For the last 35 years, Herbalife Ltd. — the Los Angeles nutrition and weight-loss company — has sold its products through a network of independent salespeople, but not online.
Now that's changing.
For the first time, Herbalife is giving U.S. customers the option of buying its protein bars, vitamins, teas and powered shake mix on the company's website.
New customers can click a few buttons and order a 30-serving container of Herbalife's top-selling Formula 1 Cookies and Cream flavor shake powder — $47.09 including shipping to a California address.
Those who click on Herbalife's "shop now" button will be randomly connected to an online sales platform managed by one of its experienced salespeople. In addition to being given the opportunity to buy products, customers can expect a salesperson to call or email to discuss weight loss or fitness strategies.
This gives consumers an online shopping experience while maintaining the company's tradition of providing both nutrition products and personal coaching from its salespeople, Herbalife President Des Walsh said in an interview. The company made the change March 23.
"We realized consumers are evolving in terms of their expectations for an online experience," he said. "Today, consumers demand immediate gratification. That's the standard they expect."
Herbalife officials would not provide online sales results, saying they intend to discuss that during an analysts' call in May. "The results certainly have exceeded our expectations," Walsh said.
Herbalife's business model has been under scrutiny since December 2012, when activist investor Bill Ackman accused it of operating a pyramid scheme that victimizes its salespeople, with the vast majority making little or no money.
The company strongly denies those charges, noting that most of its members sign up to receive wholesale prices for products they intend to personally consume — not to create a business.
The stakes are huge for Ackman: He said his hedge fund took a $1-billion short position against Herbalife's stock, a bet that gains value if the company's stock price falls.
Last year was a tough one for Herbalife. In March 2014, the Federal Trade Commission opened an investigation into Herbalife's business model. The investigation is ongoing.
Herbalife's stock price plummeted more than 50% last year as the FTC probe fueled Ackman's criticism and the company reported disappointing sales and profits.
For years, Herbalife salespeople have been able to sell products on their own websites — but the products were not available on Herbalife's site. Amid regulatory scrutiny, Herbalife last year ordered its salespeople to stop selling on their own sites, saying they could be linked instead to the company's site.
The move was seen as a way for the company to more closely monitor its salespeople's marketing statements, which have been the subject of scrutiny.
"It's another instance in which the company is able to provide greater monitoring of product claims," Walsh said.
The online approach is not expected to boost profits much.
"I doubt it moves the needle," said industry analyst Tim Ramey of Pivotal Research Group. "It's an incremental change, but one that makes a lot of sense in a world where I can go into
Walsh said he also didn't expect the change to significantly increase sales.
"In the context of a $5-billion net sales company, this is unlikely to have a significant impact," he said. "For the younger demographic, for whom the concept of purchasing something online they're very familiar with, this is very important."
As a multilevel-marketing company — like Avon and Amway — Herbalife relies on its salespeople to promote and sell its products. Selling on the company website could alienate those salespeople, but the company addressed that by including them in the process, Ramey said.
"I think the human interaction part is a really important and key piece of the puzzle," he said. "For a lot of people, their way into the business is meeting a friend or acquaintance who has lost a lot of weight. That human part is important. It's a good calling card."