The International Space Station (ISS) experienced an air leak, which was detected on different occasions, with the first reported incident occurring on August 30, 2018.

This initial leak was found in the Soyuz MS-09 spacecraft's household compartment, and it was determined that the hole was drilled in zero gravity.

The cause of the leak was initially thought to be a meteorite hit, but it was later found to be a manufacturing defect.

The leak was located in the living module of the Soyuz MS-09 spacecraft, not in the return module, and it did not pose a threat to the crew's return to Earth.

Russian cosmonauts sealed the hole with special sealant, but it was later found that the sealant had dried out.

Another air leak was detected in 2019, and it was found to be caused by cracks in the hull of the ISS.

The leak was located in the Zvezda module, and it was discovered by Russian cosmonauts Pyotr Dubrov and Anton Shkaplerov.

The cracks were found to be in the Russian segment of the ISS, and they were causing an air loss of about one pound per day.

However, under certain circumstances, the air loss increased to about two pounds per day.

The leak was being constantly monitored by Roscosmos, and it was determined that the aging of the station's structure may have contributed to the leak.

In 2020, the air leak increased, and it was found that the crack in the Zvezda module had not been fully sealed.

The crack was sealed with sealant, but the leak continued, and it was necessary to sequentially seal the station compartments.

The main frame of the Zvezda module was built in the 1980s, and it was docked to the ISS in July 2000.

The ISS was expected to expire in 2024, and an avalanche of failures was predicted after 2025.

In December 2021, another air leak was detected at the Zvezda unit, and it was found by cosmonauts Peter Dobrov and Anton Shkaplerov.

The leak was located in the middle chamber of the Zvezda unit, and it was necessary to send repair materials to the ISS on a Progress cargo vehicle.

NASA considered isolating the Zvezda module if necessary, and Roscosmos sent equipment to stop the air leakage.

The leak posed concerns for the safety of the ISS, and it was necessary to repair it to solve the problem once and for all.

The air leak was also detected in the "Star" module of the ISS, and the crew found several cracks and sealed them.

However, the pressure continued to fall after the initial seal, and it was necessary to begin repair work after the Progress cargo ship delivery.

Russian cosmonauts were to perform the repair work, and the leak site was found on December 31, 2021.

Roscosmos announced the leak and the repair plan, and the ISS crew was to receive the necessary funds for the repair.

The air leak was also detected in the tail part of the ISS, and it increased a week before the Progress launch.

The air escaped from the Zvezda module transition chamber, but the crew and the station were not threatened by the leak.

Experts were in contact to determine the next steps, and the leak did not affect the crew's safety.

Russian cosmonauts had previously repaired a faulty radiator, but no information was provided on the leak fix.

In conclusion, the air leak at the ISS was detected on different occasions, and it was caused by various factors, including manufacturing defects, cracks in the hull, and the aging of the station's structure.

The leak was located in different modules of the ISS, including the Soyuz MS-09 spacecraft, the Zvezda module, and the "Star" module.

The leak was repaired on several occasions, but it continued to pose concerns for the safety of the ISS.

The ISS is expected to expire in 2024, and an avalanche of failures is predicted after 2025, which highlights the need for continued maintenance and repair of the station.

The International Space Station (ISS) experienced an air leak, which was detected on different occasions, with the first reported incident occurring on August 30, 2018.

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Content: NASA has excluded the involvement of its astronauts in the hole in the “Union ”
American astronauts are not involved in the appearance of a hole in the household compartment docked to the ISS “Soyuz MS-09 ” in 2018.
This was stated by the assistant head of NASA for manned flights Katie Leeds, commenting on the publication of TASS, in which, with reference to the source, it is reported about the likely drilling of a hole in the ship by astronaut Serina Augnon-Chancellor.
"NASA crew members carry out their missions professionally and honestly.
I support Serina and her professional behavior, and I don't find this accusation credible, "Leaders said.
On the eve of TASS published an anonymous interview with an unnamed top manager of “Roscosmos ”, in which the Agency interlocutor said that Aunyon-Chancellor, being the only woman in the crew, experienced“ acute psychological crisis ”.
The source of the publication explained that, wanting to speed up its return to Earth in connection with the emergency situation, the American drilled a hole that threatened to depressurize the station.
As one of the confirmations of his version, the Agency interlocutor indicated that NASA astronauts refused to pass the test on the “lie detector ”.
According to the source, the hole was drilled in zero gravity.
The crew discovered an air leak on the International Space Station (ISS) on the night of August 30, 2018, which was caused by a hole in the Soyuz MS-09 spacecraft.
It was located in the household compartment, not in the lander, so it did not threaten the return of the crew to Earth.
General Director of Roscosmos Dmitry Rogozin reported that the commission of the rocket and space Corporation (RSC) Energia ruled out the version of damage to the skin of the Soyuz MS-09 spacecraft as a result of industrial defects.
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This initial leak was found in the Soyuz MS-09 spacecraft's household compartment, and it was determined that the hole was drilled in zero gravity.

The cause of the leak was initially thought to be a meteorite hit, but it was later found to be a manufacturing defect.

Title:

Content: Soyuz manufacturing defect causes air leak at International Space Station
Kazakhstan News Agency / Astana / September 3 - According to the Russian satellite network reported on the 3rd, Russian rocket space sources said that the manufacturing defect is the cause of the "Soyuz MS-09" spacecraft leak.
There was an air leak on the International Space Station on August 30.
The astronauts examined all the compartments and found tiny cracks in the Soyuz MS-09 spacecraft.
It is located in the living module, not in the return module, so it will not affect the return of the spacecraft to Earth.
It was previously thought that the fissure was the result of a miniature meteorite hitting the spacecraft.
The next night, Russian cosmonauts used special sealant to fill the hole.
The source said: "The cause of the crack in the inner shell of the living module has been identified and it has appeared on Earth.
The person responsible for the fault was identified. "
According to another source, the crew likely sealed the leak with special glue after realizing the mistake, so it was not detected during the pre-launch check and the spacecraft ’ s first two months of orbital flight.
"However, the glue later dried out and was squeezed out, revealing cracks," he said.
The Russian space agency said a special committee would investigate and determine the cause of the accident.
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The leak was located in the living module of the Soyuz MS-09 spacecraft, not in the return module, and it did not pose a threat to the crew's return to Earth.

Russian cosmonauts sealed the hole with special sealant, but it was later found that the sealant had dried out.

Another air leak was detected in 2019, and it was found to be caused by cracks in the hull of the ISS.

Title:

Content: Ribbon
01 January 07: 01
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vk.com / Cosmonaut Ivan Wagner
Moscow, January 1.
Russian cosmonauts Pyotr Dubrov and Anton Shkaplerov discovered in the Zvezda module on the International Space Station, presumably the last place of air leakage.
This was reported in the press service of Roscosmos.
The first small leak was discovered on the ISS back in 2019, since then, astronauts have been monitoring the situation and eliminating cracks in the hull.
Experts know how to return the module tightness.
This will be done as soon as Progress delivers the necessary equipment to orbit.
“Russian cosmonauts Peter Dubrov and Anton Shkaplerov found a possible last place of air leakage in the intermediate chamber of the service module“ Star ” of the Russian segment of the ISS ”, — stated in the message.
Russian President Vladimir Putin previously admitted the possibility of continuing the operation of the ISS after 2024.
This is necessary to maintain high launch activity.
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Comment

The leak was located in the Zvezda module, and it was discovered by Russian cosmonauts Pyotr Dubrov and Anton Shkaplerov.

The cracks were found to be in the Russian segment of the ISS, and they were causing an air loss of about one pound per day.

Title:

Content: 29 Feb, 2024 11:18

Russia comments on space station leak

A NASA official had previously reported that air loss from the Zvezda module had doubled

Air leaking from a segment of the International Space Station (ISS) poses no risk to its crew or the orbital outpost, the Russian space agency Roscosmos has said.

A NASA official had previously reported that the rate at which air was escaping from the satellite's Russian Zvezda module under certain circumstances had doubled. The situation is under control and being constantly monitored, the Roscosmos told Interfax on Wednesday, when asked about remarks by NASA’s ISS program manager, Joel Montalbano,.

”The aging of the station’s structure and the growing need for repair and maintenance work on board require a significant portion of the crew’s time,” Roscosmos said.

Montalbano mentioned the issue during this week’s briefing on the upcoming SpaceX Crew-8 mission, which is scheduled for launch on Friday.

”There is an area in the aft end of the International Space Station. [There is] a small leak. We’ve seen this leak increase about a week before the recent Progress launch and docking,” he said, referring to a Russian automatic supply freighter.

The volume of lost air has increased to about two pounds a day, compared to a pound a day previously, Montalbano said.

”The hatch is closed in that area. It’s not an impact on Crew-8, but I didn’t want anyone to be surprised, if they hear about that later,” he explained.

The use of the module for retrieving the Progress shipment didn’t pose any issues in terms of the leak, he said. The next opening of the hatch is expected in April. While it’s closed, the rest of the station is “solid.”

Technical issues at the ISS are being reported on a regular basis. Roscosmos has said the age of the station is a key reason why it is developing plans for a new purely Russian-manned orbital structure as an alternative to participating in the international project.

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However, under certain circumstances, the air loss increased to about two pounds per day.

The leak was being constantly monitored by Roscosmos, and it was determined that the aging of the station's structure may have contributed to the leak.

In 2020, the air leak increased, and it was found that the crack in the Zvezda module had not been fully sealed.

Title:

Content: Links for simplified access
ISS crew reports smoke and smell of burnt plastic
In the Russian module “Zvezda ” on the International space station (ISS) last night worked fire alarm, reports RIA“ Novosti ” with reference to the negotiations of the crew with the Earth, which broadcasts NASA.
Around five in the morning Moscow time, cosmonaut Oleg Novitsky told the Mission Control Center about the smoke and smell of burnt plastic.
After that, the devices showed the presence of harmful substances in the area of the medical cabinet in the Zvezda module.
French astronaut Tom Pesquet said that the smell of burnt plastic or electronics also penetrated the American segment of the ISS due to the working ventilation.
The source of the smoke and smell has not yet been identified.
The ISS included a system for removing harmful impurities.
Later, Roscosmos said that the smoke sensor and alarm system worked on the ISS “during automatic recharging of batteries. ”
Currently, all systems of the station are working normally, the department notes.
The Russian service module Zvezda docked to the ISS in July 2000.
Its main frame was built in the 1980s as the core of the Mir-2 space station, which was to replace the Mir station, but then it was decided to use it in the ISS program.
Zvezda allows a crew of three cosmonauts to stay in space, and the module can also dock with the Progress cargo ship, which once every three months delivers the necessary supplies to the station and adjusts its orbit.
In the fall of 2019, an air leak was recorded on the ISS.
A year later, the leakage rate increased fivefold.
Sequential sealing of the station compartments allowed us to establish that the cause of the leak was a crack in the Russian segment of the ISS - Zvezda.
The astronauts sealed it with a sealant, but the air leak continued.
Recently, during the survey of the International Space Station, cosmonauts found non-through cracks on the oldest module - "Dawn".
At the end of July, a meeting of the Presidium of the Scientific and Technical Council of Roscosmos took place, where it was noted that the station is breathing on incense.
The International Space Station will expire in 2024.
Earlier, Vladimir Solovyov, General Designer of the Energia Rocket and Space Corporation, predicted an avalanche of failure of numerous elements at the station after 2025.
This mainly concerns the tightness of the housing and complex computing facilities that have developed their resource, Solovyov noted.
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The crack was sealed with sealant, but the leak continued, and it was necessary to sequentially seal the station compartments.

The main frame of the Zvezda module was built in the 1980s, and it was docked to the ISS in July 2000.

The ISS was expected to expire in 2024, and an avalanche of failures was predicted after 2025.

In December 2021, another air leak was detected at the Zvezda unit, and it was found by cosmonauts Peter Dobrov and Anton Shkaplerov.

Title:

Content: Possible location of air leak from the International Space Station
Space
International Space Station
Copy Link https: / / www.rt.com / s7a8
The media office of the Roscosmos Foundation announced that the Russian cosmonauts discovered in the unit "Zvezda", the possible place of air leakage from the International Space Station.
According to the information office, the materials and equipment needed to repair this place will be sent aboard the Progress cargo vehicle.
"The equipment and materials necessary to stop air leakage will be sent with the first Progress cargo vehicle launched to the International Space Station, to solve this problem once and for all," the statement said.
Astronauts Peter Dobrov and Anton Shkaplerov discovered the possible location of the air leak in December in the middle chamber of the Zvezda unit.
NASA has said it is considering isolating the Zvezda module completely if necessary.
The Roscosmos media office commented: “The concerns of our partners are unfounded and surprising. ”
Source: Novosti
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The leak was located in the middle chamber of the Zvezda unit, and it was necessary to send repair materials to the ISS on a Progress cargo vehicle.

NASA considered isolating the Zvezda module if necessary, and Roscosmos sent equipment to stop the air leakage.

The leak posed concerns for the safety of the ISS, and it was necessary to repair it to solve the problem once and for all.

The air leak was also detected in the "Star" module of the ISS, and the crew found several cracks and sealed them.

Title:

Content: 22: 04, 31 December 2021
The Russian crew found the alleged site of air leakage on the International space station
It is located in the module “Star ”, said in“ Roscosmos ”.
The cosmonauts will begin repair work after the nearest Progress cargo ship will deliver the necessary funds to them, the state corporation said.
Today, during the congratulations of the Russian participants of the expedition to the ISS, the head of Roscosmos, Dmitry Rogozin, spoke about the problems faced by the astronauts.
Air leakage at the station was recorded more than two years ago.
Since then, crew members have found several cracks and reported that they were able to seal them.
However, the pressure on the station continued to fall.
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However, the pressure continued to fall after the initial seal, and it was necessary to begin repair work after the Progress cargo ship delivery.

Russian cosmonauts were to perform the repair work, and the leak site was found on December 31, 2021.

Roscosmos announced the leak and the repair plan, and the ISS crew was to receive the necessary funds for the repair.

The air leak was also detected in the tail part of the ISS, and it increased a week before the Progress launch.

Title:

Content: NEWS
NEWS
February 28, 20: 41
Science
Roscosmos reported air leakage on the Russian segment of the ISS
Photo: telegram channel "State Corporation" Roscosmos "
Air leakage occurred on the Russian segment of the ISS, the crew and the station itself is not threatened.
This writes TASS with reference to the press service of Roscosmos.
“Indeed, experts fix the leakage of air on board the ISS.
The crew regularly carries out work to find and eliminate possible leakage sites, and the data coming from the station are transmitted for analysis to specialists in the normal mode, ” the state corporation said.
According to "Interfax" with reference to the head of the NASA program on the ISS Joel Montalbano, the leak is observed in the tail part of the ISS.
“We saw that the leak increased about a week before the last launch of Progress and its docking with the station, ” he said.
The head of the NASA program on the ISS said that the air in the transition chamber of the Zvezda module began to leave twice as fast.
According to Montalbano, experts are in contact with Russian colleagues on the next steps.
However, this situation does not affect the safety of the crew, he said.
Last year, Russian cosmonauts Oleg Kononenko and Nikolai Chub in outer space disconnected the faulty circuit of the additional radiator on the module "Science" from the main circuit of the module.
Before that, they went into outer space, opening the exit hatch of the module "Search" of the International Space Station.
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The air escaped from the Zvezda module transition chamber, but the crew and the station were not threatened by the leak.

Experts were in contact to determine the next steps, and the leak did not affect the crew's safety.

Russian cosmonauts had previously repaired a faulty radiator, but no information was provided on the leak fix.

In conclusion, the air leak at the ISS was detected on different occasions, and it was caused by various factors, including manufacturing defects, cracks in the hull, and the aging of the station's structure.

Title:

Content:
"This Is Bad" - Russian Cosmonauts Discovery Tiny Cracks In Space Station

by Tyler Durden
Saturday, Sep 04, 2021 - 09:55 AM

Russian cosmonauts have discovered small cracks on the International Space Station (ISS), and it's unclear whether the cracks are causing air leaks in the orbiting space lab, according to Reuters

Vladimir Solovyov, the chief engineer of Moscow-based company Energia, the top contractor for Russia's spaceflight program, told Russia's state-owned RIA news agency that "superficial fissures have been found in some places on the Zarya module."

Solovyov warned: "This is bad and suggests that the fissures will begin to spread over time."

He didn't mention if the cracks were the source of air leaks which Russian cosmonauts discovered.

The 23-year old space station has been fraught with problems. NASA and the Russian Space Agency Roscosmos searched for a small air leak last year when air pressure dropped in the space station.

Readers may recall, in 2018, the station experienced an air leak that was initially thought to be the result of a micrometeorite - but turned out to be a "deliberate sabotage."

Several other recent incidents have been reported on the space station, such as a software glitch that ignited thrusters on the Russian research module Nauka and sent the ISS out of normal pitch. There was also a piece of space junk that sliced through a robotic arm

Meanwhile, Moscow has given their farewell warning that it will depart from the ISS in 2025. Russian officials have said the aging ISS is too dangerous for their cosmonauts:

"We can't risk the lives [of our cosmonauts]. The situation that today is connected to the structure and the metal getting old, it can lead to irreversible consequences - to catastrophe," Deputy Prime Minister Yuri Borisov recently said.

At the same time, China has launched a new space station that is expected to outlast the ISS.

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The leak was located in different modules of the ISS, including the Soyuz MS-09 spacecraft, the Zvezda module, and the "Star" module.

The leak was repaired on several occasions, but it continued to pose concerns for the safety of the ISS.

The ISS is expected to expire in 2024, and an avalanche of failures is predicted after 2025, which highlights the need for continued maintenance and repair of the station.


The multi-level marketing business model has experienced significant trends in recent years, with some companies experiencing a surge in profits while others have seen a decline.

Nu Skin, for example, saw its stock triple in value from March 2020 to June 2021, with over 20% of its revenue coming from China, and its salespeople increased during the pandemic.

However, the company's stock later slid back to $47 after reaching its peak.

Other companies, such as Avon and Tupperware, have also been impacted, with Avon shifting its focus to incentivizing salespeople to recruit in 2000, and Tupperware's stock value dropping over 90% in the last 5 years.

Some companies have seen a decline in their stock value, including Herbalife, which is down 64% year-to-date, and USANA Health Sciences, which is down 49% year-to-date.

The COVID-19 pandemic has had a significant impact on the multi-level marketing industry, with many companies seeing growth during this time.

However, some companies have closed or are closing down, such as Amway, which is leaving the Russian market due to economic circumstances, and Tupperware, which may violate loan agreements and potentially declare bankruptcy [10].

Additionally, some companies have switched to a simple direct sales model, such as those in Taiwan, where the direct sales industry has transformed into e-commerce or micro-business.

Educational Development Corp is an example of a company that uses the multi-level marketing strategy and has seen strong fundamentals and fair valuation, with its consultant count doubling amidst the COVID-19 pandemic.

The multi-level marketing business model has experienced significant trends in recent years, with some companies experiencing a surge in profits while others have seen a decline.

Title:

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Nu Skin’s Biggest Customer Base Is in China. Now It’s Accused of Spreading Covid.

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The Covid pandemic was good for the business of multilevel marketing firms like Nu Skin Enterprises, as furloughed workers tried to make ends meet by selling vitamins and skin creams from home. Salespeople swelled the bottom of Nu Skin’s marketing ranks, and its stock tripled in value from March 2020 to a June 2021 peak of $62, before sliding back to a recent $47.

Now Covid is a problem for the company in China, the nation where Nu Skin (ticker: NUS) gets its largest number of customers and more than 20% of its revenue. A...

Nu Skin, for example, saw its stock triple in value from March 2020 to June 2021, with over 20% of its revenue coming from China, and its salespeople increased during the pandemic.

However, the company's stock later slid back to $47 after reaching its peak.

Other companies, such as Avon and Tupperware, have also been impacted, with Avon shifting its focus to incentivizing salespeople to recruit in 2000, and Tupperware's stock value dropping over 90% in the last 5 years.

Title:

Content: 'Direct Selling' - Avon, Tupperware - Is Extinct

Nov. 18, 2022 11:25 AM ETHLF, MED, NTCO, NUS, PRI, TUP, USNA3 Comments
Robert FitzPatrick
394 Followers

Summary

  • Direct Selling became obsolete generations ago. So how is it that millions today get recruited for "income opportunity" in "direct selling" and billions are traded on "direct selling" stocks?
  • Avon and Tupperware are cited by "multi-level marketing," or MLM, promoters as "proof" that MLM, e.g., Amway, Herbalife, is "direct selling."
  • Usable data on actual income and churn rates of MLM "direct sellers," market saturation, and retail sales to actual customers are not provided.
  • In fact, Avon and Tupperware for years have been walking dinosaurs, still trying to do "person-to-person" sales to end-users with commodity products, while MLMs hype "unlimited" income.
  • The shrunken and devolved state of Avon and Tupperware today reveals that direct selling is extinct. MLM is not, and never was, direct selling.

It is generally accepted that "direct selling" was killed off generations ago by mass merchandising, big box stores, mail-order and then the internet, among other societal changes. The "Fuller Brush man" is long gone. No one's at home. No one wants or needs or has time for a "personal" salesperson. Everything's in stores or online. And, even when "direct selling" still lived, no one ever went into that tough line of work thinking they would get rich from it.

Yet, each year, millions are recruited, and pay thousands, for the "opportunity" to work as "direct sellers," with promises and expectations of "unlimited" income. The number involved today is many, many times greater than ever worked in that "extinct" field decades ago. Billions are being traded on Wall Street for shares of "direct selling" companies. How can this be?

In my book, Ponzinomics, the Untold Story of Multi-Level Marketing, I document the death of "direct selling" and the 1945 invention of "multi-level marketing," or MLM. I describe how "MLM" falsely assumed direct selling's revered old identity. I trace MLM from its Adam, a little California-based company called "Nutrilite," to today's "industry" led by Amway, Herbalife (HLF) down 64% YTD, Nuskin (NUS) down 31%, USANA Health Sciences (USNA) down 49%, Primerica, Inc. (PRI) down 13%, and Medifast (MED) down 45%. MLM's financial solicitations for consumers to become "direct sellers" have reached into – and led to losses for – virtually every household in America.

In the newly invented "MLM," the main source of revenue shifted from end-user customers to the salespeople themselves who are incentivized to "be their own customer" by buying their own products. Obviously, no one makes money purchasing their own inventory, but MLM offered a unique reason to do so – "unlimited" income potential.

No More Need to Knock on Doors

All MLM "direct sellers" can potentially gain "unlimited" income by recruiting an "endless" chain of other "direct sellers." No need to pound the pavement and get rudely rejected at front doors any more. Each "direct seller" on the chain has to meet a quota to "qualify" for future rewards from their recruits who, in turn, are their "own customers" and recruiters too, ad infinitum. The chain can grow without continuous personal effort. The qualifying quota can usually be met by just making a personal monthly purchase of inventory. "Commissions" on all these transactions, all the way down to the "last ones in," flow up the chain. In the MLM pay plan, most of the total commissions go to the top 1%. So, all new "direct sellers" try mightily to recruit (and buy) their way to those top ranks. Of course, only a tiny few can ever be at the top.

Some people argued this is a pyramid recruiting scheme, inherently unfair and deceptive, and a counterfeit of direct selling. In the design and the pay plan, bottom ranks – the vast majority – will inevitably lose. They said constantly adding salespeople in any area destroys profitable retail selling potential, if any exists to start with. They cited data on 90-99% loss rates and huge churn rates among new "recruits" and asked, where are the retail "customers"?

While offering no data on retail customers or salespeople losses or market saturation, MLM promoters offered "proof" that MLM is direct selling by pointing to two long-established and respected direct selling companies in their ranks, Avon and Tupperware (TUP). Both companies were members of the Direct Selling Association, DSA, and both were "direct selling" icons, Avon for its "ladies" and Tupperware for its "parties." To any pyramid scheme accusations, MLM promoters indignantly countered: "Are you calling Avon and Tupperware pyramid schemes?"

Walking Dinosaurs

The truth for both companies is very different from the MLM-spin. Avon and Tupperware used to have differentiated products and real consumer demand. Their salespeople made money from their own retail sales. But moving into the 21st Century, Avon and Tupperware became walking dinosaurs, vestiges of the extinct era of "direct selling." They were still trying to base their businesses on their historical brands and on person-to-person retail sales to real customers, as direct selling companies always used to do.

Despite MLM's citing Avon and Tupperware, and thereby bestowing legitimacy on the "MLM" members of the Direct Selling Association, deep differences between those icons of the old era and MLM burst into public view in 2013-14. The two companies publicly quit the Direct Selling Association, charging ethics violations and DSA-member connections to pyramid schemes.

Avon's Long Good-Bye

Avon had been a true direct seller for decades before MLM was invented. But as the door-to-door model faded, Avon began a long decline. In 2000, Avon began shifting its focus to "incentivizing" salespeople to recruit more salespeople and getting them to buy inventory, MLM-style. In 2009, during the Great Recession, Avon ran its most expensive ad in history, on television during the Super Bowl. The ad never mentioned any Avon products! It only solicited "salespeople." Still, global revenue dropped continuously over the next 10 years. Avon stock value fell from over $30 to just over $3.

Finally, Avon split off its faltering North American business and sold it to the Korean company, LG Household & Health Care. Avon claimed to have 250,000 sales representatives in North America. The remaining global business was later sold to the Brazilian MLM, Natura (NTCO) down 50% YTD, which also owns the retailer, Body Shop. Though Avon global was much larger, Avon shareholders traded 3 shares of Avon for just one in Natura.

The Korean-owned segment of Avon in North America is now classic MLM, selling the proverbial MLM "income opportunity" along with "health" supplements, make-up, jewelry, clothing, scented candles, even toothpaste.

On the Canadian Avon website, Avon promotes the "income opportunity," urging prospects in large bold black type: "Think big. Sell Avon part-time, full-time, you decide how much! It’s your business, your way!"

A disclosure (legally required in Canada, but not in the USA) appears midway down a long webpage in tiny, barely visible gray lettering: "The 2020 earnings of a typical Avon Leadership Representative was between $0 and $2,620 in commissions and bonuses." That's $0 to $50 a week, before subtracting all costs! And the "disclosure" does not break out how much of that tiny return comes from personal sales or the "downline."

Avon quietly rejoined the Direct Selling Association. The Brazilian company, Natura, which took over Avon's global business in 2020, has lost over 60% of its stock value in the last year.

Tupperware on the Brink

Tupperware was one of the first "party plan" companies, which are technically a small subset of MLM. They employ an "endless" recruiting chain, but are more rooted in retail sales transacted at "parties." Tupperware used to have a popular brand with innovative, differentiated products. But, as true direct selling began to disappear, Tupperware went into decline. It added MLM-type "health and beauty" commodities to bolster recruiting appeal but then deleted them. This year, it began also selling its products in Target department stores. Its kitchen-related goods are generally not distinct from other brands. A 10-months "Income disclosure" for Canada (not published in the USA) showed that half the "party planners" were classified "inactive," earning less than $30 for the period on average. 94% of the "active" ones reportedly received about $12 a week on average, before expenses.

In the last 5 years, the stock value of Tupperware has dropped over 90%. Its latest financials warned investors the company may violate loan agreements, setting off speculation Tupperware might declare bankruptcy.

The shrunken and devolved state of Avon and Tupperware, the most famous brand-icons of "direct selling," makes citing them as a defense of "multi-level marketing" as extinct as their old business model.

This article was written by

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Robert L. FitzPatrick is the author of the new book, Ponzinomics, the Untold Story of Multi-Level Marketing (2020),the first comprehensive history and analysis of the "MLM" phenomenon, addressing its political influence, propaganda techniques and use of cult persuasion. FitzPatrick is an expert in examining and revealing deception and fraud in Ponzi schemes, pyramid schemes and bogus home-based businesses. He served as expert or consultant in more than 30 court cases involving pyramid schemes and multi-level marketing. He is co-author of False Profits (1997), an examination of the values and beliefs that support the delusions of pyramid schemes. He was featured on NBC Dateline, ABC World News, and CBS 60 Minutes, the documentary film, Betting on Zero and the podcast, The Dream.He has been quoted in many newspapers around the world, including the New York Times and Wall Street Journal. His booklet, Pyramid Nation, has been translated to Chinese and used by government regulators in writing China's first laws on pyramid schemes. His booklet, "The 10 Big Lies of Multi-Level Marketing", has been translated into four languages and posted on numerous websites. His White Paper, "The Main Street Bubble", which details the extensive influence-buying of the direct selling industry was featured in a CNBC Documentary, Selling the American Dream. In 2005, he delivered a seminar to in Colombo, Sri Lanka to central banking representatives from that country as well as India, Bangladesh, Bhutan, Maldives and Nepal. Robert FitzPatrick has developed informational resources for consumers, journalists, academics and regulators including a multi-media PowerPoint presentation and a statistical analysis of the losses suffered by participants in pyramid selling schemes. He also published a widely read booklet on the landmark federal case brought against the Amway Corporation. He is a expert network member of GLG Research, and Coleman Research Group, as well as other networks of experts who are referred to clients for consultation, speaking and report writing. In this capacity, he has provided expert consultation to financial many analysts who sought information about multi-level marketing companies and pyramid and Ponzi schemes. Robert FitzPatrick co-founded and serves as president of Pyramid Scheme Alert, the first international organization to expose and prevent pyramid scheme fraud. He personally responds to hundreds of consumer and news media inquiries each year. He has served as consultant and expert witness for Attorney General or State Attorney offices in four states, the US Dept. of Justice, and in numerous cases involving distributor fraud and pyramid schemes. Robert FitzPatrick is not an investor in multi-level marketing companies. He has never owned and never plans to own stocks of multi-level marketing companies. He has never been compensated based on any stock's performance. He does not offer investment advice and he is not an attorney.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for educational purposes only. It discusses fundamentals of the "direct selling" business model and the evolution of "multi-level marketing."

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Some companies have seen a decline in their stock value, including Herbalife, which is down 64% year-to-date, and USANA Health Sciences, which is down 49% year-to-date.

The COVID-19 pandemic has had a significant impact on the multi-level marketing industry, with many companies seeing growth during this time.

However, some companies have closed or are closing down, such as Amway, which is leaving the Russian market due to economic circumstances, and Tupperware, which may violate loan agreements and potentially declare bankruptcy [10].

Additionally, some companies have switched to a simple direct sales model, such as those in Taiwan, where the direct sales industry has transformed into e-commerce or micro-business.

Title:

Content: Do direct sales students disappear? He is shocked that "no one can find" the truth inside the industry: turn this line
▲ Original PO said that students who used to do direct sales seem to have disappeared now. (Illustration / Reprinted from pixabay)
Posts Tagged ‘ CTWANT ’
There are hundreds of occupations, and everyone's choices are different, and direct selling is one of them.
However, a recent Internet friendly strange article said that for many years, many students or friends who do direct sales industry in the predecessor side often call to pull people, but in recent years it seems to have gradually disappeared, so that the original PO questioned "no one found that Taiwan's direct sales industry has disappeared in recent years?"
The original PO on PTT said that I remember many years in the front desk of many direct sales industry in Taiwan, "a bunch of classmates and friends who have not seen you for a long time suddenly contact you, I know he wants to promote direct sales with you", but the original PO found these direct sales people, in recent years seems to have disappeared inexplicably. Has the sales industry disappeared in recent years, and why has it become so? ”
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A post, caused a heated discussion, many netizens for the original PO answer, in fact, did not disappear just transformation, "change the name, e-commerce, micro-business, courses, investment", "direct sales have long been transformed, which will directly talk to you direct sales, now tell you about micro-business", "many new brands, sales have said their annual revenue", "you do not have a lot of", "," "Online direct sales have begun with the advancement of technology," and "it should all be turned into live sales."
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Educational Development Corp is an example of a company that uses the multi-level marketing strategy and has seen strong fundamentals and fair valuation, with its consultant count doubling amidst the COVID-19 pandemic.

Title:

Content: Educational Development Corp.: Growth Risk Might Be Overblown

Moat Investing
1.46K Followers

Summary

  • EDUC is the exclusive US co-publisher of educational children's books produced by famous Usborne Publishing by leveraging multilevel marketing (MLM) strategy.
  • It has strong fundamentals, fair valuation, and a compelling growth story that is being ignored by the market.
  • We arrived at a target price of $12.4 to $14.6 without incorporating any future growth and expansion in operating margins.

Investment Idea

Educational Development Corporation (NASDAQ:EDUC) has an attractive value proposition, strong financials, and optionality of significant growth ahead due to structural changes caused by COVID. On top of that, the valuation is reasonable, and management has skin in the game (owns 23% of shares outstanding). For these reasons, we remain bullish.

Business Overview

EDUC is the exclusive US co-publisher of educational children's books produced in the UK by Usborne Publishing, and EDUC also exclusively publishes books through their ownership of Kane Miller.

The business operates in two segments:

Home Business Division (Usborne Books & More or "UBAM") -(95% of revenues) - This segment sells books through consultants directly to consumers using a multilevel marketing model (MLM). Consultants sell books by hosting home parties, social media, and hosting book fairs with schools and public libraries.

Publishing Division – (5% of revenues) - Sells books to bookstores, toy stores, and other retail outlets.

If you would like to get the gist of our thesis, you can watch our YouTube video below.

Value Proposition

The children's books market is very competitive and fragmented. There are more than 135 publishers of children's books in the US. EDUC is competing with Scholastic and Pearson, which have extensive resources to run marketing campaigns and are well-positioned in both online and offline distribution channels. Although EDUC has a little moat, they have some strengths to their business model that will allow long-term value creation.

They have an exclusive and long-term relationship with Usborne. Therefore, clients of the Usborne in the US must acquire their books via EDUC. Also, there is a consensus that Usborne books are high quality and among the industry's best.

Their sales are a function of the number of active sales consultants. Commissions paid to consultants are a variable cost, and they are only paid when sales are made. Although this makes SG&A grow as the top line grows, since it's not a fixed cost to the business, it allows EDUC to achieve significant operating leverage. Also, it allows them to scale quickly and have flexibility.

Direct sales strategies like multilevel marketing are commonly referred to as pyramid and Ponzi schemes. However, the table below shows that it does work sustainably and increases revenue growth over the long run despite the negative press.

Source: S&P Capital IQ

Why might EDUC be mispriced?

There are multiple factors. Firstly, it's a micro-cap. This usually means there is limited analyst coverage, and due to the stock's illiquidity, there is low institutional interest. These factors, coupled with others, leave the company under the market radar despite its business is doing well and has promising perspectives.

Second, there is negative press around the MLM business models. The MLM model deployed by EDUC is vastly different from dodgy tactics used by other players. For example, many MLM models require the seller to purchase the inventory from the company before selling. However, this reduces the risk for the company and puts extra pressure on the seller, which can be left with expensive inventory that cannot be sold or returned. In the case of EDUC, there is no requirement to hold inventory.

Third, markets might be believing that the business's tailwinds are temporary due to COVID. Amidst Covid, schools were closed, and parents were working from home; this drove home-based learning and benefited EDUC. Additionally, unemployment rates soared, and many were left looking for work. This allowed EDUC almost to double its consultant count from 33 to 60 thousand. We believe the post-pandemic work from home trend will persist, supporting their sales. Furthermore, the active consultant might not fall back to the pre-pandemic level as these roles are usually part-time work which fits nicely with the trending gig economy.

The evidence speaks louder than words

There are also some clues from the management that revenue generated amidst pandemics might be sticky.

Management increased its dividend per share from $0.20 to $0.32. A dividend increase should be seen as a signal that a business is in solid financial shape and management is confident about its future.

Management increased capital expenditures to $4.15 million from $0.64 in 2020. This expenditure was primarily associated with equipment purchases to increase daily shipping capacity. These are some early signs that management is expecting positive growth going ahead. Additionally, this also improves their margins as amidst Covid they paid a premium for extra shifts.

EDUC has increased its inventory; the inventory build-up is approximately 60% of its total assets. This has been in anticipation of an increase in the sales, as it takes a four to six-month lead-time to have a title printed and delivered to them.

Source: Koyfin

Value Investing Approach: Asset Value

To calculate the actual asset value of the company, we tried to replicate the business from scratch. Therefore, below you will find the last reported balance sheet, where we have made some adjustments.

The value of the land recorded on books was $4.1 million. They own a 40-acre complex at 5402 South 122nd East Ave, Tulsa, with 400,000 square feet of office and warehouse space. They also own a facility located at 10302 East 55th Place, Tulsa, that has 105,000 square feet of usable space. According to our channel checks with realtors, the average price per square foot of their land lies between the range of $100 to $115. To remain conservative, we took the average price square feet to be $85. Therefore, we estimate the value of its land to be $42.9 million.

They also have a network of around 55,000 active consultants. To construct such a network from scratch is both costly and time-consuming. We estimate the replication cost of this network to be around $27.5 million ($500 per consultant). This is also roughly five months of sales commission cost incurred by EDUC in the fiscal year 2021.

The rest of the items are taken on book value.

Based on the above adjustment, we arrive at the total asset value of 106.7, and the fair value per share to be $12.4

Source: Moat Investing

Value Investing Approach: Earnings Power Value

This approach allows us to value EDUC without incorporating any growth. Here, we consider the business's historical figures (last five years) to get the normalized earnings and operating margin. To calculate the sustainable earnings, we smoothed out the company revenues for the previous five years to $131 million and then calculated the firm's average operating margin (6.5%) to arrive at the sustainable Operating Income of $8.5 million.

We add back the expenses typically spent on growth, and we estimate around 4.5% of sales is spent on growth marketing, i.e., promotion, advertisement, and discounts. Hence, we add this back as this expense is not required if the firm was not aiming to achieve growth.

We assume the normalized tax rate to be 26% and the estimated cost of equity at 9%. Therefore, we estimate Earning Power Value of the operating business to be $134 million. To that, we add the non-operational cash ($1.8 million), and we subtract long-term debt (10.8); we arrive at an implied market cap of $125.6 million or $14.6 price per share, with 12.3% upside potential, without incorporating any growth or expansion in operating margins.

Source: Moat Investing

Risks to Our Investment Case

  • Stringent regulation regarding MLM companies. For instance, the requirement to treat consultants as employees. This could have implication when it comes to taxation, wages paid and welfare concerns for workers. This could, in turn, shrink the bottom line or, worse, business model tatters.
  • The most straightforward risk is consultants quitting or switching to find other employment as the US economy improves. However, within our valuation model, we have smoothed the growth of revenue in the last five years, which is a function of l consultants recruited. Even if there is some mean reversion in terms of consultants working with EDUC due to the COVID base effect, our thesis would be less impacted.
  • As highlighted earlier EDUC’s inventory level is a significant portion of its asset. Whatever reason they become unsalable (i.e., change in taste or controversy in terms of published content) could impact our valuation.
  • Oil prices have increased significantly since last year (see below). Shipping costs are amongst the most significant component of its COGS; further rise in oil prices (consequently increasing shipping cost) could make it difficult for EDUC to remain profitable.

Source: Trading Economics

Conclusion

EDUC has an attractive value proposition, strong financials, and optionality of significant growth ahead due to structural changes caused by COVID. On top of that, the valuation is reasonable, management has skin in the game (owns 23% of shares outstanding), and investors are not even paying for any future growth at current prices. For these reasons, we remain bullish.

This article was written by

1.46K Followers
We are a group of experienced investors that like to dig deeper into stocks to find growth stories at a reasonable price with strong economic moats. We also aim to conduct high-quality analysis by deep diving into valuations, key business drivers, risk/reward, and different future scenarios.
Follow

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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The multi-level marketing (MLM) business model has been a subject of interest in recent years, with various companies experiencing a surge or a fall in profits.

According to the information available, some MLM companies have seen a significant increase in revenue during the pandemic, with Nu Skin's revenue increasing due to furloughed workers selling products.

Nu Skin's stock tripled in value from March 2020 to June 2021, indicating a positive trend for the company during this period.

However, after the pandemic peak, Nu Skin's stock slid back to $47 after reaching a peak of $62 in June 2021, suggesting a decline in the company's stock value.

Other MLM companies, such as Educational Development Corp, have also seen an increase in sales, with the company's consultant count almost doubling during the pandemic.

On the other hand, some MLM companies have experienced a decline in profits, with Avon's stock value falling from $30 to $3 in 10 years, and Tupperware's stock value dropping over 90% in 5 years.

Herbalife's stock is also down 64% year-to-date, and USANA Health Sciences' stock is down 49% year-to-date, indicating a negative trend for these companies.

Additionally, Nuskin's stock is down 31% year-to-date, and Medifast's stock is down 45% year-to-date, further suggesting a decline in the MLM industry.

Avon and Tupperware, two well-known direct selling companies, left the Direct Selling Association in 2013-14, which may indicate a shift in their business strategies.

The pandemic has had a significant impact on the MLM industry, with many companies seeing a surge in salespeople during this period.

However, after the pandemic peak, some companies have experienced a decline in sales, which may be due to various factors such as changes in consumer behavior and market trends.

Educational Development Corp, for example, has increased its capital expenditures to $4.15 million and has increased its inventory by 60% of total assets, which may indicate the company's efforts to adapt to the changing market.

The company's management has also increased the dividend per share from $0.20 to $0.32, which may suggest a positive outlook for the company.

Some MLM companies have closed or are closing down, or have switched to a simple direct sales model without a recruitment component.

Amway, for example, is leaving the Russian market due to economic circumstances, and Herbalife has closed 62 sales centers in Russia.

Avon and Oriflame are also experiencing hard times and potential exit from the Russian market, which may indicate a decline in the MLM industry in this region.

However, domestic brands in Russia are filling the niches left by foreign companies, and Russian direct sales companies are demonstrating high crisis resistance.

In Taiwan, the direct sales industry has seemingly disappeared in recent years, with many direct sales people transforming into e-commerce or micro-business.

Some direct sales companies have shifted to live sales, and traditional direct sales methods are no longer used.

Instead, people are now using terms like micro-business instead of direct sales, which may indicate a shift in the industry towards more online-based sales models.

In conclusion, the MLM business model has experienced both positive and negative trends in recent years, with some companies seeing a surge in revenue during the pandemic and others experiencing a decline in profits.

The pandemic has had a significant impact on the industry, with many companies adapting to the changing market by increasing capital expenditures and inventory.

However, some companies have closed or are closing down, or have switched to a simple direct sales model without a recruitment component, which may indicate a decline in the MLM industry.

Overall, the MLM industry is undergoing significant changes, and companies that adapt to these changes are more likely to succeed in the long run.

The multi-level marketing (MLM) business model has been a subject of interest in recent years, with various companies experiencing a surge or a fall in profits.

According to the information available, some MLM companies have seen a significant increase in revenue during the pandemic, with Nu Skin's revenue increasing due to furloughed workers selling products.

Title:

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Nu Skin’s Biggest Customer Base Is in China. Now It’s Accused of Spreading Covid.

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The Covid pandemic was good for the business of multilevel marketing firms like Nu Skin Enterprises, as furloughed workers tried to make ends meet by selling vitamins and skin creams from home. Salespeople swelled the bottom of Nu Skin’s marketing ranks, and its stock tripled in value from March 2020 to a June 2021 peak of $62, before sliding back to a recent $47.

Now Covid is a problem for the company in China, the nation where Nu Skin (ticker: NUS) gets its largest number of customers and more than 20% of its revenue. A...

Nu Skin's stock tripled in value from March 2020 to June 2021, indicating a positive trend for the company during this period.

However, after the pandemic peak, Nu Skin's stock slid back to $47 after reaching a peak of $62 in June 2021, suggesting a decline in the company's stock value.

Other MLM companies, such as Educational Development Corp, have also seen an increase in sales, with the company's consultant count almost doubling during the pandemic.

Title:

Content: Educational Development Corp.: Growth Risk Might Be Overblown

Moat Investing
1.46K Followers

Summary

  • EDUC is the exclusive US co-publisher of educational children's books produced by famous Usborne Publishing by leveraging multilevel marketing (MLM) strategy.
  • It has strong fundamentals, fair valuation, and a compelling growth story that is being ignored by the market.
  • We arrived at a target price of $12.4 to $14.6 without incorporating any future growth and expansion in operating margins.

Investment Idea

Educational Development Corporation (NASDAQ:EDUC) has an attractive value proposition, strong financials, and optionality of significant growth ahead due to structural changes caused by COVID. On top of that, the valuation is reasonable, and management has skin in the game (owns 23% of shares outstanding). For these reasons, we remain bullish.

Business Overview

EDUC is the exclusive US co-publisher of educational children's books produced in the UK by Usborne Publishing, and EDUC also exclusively publishes books through their ownership of Kane Miller.

The business operates in two segments:

Home Business Division (Usborne Books & More or "UBAM") -(95% of revenues) - This segment sells books through consultants directly to consumers using a multilevel marketing model (MLM). Consultants sell books by hosting home parties, social media, and hosting book fairs with schools and public libraries.

Publishing Division – (5% of revenues) - Sells books to bookstores, toy stores, and other retail outlets.

If you would like to get the gist of our thesis, you can watch our YouTube video below.

Value Proposition

The children's books market is very competitive and fragmented. There are more than 135 publishers of children's books in the US. EDUC is competing with Scholastic and Pearson, which have extensive resources to run marketing campaigns and are well-positioned in both online and offline distribution channels. Although EDUC has a little moat, they have some strengths to their business model that will allow long-term value creation.

They have an exclusive and long-term relationship with Usborne. Therefore, clients of the Usborne in the US must acquire their books via EDUC. Also, there is a consensus that Usborne books are high quality and among the industry's best.

Their sales are a function of the number of active sales consultants. Commissions paid to consultants are a variable cost, and they are only paid when sales are made. Although this makes SG&A grow as the top line grows, since it's not a fixed cost to the business, it allows EDUC to achieve significant operating leverage. Also, it allows them to scale quickly and have flexibility.

Direct sales strategies like multilevel marketing are commonly referred to as pyramid and Ponzi schemes. However, the table below shows that it does work sustainably and increases revenue growth over the long run despite the negative press.

Source: S&P Capital IQ

Why might EDUC be mispriced?

There are multiple factors. Firstly, it's a micro-cap. This usually means there is limited analyst coverage, and due to the stock's illiquidity, there is low institutional interest. These factors, coupled with others, leave the company under the market radar despite its business is doing well and has promising perspectives.

Second, there is negative press around the MLM business models. The MLM model deployed by EDUC is vastly different from dodgy tactics used by other players. For example, many MLM models require the seller to purchase the inventory from the company before selling. However, this reduces the risk for the company and puts extra pressure on the seller, which can be left with expensive inventory that cannot be sold or returned. In the case of EDUC, there is no requirement to hold inventory.

Third, markets might be believing that the business's tailwinds are temporary due to COVID. Amidst Covid, schools were closed, and parents were working from home; this drove home-based learning and benefited EDUC. Additionally, unemployment rates soared, and many were left looking for work. This allowed EDUC almost to double its consultant count from 33 to 60 thousand. We believe the post-pandemic work from home trend will persist, supporting their sales. Furthermore, the active consultant might not fall back to the pre-pandemic level as these roles are usually part-time work which fits nicely with the trending gig economy.

The evidence speaks louder than words

There are also some clues from the management that revenue generated amidst pandemics might be sticky.

Management increased its dividend per share from $0.20 to $0.32. A dividend increase should be seen as a signal that a business is in solid financial shape and management is confident about its future.

Management increased capital expenditures to $4.15 million from $0.64 in 2020. This expenditure was primarily associated with equipment purchases to increase daily shipping capacity. These are some early signs that management is expecting positive growth going ahead. Additionally, this also improves their margins as amidst Covid they paid a premium for extra shifts.

EDUC has increased its inventory; the inventory build-up is approximately 60% of its total assets. This has been in anticipation of an increase in the sales, as it takes a four to six-month lead-time to have a title printed and delivered to them.

Source: Koyfin

Value Investing Approach: Asset Value

To calculate the actual asset value of the company, we tried to replicate the business from scratch. Therefore, below you will find the last reported balance sheet, where we have made some adjustments.

The value of the land recorded on books was $4.1 million. They own a 40-acre complex at 5402 South 122nd East Ave, Tulsa, with 400,000 square feet of office and warehouse space. They also own a facility located at 10302 East 55th Place, Tulsa, that has 105,000 square feet of usable space. According to our channel checks with realtors, the average price per square foot of their land lies between the range of $100 to $115. To remain conservative, we took the average price square feet to be $85. Therefore, we estimate the value of its land to be $42.9 million.

They also have a network of around 55,000 active consultants. To construct such a network from scratch is both costly and time-consuming. We estimate the replication cost of this network to be around $27.5 million ($500 per consultant). This is also roughly five months of sales commission cost incurred by EDUC in the fiscal year 2021.

The rest of the items are taken on book value.

Based on the above adjustment, we arrive at the total asset value of 106.7, and the fair value per share to be $12.4

Source: Moat Investing

Value Investing Approach: Earnings Power Value

This approach allows us to value EDUC without incorporating any growth. Here, we consider the business's historical figures (last five years) to get the normalized earnings and operating margin. To calculate the sustainable earnings, we smoothed out the company revenues for the previous five years to $131 million and then calculated the firm's average operating margin (6.5%) to arrive at the sustainable Operating Income of $8.5 million.

We add back the expenses typically spent on growth, and we estimate around 4.5% of sales is spent on growth marketing, i.e., promotion, advertisement, and discounts. Hence, we add this back as this expense is not required if the firm was not aiming to achieve growth.

We assume the normalized tax rate to be 26% and the estimated cost of equity at 9%. Therefore, we estimate Earning Power Value of the operating business to be $134 million. To that, we add the non-operational cash ($1.8 million), and we subtract long-term debt (10.8); we arrive at an implied market cap of $125.6 million or $14.6 price per share, with 12.3% upside potential, without incorporating any growth or expansion in operating margins.

Source: Moat Investing

Risks to Our Investment Case

  • Stringent regulation regarding MLM companies. For instance, the requirement to treat consultants as employees. This could have implication when it comes to taxation, wages paid and welfare concerns for workers. This could, in turn, shrink the bottom line or, worse, business model tatters.
  • The most straightforward risk is consultants quitting or switching to find other employment as the US economy improves. However, within our valuation model, we have smoothed the growth of revenue in the last five years, which is a function of l consultants recruited. Even if there is some mean reversion in terms of consultants working with EDUC due to the COVID base effect, our thesis would be less impacted.
  • As highlighted earlier EDUC’s inventory level is a significant portion of its asset. Whatever reason they become unsalable (i.e., change in taste or controversy in terms of published content) could impact our valuation.
  • Oil prices have increased significantly since last year (see below). Shipping costs are amongst the most significant component of its COGS; further rise in oil prices (consequently increasing shipping cost) could make it difficult for EDUC to remain profitable.

Source: Trading Economics

Conclusion

EDUC has an attractive value proposition, strong financials, and optionality of significant growth ahead due to structural changes caused by COVID. On top of that, the valuation is reasonable, management has skin in the game (owns 23% of shares outstanding), and investors are not even paying for any future growth at current prices. For these reasons, we remain bullish.

This article was written by

1.46K Followers
We are a group of experienced investors that like to dig deeper into stocks to find growth stories at a reasonable price with strong economic moats. We also aim to conduct high-quality analysis by deep diving into valuations, key business drivers, risk/reward, and different future scenarios.
Follow

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.

On the other hand, some MLM companies have experienced a decline in profits, with Avon's stock value falling from $30 to $3 in 10 years, and Tupperware's stock value dropping over 90% in 5 years.

Title:

Content: 'Direct Selling' - Avon, Tupperware - Is Extinct

Nov. 18, 2022 11:25 AM ETHLF, MED, NTCO, NUS, PRI, TUP, USNA3 Comments
Robert FitzPatrick
394 Followers

Summary

  • Direct Selling became obsolete generations ago. So how is it that millions today get recruited for "income opportunity" in "direct selling" and billions are traded on "direct selling" stocks?
  • Avon and Tupperware are cited by "multi-level marketing," or MLM, promoters as "proof" that MLM, e.g., Amway, Herbalife, is "direct selling."
  • Usable data on actual income and churn rates of MLM "direct sellers," market saturation, and retail sales to actual customers are not provided.
  • In fact, Avon and Tupperware for years have been walking dinosaurs, still trying to do "person-to-person" sales to end-users with commodity products, while MLMs hype "unlimited" income.
  • The shrunken and devolved state of Avon and Tupperware today reveals that direct selling is extinct. MLM is not, and never was, direct selling.

It is generally accepted that "direct selling" was killed off generations ago by mass merchandising, big box stores, mail-order and then the internet, among other societal changes. The "Fuller Brush man" is long gone. No one's at home. No one wants or needs or has time for a "personal" salesperson. Everything's in stores or online. And, even when "direct selling" still lived, no one ever went into that tough line of work thinking they would get rich from it.

Yet, each year, millions are recruited, and pay thousands, for the "opportunity" to work as "direct sellers," with promises and expectations of "unlimited" income. The number involved today is many, many times greater than ever worked in that "extinct" field decades ago. Billions are being traded on Wall Street for shares of "direct selling" companies. How can this be?

In my book, Ponzinomics, the Untold Story of Multi-Level Marketing, I document the death of "direct selling" and the 1945 invention of "multi-level marketing," or MLM. I describe how "MLM" falsely assumed direct selling's revered old identity. I trace MLM from its Adam, a little California-based company called "Nutrilite," to today's "industry" led by Amway, Herbalife (HLF) down 64% YTD, Nuskin (NUS) down 31%, USANA Health Sciences (USNA) down 49%, Primerica, Inc. (PRI) down 13%, and Medifast (MED) down 45%. MLM's financial solicitations for consumers to become "direct sellers" have reached into – and led to losses for – virtually every household in America.

In the newly invented "MLM," the main source of revenue shifted from end-user customers to the salespeople themselves who are incentivized to "be their own customer" by buying their own products. Obviously, no one makes money purchasing their own inventory, but MLM offered a unique reason to do so – "unlimited" income potential.

No More Need to Knock on Doors

All MLM "direct sellers" can potentially gain "unlimited" income by recruiting an "endless" chain of other "direct sellers." No need to pound the pavement and get rudely rejected at front doors any more. Each "direct seller" on the chain has to meet a quota to "qualify" for future rewards from their recruits who, in turn, are their "own customers" and recruiters too, ad infinitum. The chain can grow without continuous personal effort. The qualifying quota can usually be met by just making a personal monthly purchase of inventory. "Commissions" on all these transactions, all the way down to the "last ones in," flow up the chain. In the MLM pay plan, most of the total commissions go to the top 1%. So, all new "direct sellers" try mightily to recruit (and buy) their way to those top ranks. Of course, only a tiny few can ever be at the top.

Some people argued this is a pyramid recruiting scheme, inherently unfair and deceptive, and a counterfeit of direct selling. In the design and the pay plan, bottom ranks – the vast majority – will inevitably lose. They said constantly adding salespeople in any area destroys profitable retail selling potential, if any exists to start with. They cited data on 90-99% loss rates and huge churn rates among new "recruits" and asked, where are the retail "customers"?

While offering no data on retail customers or salespeople losses or market saturation, MLM promoters offered "proof" that MLM is direct selling by pointing to two long-established and respected direct selling companies in their ranks, Avon and Tupperware (TUP). Both companies were members of the Direct Selling Association, DSA, and both were "direct selling" icons, Avon for its "ladies" and Tupperware for its "parties." To any pyramid scheme accusations, MLM promoters indignantly countered: "Are you calling Avon and Tupperware pyramid schemes?"

Walking Dinosaurs

The truth for both companies is very different from the MLM-spin. Avon and Tupperware used to have differentiated products and real consumer demand. Their salespeople made money from their own retail sales. But moving into the 21st Century, Avon and Tupperware became walking dinosaurs, vestiges of the extinct era of "direct selling." They were still trying to base their businesses on their historical brands and on person-to-person retail sales to real customers, as direct selling companies always used to do.

Despite MLM's citing Avon and Tupperware, and thereby bestowing legitimacy on the "MLM" members of the Direct Selling Association, deep differences between those icons of the old era and MLM burst into public view in 2013-14. The two companies publicly quit the Direct Selling Association, charging ethics violations and DSA-member connections to pyramid schemes.

Avon's Long Good-Bye

Avon had been a true direct seller for decades before MLM was invented. But as the door-to-door model faded, Avon began a long decline. In 2000, Avon began shifting its focus to "incentivizing" salespeople to recruit more salespeople and getting them to buy inventory, MLM-style. In 2009, during the Great Recession, Avon ran its most expensive ad in history, on television during the Super Bowl. The ad never mentioned any Avon products! It only solicited "salespeople." Still, global revenue dropped continuously over the next 10 years. Avon stock value fell from over $30 to just over $3.

Finally, Avon split off its faltering North American business and sold it to the Korean company, LG Household & Health Care. Avon claimed to have 250,000 sales representatives in North America. The remaining global business was later sold to the Brazilian MLM, Natura (NTCO) down 50% YTD, which also owns the retailer, Body Shop. Though Avon global was much larger, Avon shareholders traded 3 shares of Avon for just one in Natura.

The Korean-owned segment of Avon in North America is now classic MLM, selling the proverbial MLM "income opportunity" along with "health" supplements, make-up, jewelry, clothing, scented candles, even toothpaste.

On the Canadian Avon website, Avon promotes the "income opportunity," urging prospects in large bold black type: "Think big. Sell Avon part-time, full-time, you decide how much! It’s your business, your way!"

A disclosure (legally required in Canada, but not in the USA) appears midway down a long webpage in tiny, barely visible gray lettering: "The 2020 earnings of a typical Avon Leadership Representative was between $0 and $2,620 in commissions and bonuses." That's $0 to $50 a week, before subtracting all costs! And the "disclosure" does not break out how much of that tiny return comes from personal sales or the "downline."

Avon quietly rejoined the Direct Selling Association. The Brazilian company, Natura, which took over Avon's global business in 2020, has lost over 60% of its stock value in the last year.

Tupperware on the Brink

Tupperware was one of the first "party plan" companies, which are technically a small subset of MLM. They employ an "endless" recruiting chain, but are more rooted in retail sales transacted at "parties." Tupperware used to have a popular brand with innovative, differentiated products. But, as true direct selling began to disappear, Tupperware went into decline. It added MLM-type "health and beauty" commodities to bolster recruiting appeal but then deleted them. This year, it began also selling its products in Target department stores. Its kitchen-related goods are generally not distinct from other brands. A 10-months "Income disclosure" for Canada (not published in the USA) showed that half the "party planners" were classified "inactive," earning less than $30 for the period on average. 94% of the "active" ones reportedly received about $12 a week on average, before expenses.

In the last 5 years, the stock value of Tupperware has dropped over 90%. Its latest financials warned investors the company may violate loan agreements, setting off speculation Tupperware might declare bankruptcy.

The shrunken and devolved state of Avon and Tupperware, the most famous brand-icons of "direct selling," makes citing them as a defense of "multi-level marketing" as extinct as their old business model.

This article was written by

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Robert L. FitzPatrick is the author of the new book, Ponzinomics, the Untold Story of Multi-Level Marketing (2020),the first comprehensive history and analysis of the "MLM" phenomenon, addressing its political influence, propaganda techniques and use of cult persuasion. FitzPatrick is an expert in examining and revealing deception and fraud in Ponzi schemes, pyramid schemes and bogus home-based businesses. He served as expert or consultant in more than 30 court cases involving pyramid schemes and multi-level marketing. He is co-author of False Profits (1997), an examination of the values and beliefs that support the delusions of pyramid schemes. He was featured on NBC Dateline, ABC World News, and CBS 60 Minutes, the documentary film, Betting on Zero and the podcast, The Dream.He has been quoted in many newspapers around the world, including the New York Times and Wall Street Journal. His booklet, Pyramid Nation, has been translated to Chinese and used by government regulators in writing China's first laws on pyramid schemes. His booklet, "The 10 Big Lies of Multi-Level Marketing", has been translated into four languages and posted on numerous websites. His White Paper, "The Main Street Bubble", which details the extensive influence-buying of the direct selling industry was featured in a CNBC Documentary, Selling the American Dream. In 2005, he delivered a seminar to in Colombo, Sri Lanka to central banking representatives from that country as well as India, Bangladesh, Bhutan, Maldives and Nepal. Robert FitzPatrick has developed informational resources for consumers, journalists, academics and regulators including a multi-media PowerPoint presentation and a statistical analysis of the losses suffered by participants in pyramid selling schemes. He also published a widely read booklet on the landmark federal case brought against the Amway Corporation. He is a expert network member of GLG Research, and Coleman Research Group, as well as other networks of experts who are referred to clients for consultation, speaking and report writing. In this capacity, he has provided expert consultation to financial many analysts who sought information about multi-level marketing companies and pyramid and Ponzi schemes. Robert FitzPatrick co-founded and serves as president of Pyramid Scheme Alert, the first international organization to expose and prevent pyramid scheme fraud. He personally responds to hundreds of consumer and news media inquiries each year. He has served as consultant and expert witness for Attorney General or State Attorney offices in four states, the US Dept. of Justice, and in numerous cases involving distributor fraud and pyramid schemes. Robert FitzPatrick is not an investor in multi-level marketing companies. He has never owned and never plans to own stocks of multi-level marketing companies. He has never been compensated based on any stock's performance. He does not offer investment advice and he is not an attorney.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for educational purposes only. It discusses fundamentals of the "direct selling" business model and the evolution of "multi-level marketing."

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Herbalife's stock is also down 64% year-to-date, and USANA Health Sciences' stock is down 49% year-to-date, indicating a negative trend for these companies.

Additionally, Nuskin's stock is down 31% year-to-date, and Medifast's stock is down 45% year-to-date, further suggesting a decline in the MLM industry.

Avon and Tupperware, two well-known direct selling companies, left the Direct Selling Association in 2013-14, which may indicate a shift in their business strategies.

The pandemic has had a significant impact on the MLM industry, with many companies seeing a surge in salespeople during this period.

However, after the pandemic peak, some companies have experienced a decline in sales, which may be due to various factors such as changes in consumer behavior and market trends.

Educational Development Corp, for example, has increased its capital expenditures to $4.15 million and has increased its inventory by 60% of total assets, which may indicate the company's efforts to adapt to the changing market.

The company's management has also increased the dividend per share from $0.20 to $0.32, which may suggest a positive outlook for the company.

Some MLM companies have closed or are closing down, or have switched to a simple direct sales model without a recruitment component.

Amway, for example, is leaving the Russian market due to economic circumstances, and Herbalife has closed 62 sales centers in Russia.

Title:

Content: Russian Federation
Moscow
+ 21 °
Society27 July 2022 10: 40
Amway is leaving the Russian market.
Oriflame and Avon next?
The largest players in various fields continue to leave the domestic market.
Direct selling is no exception.
This opens wide horizons for domestic brands
Dmitry VASILIEV
Photo by Shutterstock
SNOW KOM
March 11, among the first who made a statement about the termination of work in Russia, was the American Herbalife.
62 sales centers stopped shipping their products.
Today, such news does not seem out of the ordinary – foreign companies continue to close.
Rumors that Amway (USA) is also about to join the ranks of “sinking ships ” went for four months and, finally, found confirmation.
At the end of June, the global board of directors announced the official decision: “We have reached a point where economic, technological, organizational and operational circumstances have made it impossible for us to continue our work. ”
Meanwhile, Amway is the number one direct selling company in the world and of course many companies follow it.
STORMITH!
It is known that two other foreign brand leaders – Avon (USA) and Oriflame (Sweden) – are also going through hard times today.
According to various sources, employees admit that they do not feel a sense of stability: “The decision to leave Russia is made by top management located abroad.
We are kept to the last in the dark, in limbo, ” admits an Avon employee, who wished to remain incognito in the framework of the publication. – Do my colleagues and I expect that the story of “Amway ” will repeat itself?
Yes, unfortunately, we are preparing for the worst. ”
According to the analysis of the sites, Avon and Oriflame products are in short supply, which may indirectly indicate problems with production.
And although neither Avon nor Oriflame made any official statements, their actions are in many ways reminiscent of Amway.
ALL YOUR OWN, MOTHERLY
As you know, a holy place is never empty.
The released niches are filled by domestic manufacturers: new Russian brands are actively developing, and already well-known market players are increasing their capacities.
The departure of foreign brands will definitely not cause a decline in the direct sales industry.
Moreover, business analysts indicate that Russian direct sales companies demonstrate high crisis resistance.
First of all, they will not be closed for political reasons.
Secondly, in the conditions of limited choice in the labor market, economic recession and rising prices, they offer people the opportunity to earn extra money, as well as the purchase of high-quality goods for personal use with a good discount.
Of course, the most affected are those who built a business in foreign companies and planned to transfer it to children.

Avon and Oriflame are also experiencing hard times and potential exit from the Russian market, which may indicate a decline in the MLM industry in this region.

However, domestic brands in Russia are filling the niches left by foreign companies, and Russian direct sales companies are demonstrating high crisis resistance.

In Taiwan, the direct sales industry has seemingly disappeared in recent years, with many direct sales people transforming into e-commerce or micro-business.

Title:

Content: Do direct sales students disappear? He is shocked that "no one can find" the truth inside the industry: turn this line
▲ Original PO said that students who used to do direct sales seem to have disappeared now. (Illustration / Reprinted from pixabay)
Posts Tagged ‘ CTWANT ’
There are hundreds of occupations, and everyone's choices are different, and direct selling is one of them.
However, a recent Internet friendly strange article said that for many years, many students or friends who do direct sales industry in the predecessor side often call to pull people, but in recent years it seems to have gradually disappeared, so that the original PO questioned "no one found that Taiwan's direct sales industry has disappeared in recent years?"
The original PO on PTT said that I remember many years in the front desk of many direct sales industry in Taiwan, "a bunch of classmates and friends who have not seen you for a long time suddenly contact you, I know he wants to promote direct sales with you", but the original PO found these direct sales people, in recent years seems to have disappeared inexplicably. Has the sales industry disappeared in recent years, and why has it become so? ”
[Advertisement] Please continue reading...
A post, caused a heated discussion, many netizens for the original PO answer, in fact, did not disappear just transformation, "change the name, e-commerce, micro-business, courses, investment", "direct sales have long been transformed, which will directly talk to you direct sales, now tell you about micro-business", "many new brands, sales have said their annual revenue", "you do not have a lot of", "," "Online direct sales have begun with the advancement of technology," and "it should all be turned into live sales."
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Some direct sales companies have shifted to live sales, and traditional direct sales methods are no longer used.

Instead, people are now using terms like micro-business instead of direct sales, which may indicate a shift in the industry towards more online-based sales models.

In conclusion, the MLM business model has experienced both positive and negative trends in recent years, with some companies seeing a surge in revenue during the pandemic and others experiencing a decline in profits.

The pandemic has had a significant impact on the industry, with many companies adapting to the changing market by increasing capital expenditures and inventory.

However, some companies have closed or are closing down, or have switched to a simple direct sales model without a recruitment component, which may indicate a decline in the MLM industry.

Overall, the MLM industry is undergoing significant changes, and companies that adapt to these changes are more likely to succeed in the long run.