Lyoness is a network marketing business that’s based in the European Union. By signing up for and using its Lyoness Cashback Card, users can get discounts and cash back at a wide range of brick and mortar and online retailers. Additionally, if you sign up other people through referrals, you can earn a 0.5% commission on all of their products.
It’s used by an estimated five million people across 40 countries, and the annual value of the transactions made in the Lyoness system exceed one billion euros.
Did I get on board? This explains everything:
The search engine traffic for the company has been on a long, slow decline over the past several years. After peaking in early 2012, search traffic through Google has slid to only 40% of its former levels. The good news is that 2017 has seen a bit of a rebound in search traffic, so its popularity may be returning to some extent.
Products
Unlike other marketing networks, Lyoness doesn’t directly sell any products. Instead, the company acts as a nexus for shoppers and merchants looking to buy and sell products.
Their online store links to affiliates who sell everything from power tools to farm equipment to health and beauty products and more. There are also many in-person stores that you can present your Lyoness card at to earn cash back and “shopping points,” which can be redeemed online for special discounts and deals from certain manufacturers and retailers.
Compensation plan
In several countries, Lyoness is free to join, and you’ll get on the order of one or two percent cash back, as well as a 0.5% commission on any purchases made by friends that you refer to the program. However, upstream of you are the premium members, who paid 150 or 2000 euros to join earlier on in the program’s history, They have more referrals and earn more money as a result.
Unfortunately, though it sounds like a good deal, the math doesn’t work out in your favor. If five million people spend a total of 1.2 billion euros, this means each person is only spending a few hundred euros each year. Given that the commission rates are very small, you would need hundreds of people signed up underneath you, or several connections who spend thousands of euros annually, in order to make any real money.
On top of this, all of your cash back is only redeemable as purchases within the Lyoness system. You don’t ever get a check in the mail, no matter how much money you make.
The limited retail selection of the network also compounds the problem of the small cash back rewards. It’s not at all major retailers, like many credit card cash back schemes are, and you have to change your shopping habits (plus convince everyone you refer to the program to change theirs) to really reap any rewards for the cash back or shopper points.
This arrangement, and especially the joiner’s fees that were in place, have landed Lyoness in legal trouble in the past.
A 2016 ruling at a regional court in Austria (the country in which Lyoness is based) found that the company was guilty of deceptive marketing practices. Regulators are concerned that the business model of Lyoness looks suspiciously like a Ponzi scheme.
This kind of scam involves using buy-ins from newer members to pay off older investors, without generating any real revenue or growth. There are also pending criminal charges against founder Hubert Friedl. Freidl, who founded Lyoness in 2003, had earlier charges dismissed in 2015, but is facing new charges brought the next year.
This next round of criminal complaints alleges that Friedl did not follow some technical details in his business contracts–this new strategy was set up after Austrian courts found that Friedl was not guilty of the broader charge of running a pyramid scheme; in the court’s interpretation, the Lyoness model did not meet their standard for a fraudulent pyramid scheme.
Still, the simple fact that there are so many legal wranglings over the business model of Lyoness should give you some pause. If the next round of investigations does not come to as favorable as an end for Hubert Friedl and the executives at Lyoness, the bubble could pop, and the bottom could fall out.
If the network is dismantled by regulators, you are likely going to be entitled to some damages, but whether you actually get them is a different manner. Imagine the worst case is true–imagine it is a pyramid scheme.
If this is the case, once the curtain is drawn back, there won’t be enough money to award damages to everybody involves. Remember, the company’s annual turnover is only about 250 euros per person.
Recap
While the idea sounds like a good one–join for free, score discounts and cash back when making all of your typical purchases–there are too many red flags to recommend Lyoness.
The math just doesn’t work out very well: you’ll likely only make a few euros here and there, and you can only spend them on Lyoness network retailers. On top of this, the legal trouble that Lyoness has repeatedly landed itself in make it a dangerous move for getting involved. As a business-savvy reader might guess, since you aren’t really functioning as a retailer at all, it’s not really even a MLM model. You are more of an affiliate, advertising for the network which operates outside your control. Steer clear of Lyoness if your goal is to actually make any real money.
Basically, if you’re set on MLM, this one’s not terrible, but probably not the best, either.
If you’re doing it for the money, there are better ways to kill your day job. You might like our coaching because it shows you the good life without peddling products to your family and friends.
http://bodynutrition.org/lyoness-review/
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