Herbalife Israel CEO: "What's great about our business model - no entry costs"
Herbalife Israel CEO: "What's great about our business model - no entry costs"
Ron Porat spoke at the Growth Conference of Calcalist and Mizrahi Tefahot and pointed out that contrary to the perception that the company under his management operates as a pyramid, it is actually "multi-level marketing"
"The business environment in Israel is difficult, whether it concerns manpower, regulation, licenses and other areas," said Ron Porat, CEO of Herbalife Israel, at the Calcalist and Mizrahi Tefahot Growth Conference.
Porat referred to Herbalife's business model and said that "I joined the company 10 years ago, and since then I have been fighting against old perceptions regarding the model. In my opinion, it is always about people who need to have explained to them that it is not a pyramid, a term that is well known to Israelis. In my opinion, the perception of a company that operates as a pyramid is a mistake - our business model may look like a pyramid but it is multi level marketing."
According to Porat, "This is a model that meets all the difficulties of those who work for us, this model provides an answer to what is related to physical investment in the business. It provides stability in the issue of falling markets and rising markets. Multi-level marketing companies are retail companies for all intents and purposes. Our distributors are people who are engaged in retail, but it is not a classic model, it is not what is called in the United States 'brick and mortar', that is, an existing business made of bricks, but people who sell a product. And not only that - they sell products in emerging markets in food supplements and cosmetics, these are rising markets."
Porat further said that "the beauty of multi-layer marketing is that the risk in this model is low. And why? Because there are no entry costs to this model, you do not need to purchase a license from anyone, you do not need a unique higher education to engage in the model, here you do not need training. It costs nothing to set up, no license from the municipality, no need to purchase a franchise or build a brand in the retail market, which costs a lot of advertising and marketing money, and no high inventory because we encourage our distributors not to hold unnecessarily large inventory. No expensive personnel, only inventory needed to increase the distributor's profitability."
Porat concluded by saying: "In addition to these things, there is the backing of the company that gives the independent distributor training, technological support, and teaches the distributor sales methods that have already been tried by distributors. And in the end we are talking about a flexible model, it is suitable for those who have this as their second income or are changing careers. In recent years, many people have joined us, including many women, who have come from the educational system and other places, people who have made a career change and are now their own boss. All of this is based on sales to the end customer, personal advice and experience. There is the building of communities here that support the business.
"In addition, those who want to advance beyond the retail model have the ability to build a distribution business, just as companies build distribution lines, they have the ability to build distribution lines by other people.
"The direct marketing model answers all the difficulties that exist in our time: financing, personnel, it provides a flexible solution for all populations, wherever they are, and it is an opportunity for growth for the Israeli economy as well."
