The Annual Report 2015
On page two there's Zinzino's CEO Dag Bergheim Pettersen giving his thoughts about the past year. "Our new IT system and web shop are now well established, and it is already clear that our work has become more efficient and simpler." Then he goes explaining: "Because of intensive work with our new IT system, we received a short-term decline in growth in the fourth quarter of 2015."
On page 10:
A major project was to implement a new web-shop. The focus has been on stability and intuitiveness. The customer is the focus of attention as the web-shop no longer requires a login. An web-shop that is easily accessible provides an even better visitor experience. New, potential customers can browse through Zinzino's range of quality products and make their personal choices."
Okay, let's try it:
|To the web shop! ...|
|... Oh, okay, let's try again.|
Everything looks simple at first, there's an icon directing to the web shop in the middle of Zinzino's web page. After clicking the icon there's an utterly pointless page that needs to be clicked again to enter the web shop which opens in a separate tab. The actual web shop has several issues. For instance occasionally the shopping cart was unable to show the box for typing delivery address. Entering to payment process with credit card option selected took so long that I already thought I crashed my shopping cart. Of course I wasn't going to actually buy anything, but the web shop didn't know it. It's also common that there are objects that won't load at all and even prevent the purchase from happening.
|A common sight in Zinzino's web shop.|
|I gave up after watching over two minutes of this. This button is the last step before making a payment for the purchase. (It's still going on after about 20 minutes so it's safe to say my shopping cart crashed.)|
It's soon the end of 2016 so it's not like they are only having technical issues with a newborn. Pettersen mentions that Zinzino aims to reach one million customers by 2020. However I think they are still more concentrated into recruiting new partners than acquiring customers, and it shows.
From the customer point of view the most bizarre feature of the Zinzino's web shop is that you can't purchase a product without having an independent partner and one's upline taking its toll from the purchase. While making a purchase you must select an independent partner as a "referral" before you can go forward - even if you don't know any partners. You simply can't buy any products directly from the company without a totally unnecessary third party. This is totally absurd and there's no reasonable explanation I can possible think of why I should participate in paying commissions via my purchase to an unknown independent partner while buying a product directly online.
Zinzino's web shop is a perfect example why Multi Level Marketing (MLM) just doesn't work as a cost effective distributing channel from producer to customer. While representatives of MLM businesses usually claim that their way of distributing goods to the end consumer is the most cost effective one, the reality is by far different from it. The Internet has made MLM even worse distributing channel than it ever was when shopping online has become more and more popular.
A cost effective distributing system would cut down any unnecessary levels that cause expenses whereas MLM just adds them. The way Zinzino's web shop forces all their customers to name a (non-distributing) distributor as a referral even when it's totally unnecessary just underlines this craziness.
Can you make money by being an independent partner?
Because I have mostly knowledge about Zinzino's Finnish branch I'll use it as an example.
After publishing the Annual Report of 2014 Zinzino has not thereafter revealed how many new distributors they have recruited. However as we know according to the annual reports of 2013 and 2014 almost each and everyone of their Finnish recruits have dropped out soon after starting as a Zinzino partner. I guess it's safe to say that those thousands of recruits didn't earn much by being an independent partner and most of them must have suffered financial losses.
Well, how much can an independent partner make then? Despite those thousands of dropouts Finland has continuously had throughout the years about 1000 active partners. An anonymous representative claims that Zinzino pays 40 % of its sales as commissions to the distributors*. The sales in Finland was about 5.8 million euros in 2015. 0,4 x 5.8 million = 2.3 million euros for commissions. Let's assume that they had to pay commissions to 2.000 partners. That gives on average 1.160 euros of commission for the whole year to a single partner. A monthly income of below 100 euros isn't much for an entrepreneur - in fact it's pathetic. Even if there would be only 1.000 partners collecting the commissions the income would be on average around 200 euros for a single rep for a month.
* source, the comment posted 22.12.2015 11:02:
(this is a sort of Q&A page and presumably the answer are given by the top reps of Finnish Zinzino)
The police investigation in Finland closed
After almost three years since they started the investigation on Zinzino's operation in Finland the Finnish police and the Prosecutor's Office of Helsinki have finally ended the investigation. Zinzino's CEO released this post 23th August:
In October 2013 the Finnish Lottery administration started the police for investigation regarding Zinzino suspected violation of the Money Collection Act.Comment on the matter according to this letter, which can be found here: https://www.zinzino.com/wp-content/uploads/2013/10/Kirje-suomalaisille-Partnereille.pdf
Today our lawyer has informed me that the Helsinki police investigation has decided to close the case, on basis of Zinzino action is in accordance with the Finnish law and regulations. We are naturally delighted about this. The result was expected, as Zinzino has from the beginning worked prevailing in each country according to the laws and regulations and is in addition to most of the countries member of the Direct Selling associations and has thus committed itself to these rules, but after a long process it feels good to get a positive decision.
The rest of the post can be read here (English translation also available there):
Well, what does the resolution of the police say? I'm not going to translate all of it but let's go through some key points.
As a witness they have interviewed a Zinzino representative. The rep joined Zinzino 2013 paying a starter pack/fee of 912 euros. According to the witness the price range of a starter pack ranged 869-1895 euros. In addition any rep must have a registered business to receive commissions or credits. (By the way, the witness doesn't seem to be a Zinzino rep anymore.)
Although police and the prosecutor have apparently seen the starter kit to be somewhat legitimate, the percentage of starter kits cut of the total sales speaks for itself:
2011: start-up package 444.247 € / sales partners 738.796 € / commissions 243.263 €- Start-up package accounts for 60.13 % of sales
2012: start-up package 2.175.983 € / sales partners 3.604.203 € / commissions 1.352.367 €- Start-up package accounts for 60.37 % of sales
2013: start-up package 762.417 € / sales partners 5.098.344 € / Commissions 1.761.345 €- Start-up package accounts for 14.95 % of sales
2014: start-up package 170.633 € / sales partners 6.008.976 € / the commission does not occur- Start-up package represents 2.83% of sales
The police concludes that Zinzino's operation in Finland is based on product selling and there has not been a separate starter's fee. Therefore Zinzino's operation isn't violating Money Collection Act. At the end the prosecutor has decided that there isn't such important public or private interest that requires a preliminary investigation to be carried out.
Scam Detector's verdict
As you can see in the recent years there has been a significant drop in the cut of start-up packages of total sales after 2012. However according to the annual report of 2014 they reached probably the all time high with recruiting 1.701 new distributors in Finland. Then how come the sales of start-up packages is only 2.83 % in 2014 when it was 14.95 % of the total sales in 2013 with 1.661 new recruits? Comparing the figures to the ones in 2012 raises even more questions. Those numbers just don't make sense and it's very suspicious that this drop happened just after police started the investigation in the end of 2013. They recruited over 3.000 new distributors during 2013 and 2014 and yet they claim that the sales of Start-up packages was very low.
In my opinion the massive percentage of the Start-up package sales in 2011-2012 just show a clear pattern of pyramid scam building. Now, I'm not saying that Zinzino did anything illegal. In the end the people who conduct the pyramid building are the ones responsible. The rush to join Zinzino's distributor network rose from Finnish top reps giving false promises of massive and easy incomes and exaggerated chances of becoming "a top leader". This has been the cause for Zinzino's bad reputation in Finland and of course also the reason why so many recruits have quit working as a distributor soon after finding out that there was no passive income to gain nor a financial freedom to obtain.
Reading between the lines that document from the Prosecutor's Office of Helsinki it seems like the prosecutor just didn't see Zinzino worth wasting any more time. I guess the massive case of Wincapita - the largest ponzi scam ever in Finland - has set the bar quite high for the prosecutor's office to launch actions. After Wincapita trials there has been for example clear pyramid-ponzi scams such as Emgoldex and OneCoin which both had police investigating them without any actions taken to stop them. Authorities seem to be very reluctant to interfere pyramid/ponzi scams in Finland nowadays - especially when they are international.
Zinzino's coffee business fading away
In 2013 Zinzino's coffee business had total sales of 2.5 million euros and it was still the dominating product line for the company. However in 2015 the sales was only 1.2 million euros. Zinzino's salvation was the health related products they introduced when the collapse of coffee business started. It remains to be seen how long they can keep it going with the supplements. Their distributor network seems to be in a stagnant state here in Finland. A network built like a pyramid will usually start crumbling as soon as the growth stops. I'd bet that the situation is similar in all other countries that the company invaded years back.
Zinzino announced a sponsorship deal with ice hockey team Pelicans
Zinzino has been making some sponsorship deals with European football clubs. Pelicans is the first Finnish sports clud they managed to have a sponsorship deal with. These are the soccer clubs with whom Zinzino informs having some kind of arrangement:
It's very rare in sports that such small time sponsorship deal raises any reaction whatsoever. Thus it's interesting that this deal caused such a stir that Pelicans needed to explain themselves. The actual deal consists the following: Zinzino provides fish-olive-oil supplements to the team. Zinzino is given an ad space on the team's training jerseys and an ad space in the club's arena. Apparently the club receives no financial gain from the deal.