Did Greed Cause Arbonne To File For Chapter 11 Bankruptcy? - By: Wayne Wu

On January 27, 2010, Arbonne International, a major MLM company with a distributor force of 800,000 filed for Chapter 11 Bankruptcy with over $800 million in debt. How did this happen? Arbonne has been retailing it's own brand personal care and skin care products through independent distributors for 30 years. It has always had a reputation for providing reps a solid business opportunity.

My concern is how Arbonne distributors will fair after this restructuring. Will they be able to continue doing business as usual? Moreover, what can we, as network marketers learn from this episode to protect our own long term future in this wonderful industry of MLM?

My personal mentor, MLM industry leader of over 30 years experience and still actively building his business says that most companies and large distributor organisations crash and burn because of greed and ego. Greed and ego.

Arbonne began its operations in the US in 1980. For its first 25 years, Arbonne was a perfectly good rock solid company. It was a privately held company with good owners and operators. Arbonne had a very strong distributor base and it had excellent products that people wanted to buy.

In 2004/2005, Natural Products Group, a publically traded company, took over the holding of Arbonne (ie bought the company). And this is when problems began. The owners of Natural Products Group had no experience as distributors of a network marketing company, so they have no idea about the blood, sweat and tears that distributors go through to build an MLM company. They saw Arbonne as a cash cow they could milk.

There are also rumors that in the months preceding the bankruptcy, Arbonne asked its top earners to take a cut in commissions in an effort to stave it off.

Isn't that funny? For 25 years, Arbonne turned ordinary people into millionaires and gave people a great opportunity to own their lives, and then a somebody comes in and messes up the whole thing! And then they have the nerve to ask distributors who spent many years of their lives building the company to take a pay cut.

Here's what the owners of Natural Products Group told the court about why their bankruptcy filing was necessary:

"Although the Company had experienced a high rate of revenue growth through 2006 and early 2007, this was driven primarily by unusually higher levels of recruitment of new AICs (i.e. distributors), which was unsustainable. In 2005 and 2006, on a net basis, the Company added approximately 434,000 and 612,000 AICs, respectively. Because recruitment of AICs tends to be a leading indicator of later attrition, the historically high numbers of new consultants in those years resulted in attrition exceeding the recruiting levels in subsequent years. In 2007, 2008 and 2009, on a net basis, the Company lost approximately 108,000, 270,000 and 145,000 AICs, respectively. This attrition, combined with the downturn in the economy and the financial crisis later in 2008, caused a reduction in the Company’s overall net sales."

This is really interesting. Unless I interpreted the above wrong... Between 2005 and 2006, Arbonne added a net total of about 1,046,000 distributors. In the subsequent three years, 2007, 2008 and 2009, it lost a net total of 523,000 distributors. Well, that's still a net gain of 523,000 distributors over 5 years since Natural Products Group became a partner.

Rod Cook of MLM Watchdog reports that in 2005, Natural Products Group pulled $200 million out of Arbonne as dividends for investors. In other words, they robbed Arbonne of $200 million to pay investors. If they hadn't have done that, the bankruptcy may have been prevented.

And why did Arbonne lose so many distributors in the last 3 years? This may explain something... If you search for Arbonne on eBay, you will find hundreds (I found over 600) of Arbonne items for sale at half the recommended retail price or less.

That's what happens when a company front end loads its distributors with so much product that they can't sell or use themselves - they quit and then they try and sell the products on eBay in an effort to recoup their costs.

Please, my fellow networkers, beware of Greed and Ego. Network marketing is a wonderful industry where people help other people achieve their dreams. But you must do your due diligence and join people with integrity, from the top of the company to your personal sponsor.

About the Author

We can all learn something from the Arbonne Bankruptcy to have a securer future. Wayne teaches network marketers how to brand themselves and generate an endless flow of qualified prospects with powerful, low cost marketing. To learn how you can make money in less than one year in MLM, visit The Profitable Networker.

Article Directory Source: http://www.articlerich.com/profile/Wayne-Wu/66115

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