A Look At Reliv' International
Feb. 26, 2015
* Reliv' International is a small cap multi-level marketing company.
* Overpriced products and a reduction in distributors has resulted in declining revenue.
* The revenue decline, along with a weak capital position could spell trouble for this company.
Reliv' International (NASDAQ:RELV) is a 27-year-old direct seller of nutritional supplements and skincare products. The company has been publicly traded on the Nasdaq since 1996. Over the past year, the stock has continued to hit new 52-week lows. (After reaching nearly $20 a share a few years ago, Reliv's share price has steadily declined to a current quote of $1.14.) A deep look into the business shows an absolutely flawed business model and perfectly explains why the company has experienced a sequential decline in revenue over the past several years.
Since 2009, the company's revenue has decreased by 32% from $85.4mm in 2009 to an estimated $57.8mm for 2014. Sales for the first 9 months of 2014 were down 15% yoy (year-over-year).
Who Buys This Stuff?
Reliv's products are sold through a distributor base of 49,000 people, 72% of whom are in the US. The number of distributors has decreased by 27% from a high of 67,940 in 2009. In the third quarter of 2014, the company processed 46,018 orders, less than one sale per distributor for the entire quarter. A recent Harris survey of the direct selling industry concluded that the median number of clients for a typical direct seller was 6 per year. With an annual average of just 3.6 orders per distributor, Reliv' has a relatively unproductive salesforce. Given the exceedingly expensive products, it is not hard to see why distributors are having a hard time making sales.
Read more on the link at the top if interested in further details.The products are significantly more expensive than competing products and the compensation system is significantly less attractive than other multi-level marketers. Combined, it is easy to understand why the company is recruiting fewer distributors, and unable to hold on to existing distributors. In any direct selling firm, the ability to grow the distributor base is a key element of success.