affiliate commissions were cited as primary reasons for the filing.
What sounded like the end of the company later transitioned into maintaining Solavei’s business operations, albeit on a tight budget.
Just shy of a year and a half later it appears that, even on a tight budget, Solavei’s business model still isn’t feasible.
In a video announcement made within the twenty-four hours, CEO Ryan Wuerch has announced the end of Solavei as we know it.
Citing the competitive and costly nature of being a mobile service provider in the US, Wuerch (right) cites a failure to negotiate a contract with T-Mobile as the reason for the collapse.
[2:24] Due to the competitive landscape of the mobile service industry and the many changes we’ve had to make to keep our service competitive, it has put an incredible strain on our company.
[2:41] Unfortunately, we’ve not been able to reach terms with our current mobile service provider to continue to providing a quality and cost-effective service to our members.
[2:57] As of December 4th, Solavei mobile service will be discontinued.
Existing Solavei customers are to be given the option of continuing their service through T-Mobile, with Wuerch going on to T-Mobile’s “attractive service plans”.
T-Mobile also apparently have access to Solavei’s customer-base, with the company to send out T-Mobile SIM card packs to all existing Solavei customers.
Wuerch claims this is “great news” and a “great offer” for “tens of thousands” Solavei customers.
Not disclosed is whether or not Solavei receive a commission per existing Solavei customer that signs up as a T-Mobile customer.
[4:47] The last couple of days has been the hardest, the most difficult of my business career.
Cause what it means is we are now forced to stop all payments, commissions and all future service under the Solavei brand.
I never would have thought it.
Ryan Wuerch’s full Solavei announcement can be viewed below in its entirety (courtesy of MLM Helpdesk):
Update 3rd August 2021 – As at the time of this update the video referenced in this article has been marked private.
As such I’ve removed the previously accessible YouTube link.
Always said mobile has no margin to support MLM.
Wonder if they tried to sign something with Stream and the deal fell through?
There’s bad blood between Stream and Solavei, so unlikely.
@ K Chang
True, but then how do you explain the success of Excel Communications (long distance), Ambit (energy), ACN (telecommunications/energy), Send Out Cards (low cost printed greeting cards) and other low margin product/service MLMs?
Keep in mind, I contend MLM does NOT sell products or services in the first place.
excel communications entered the telecom services market in 1988, around the time telecom was de regulated in the US allowing private companies into the telecom space.
as private competition in this space grew and margins contracted, excel could not continue its MLM model and afford commissions to its affiliates. MLM as we can see, can function in industries which have ‘wide’ gross margins like health and personal care.
towards the end of excels MLM run, affilaites could earn mostly from the onetime recruitment commission but hardly made any money from the ‘telecom services’ itself.
excel just managed to stay in MLM business longer than say solavei, because initially the margins in telecom services were healthy, and also because the ‘rate of growth’ of its MLM affiliate base was slower, as communications were not as instant as they are today in the 21st century.
my contention is that in any ‘low margin product/services MLM’s’ the way to make money will be via recruitment commissions primarily. such ‘products/services’ are not suited to the MLM business.
like solavie, excel dropped its MLM opportunity, but continued to offer telecom services to its customer base.
My opinion?
Excel was successful when LD was popular, when MCI was still around. They’re living off their own reserves ever since.
ACN is living off their own affiliate’s self-consumption. Their Canadian numbers explains their pattern: grow affiliates (with self-consumption) instead of overall subscribers. AVERAGE revenue per affiliate in Canada is $500… per year.
A MLM based on low-margin biz like energy and mobile *can* work, but NOBODY (except those at very top) will make serious income with it. It’s not a “career-type” MLM.
ACN has an approx 500$ joining fee from which recruitment commissions are paid. again like in excel comm, the residual commissions earned for actual telecom/energy services is low, and not worth mentioning unless an affiliate has thousands of customers in their downlines.
ACN has been prosecuted as a pyramid scheme in montana but the case was settled.
IMO, ACN is no different from FHTM [fortune high tech] which sold low margin third party products, and where commissions are sourced primarily from affiliate fees.
i guess as real products/services ARE sold to Retail Customers, MLM like ACN are mostly left alone by regulators as being less egregious schemes.
most affiliates who join MLM like excel or ACN, end up not only NOT MAKING money, but actually LOSING money. ‘not making’ money is not public harm [except for ‘false representation’], ‘losing money’ is public harm.
most affiliates may however continue to utilize the company’s services, as people are not wont to change their telecom/energy service providers on a daily basis.
so i would go as far as to say, that MLM like excel and ACN actually CHEAT consumers into becoming their customers.
btw, US presidential candidate donald trump was a major ‘supporter’ of ACN, but has rescinded his stance since he filed his nomination. [on an unrelated note: trump for president??!! the US should avoid such an embarrassment! 🙂 ]
K Chang – the short answer is they each use a Coded Bonus type compensation plan which works well with the “sell the opportunity model” of MLM.
The product/service is rarely sold on a traditional retail basis. They typically get family members and friends to “do them a favor” and switch the LD, energy or whatever so that they TRIGGER the code.
A side benefit to this type of plan is it allows the product/service to actually be priced with the market (your point about low margins).
The problem is obvious. The code can work like a head-hunter fee for recruiting. These companies seem to get around this issue by requiring a minimum number of retail sales in order to release the bonuses.
I actually prefer this model over the over-priced product plans.
Second side benefit: At some point, if you build a large enough organization, the residual income from overriding thousands of customers can be substantial.
I think we agree here. You need a very large time investment and a huge organization… of self-consumers (and their relatives).
In other words, only the early joiners will benefit. The churners and noobs need not apply.
Building a business completely dependent on another company is almost always doomed to fail. That being said Solavei had a great idea.
I love tech MLMs because they are pushing pills and potions to family and friends.
The newest one which is all about B2B not harassing family and is helping local businesses seems like the future of sustainable network marketing.
staci wallace, the founder of the top team in solavei has a video out which says solavei has new plans for the future which will be announced in the next couple of days.
youtube.com/watch?v=BTXJXfnSSmg&feature=youtu.be
maybe solavei will continue the MLM opportunity with some new product?
i hope they will avoid recruitment commissions this time around and choose a product with sufficient margins to fund distributor commissions. why repeat the same mistakes in a fresh start?
It looks like all the Solavei “leaders” sold out to ACN and are bringing their “networks” over. lol How much you want to bet Ryan was compensated to sell the database and leadership network to ACN?
Apparently ACN tried to buy Solavei out at one point (before they entered Bankruptcy).
After meeting many of the company executives and field leaders, one thing I can assure you of, you DO NOT want to do business with these people.
They are con artists and it looks like they are trying to milk the network again by trying to push them into ACN. Hilarious.
@ Solavei Leader – so tell us “Solavei Leader” – where did you end up selling out to? Have you tried OneCon? One of the other “Solavei Leaders” and Top Earners (Tom McMurrain) is pumping that ponzi hard.
ACN had been a long joke. They admitted that average Canadian affiliate earn $500 A YEAR and that was figures from couple YEARS ago, which means it could not have gone up.
They never bothered to release figures for the US. Instead, they bought spots on the Trump show and was pi**ed when Trump pretended not to know them when he started campaigning.
But if that’s all Solavei “leaders” know how to do… Well, a leopard can’t change its spots.
@ K Chang – Interesting. Are you saying the “average” ACN rep in Canada earned $500 a couple of years ago?
I have to say, that’s not all bad, IMO. Keep in mind, we ARE talking averages here. And I don’t think most successful people in ANY field pay too much attention to what the “average” person makes. That has been my own personal experience anyway.
ACN products/services seem to be reasonably priced. Plus, there are no “auto ships with over-priced lotions and potions” as was the case with Vemma.
I also heard they have “above average” reps earning 5-figures each year.
Is that true?