There's a big problem with buying supplements at retail stores...
Before I get to the heart of it, I want to share a related news story from about a week ago, concerning GNC, the supplement retail giant.
As reported in USA Today, GNC is being sued by Oregon's attorney general for allegedly selling thousands of units of "dietary supplements" containing prescription drugs. Specifically, they've supposedly sold 22 workout and fat-burning supplements containing picamilon, a Russian drug used in the treatment of certain neurological disorders, as well as other (similar) supplements containing BMPEA (beta-methylphenethylamine), a synthetic (i.e. man-made chemically-produced substance) amphetamine-like compound.
Of course, typical of large corporations accused of illegal wrongdoing, GNC is denying the claims and intends to "vigorously defend" against the allegations.
And Wall St. had no dirty hands in the financial collapse of 2008, Enron executives didn't shred documents to cover up fraudulent financial reporting, and Bernie Madoff wasn't running a ponzi scheme.
Look, I have no interest in kicking mud, but this thing with GNC is more than just a juicy news story for blood-thirsty reporters.
It reminds us, in no small way, of much about what's wrong with big corporations and how they do business.
Namely, they often toe the line of ethical behavior, exploit loopholes in government regulations (which is phenomenally lax in the dietary supplement industry in particular), and take amoral calculated risks, for everything is subordinate to the ultimate goal of maximizing shareholder wealth (i.e. profits).
In fact, it's a fiduciary imperative that corporate directors do this -- a legal responsibility.
Which takes me to my point about buying your supplements at retail giants like GNC or Walmart...
A Model That Doesn't Benefit Consumers
The fact is, the retail business model is really tough for dietary supplement companies, unless they're willing to bend the rules and/or sell crappy products.
You see, the supplements you buy at GNC or other retailers (including online retail stores) are actually sold a couple times before they grace the pantry of your kitchen.
The product creator (XYZ Supplement Brand) contracts a manufacturer to produce a supplement (very, very few supplement companies manufacture their own products), and then XYZ Supplement Brand sells their product to a 3rd party retailer (at a wholesale price that hopefully covers all expenses and leaves a bit leftover for bottom-line profit) such as GNC or Bodybuilding.com. Then, the retailer marks it up and sells you XYZ Supplement Brand's product at a retail price that -- hopefully -- includes a sizable profit for itself.
In other words, the price you pay includes a profit margin for both the product developer and the retailer, which involves a tight balancing act for each party to ensure they get a sufficient piece of the pie.
In the end, that balancing act too often includes -- at a minimum -- some deceptive marketing and sales tactics, and mediocre products.
At its worst, this balance act leads some supplement companies to (deceitfully and illegally) spike their formulas with prescription drugs or other compounds that are potentially dangerous, and certainly disingenuous.
What's worse, sometimes the retailers are complicit with the scam, as the Oregon attorney general claims with respect to GNC.
The Solution: Buy Direct
A business model that works better for consumers is the direct-to-consumer sales model.
In direct-to-consumer sales, the retailer is cut from the equation, meaning that there's only one profit margin at play. XYZ Supplement Brand develops a product (paying the contract manufacturer to produce it, as noted above), and then sells it directly to the consumer at a profitable price. Wholesaling is cut out.
This has TWO MAJOR BENEFITS to you:
- XYZ Supplement Brand tends to produce much higher-quality products when they don't need to worry about wholesale profitability (so will not cut corners on product costs), and
- There is less incentive and opportunity to engage in dubious and unscrupulous business practices (like spiking, label fraud, etc.) to protect healthy profit margins.
Also -- one last but very key point...
...very few large corporations do business this way (i.e. direct-to-consumer).
Well, because despite the balancing act mentioned above, big supplement companies have figured out a profitable formula and, that being the case, there's lots of money to be made with widespread retail distribution (which ensures huge sales volume).
One industry-leading supplement company (that I won't name but you know who they are) boasts in its annual report filed with the SEC that it sells their supplements to over 45,000 retail outlets worldwide.
If you missed it, I said forty-five thousand!
Big, bureaucratic companies with corporate boards and institutional investors aren't going to focus on direct sales channels because they simply can't produce astronomical revenues like big-scale retail distribution can.
And remember what I said above -- the goal of these big corporations isn't to maximize your value, it's to maximize their profits and produce the biggest returns for their investors.
By contrast, small companies MUST maximize your value and delight you or they'll never be able to compete with the big dogs for your business (simply because the big guys are everywhere with their multimillion-dollar advertising budgets).
And because the economics work better for them, small companies almost HAVE TO sell direct in order to turn any profit at all.
THAT is why I always buy direct...because I trust and respect small businesses that prioritize value over profits.
I find a sincere, value-driven company that I trust, which produces the absolute highest-quality products, and I buy from them through whatever eCommerce platform they use (e.g. their website, Amazon, etc.), which is the greatest innovation in free enterprise since...ever.
I strongly encourage you to do the same.
Best, Todd P.S. Want to learn about more supplement deceptions?