500 a week, no experience needed? Why you should be cautious about MLMs

 

Note: This is a contribution from a reader who has chosen to go anonymous.  

I always tell my mother very earnestly that if it weren’t for her, I’d be found dead in a ditch before I turned 20. She rolls her eyes every time I utter this with dramatic flair but without her, I’d have been tricked into joining an illegitimate MLM scheme during my schooling days.

While this happened years ago, tons of accounts suggest that such schemes are ongoing today. Since many of them zoom in on unknowing students, it’s a subject I’ll share about here!

A small disclaimer that my account isn’t as detailed because 1: I got stopped in time and 2: this happened to me 8 years ago. Quite a few people have had similar experiences and written warning posts that you should check out too. This reddit thread has accounts from people worldwide about their MLM experiences, which is worth a read.

What is MLM all about?

MLM stands for multi-level marketing. It is a form of direct selling that happens when a company sells its products and/or services through non-salaried individuals while recruiting others and earning additional commission from their sales.

This marketing model is fairly popular and legal in countries like the United States of America. In Singapore however, MLM activities are governed by the Multi-level Marketing and Pyramid Selling (Prohibition) Act and only “legitimate businesses from the Act, such as insurance companies, master franchises, and direct selling companies which fulfil certain criteria” are exempt.

What’s the problem? MLM doesn’t sound all that bad?

The problem with MLM truly begins when it involves Pyramid Selling, which is all too common here. This is a business model where the focus is not on the products/services offered, but on recruiting participants and promising financial rewards from each additional member they recruit. The cycle can go on and on and on, with an upfront charge paid by each new member that goes up a chain up to the top-levels. This charge can come as a fee for the privilege of joining, or a member being made to buy the MLM Company’s products in bulk to sell off.

As per the Act, anyone found participating or promoting a pyramid-selling scheme is liable on conviction to a fine not exceeding $200,000 or to imprisonment for a term not exceeding 5 years—or to both.

How do companies recruit new blood?

Illegitimate MLM-mers (let’s call them this) typically recruit via word-of-mouth from their family or friend circles. If someone you know tells you of a ‘business opportunity’ but remains evasive when you push for details, this is red flag #1. When they ask you to find out more by going for a training session or two, that’s red flag #2. If they also tell you that you can earn tons of money in a short time, that’s red flag #3. Tons of money is a stretch.

They also recruit via online sites like Carousell and Gumtree, through FB messages, and surveys. For me, I’d received a call from an illegitimate MLMmer who’d solicited for people’s contact details in town. He disguised his agenda by posing as a surveyor wanting to know more about students and their career interests.

They’ll then tell you about a freelancing or part-time job opportunity, with training provided and no experience required. They might also tell you that their company is ‘expanding’ and needs manpower to help out, with attractive remuneration at about $500-700 weekly.

(FYI: That’s close to entry-level startup pay and is too good to be true in today’s economy, especially when no formal qualifications are required. The economy has been slowing down, too, and a company expanding ‘quickly’ should raise a few doubts in your mind.)

There might be other ways but here’s a rule of thumb: if anything sounds too good to be true, it probably IS too good to be true. Harsh, but nothing in life comes easy.

So, what next?

The person contacting you will tell you, as mentioned above, to head down for a training session or briefing. In my experience, I was told by the illegitimate MLM-mer to meet at an MRT Station for a briefing about this part-time job. He’d take me to the office, which was a short walk away.

Honestly, which office worker has time or energy to step away from their desk to do this? Ask your parents or seniors: they’d look at you and probably laugh in your face. Illegitimate MLM-mers do this because they aren’t legal and don’t want to tell you their company name yet. Once you know it and do a search, they know they’ll probably lose you.

After being led to a very bare “office” space I was brought on an office tour, with other illegitimate MLM-mers milling around to add to the “professional” atmosphere. A group of us gazed upon a wall of framed portraits: in them, people posed beside fancy cars. We were told that these were the high-fliers of the company that achieved xxxx revenue within xxx months, and how this could be us too.

Till today I still can’t believe this happened, which should show how ridiculous and ambiguous the entire situation was, but I was young, dumb, and dying for money. Their training consisted of a quick demo of their products. (This filtration system has xxxx technology which provides great health benefits!) I was then sat down with the illegitimate MLM-mer that contacted me, told that he’d be my mentor and talked to about all the monetary gains I’d be getting in no time. Just sell one product and you’d start reaping the rewards! So they said.

Across me was another illegitimate MLM-mer talking to a woman that looked like a housewife. We were all seated at small round tables. This is quite a common set-up in MLM companies; you’re persuaded to join the team or return for another round of persuasion.

I went home feeling hopeful about everything, excited about this money-making opportunity within my reach. I mentioned the possibility of earning a lot of money without going into much detail and my mom, who I remember was hanging the laundry, looked at me askance.

“Where got this kind of chance to earn money one? Sure it’s real not?”

Thank the heavens for that pointed question, which was enough to burst my bubble and plant a seed of doubt within me. That was the night I learnt what MLM was. Days later, when I turned the illegitimate MLM-mer down for a next training session or a meet-up, he started sounding a little angry over text. Oh boy.

Gain little, lose a lot

Join an illegitimate MLM here and commit social suicide, most people say. That’s because your worth lies in your connections, and without roping them in you’d earn very little. You’d also need to earn back that upfront fee you’ve paid, of course. Your upline (aka the person who recruited you) will also nag or motivate you to get more sales, because if you don’t where will their money come from? You’d burn through your entire contact list trying to persuade them to join and/or buy your products—and some of your close ones might do so out of trust or sympathy—but many will grow cautious and wary of you.

You know those friends and acquaintances that reconnect with you just to sell you insurance? Yup, you’ll become just like that guy or girl.

Illegitimate MLMs promote the idea of exclusivity and success. They will also host regular seminars and events to keep both new and current members motivated. Many times, this involves a high-flyer member talking about his success and how he got there (through hard work and gumption and the company, of course!). You’ll feel inspired and that you will make it if you just try hard enough.

Truthfully? You work harder and possibly lose more in the process, while the individuals at the very top of the scheme watch money roll up and up and up, laughing their way to the bank as you try desperately to recoup what you’ve lost.

So thanks for saving my skin, mom. Hopefully this article will prevent you, dear reader, from falling into the same trap too.

A quick summary on how to spot an illegitimate MLM Company:

  1. Do they promise you commission that isn’t generated from the product/service sales of your ‘downline’, but from recruiting others? If so, they’re illegal.
  2. Do they require you to purchase/acquire a product inventory at your own expense in order to join? The Multi-level-Marketing-and-Pyramid-Selling (Prohibition) Act maintains that this is not allowed, bar demonstration equipment—which should only be sold to you at cost price and not for resale. Make sure that there is no unreasonable financial risk imposed upon you.
  3. Do they tell you that you’ll get rich quick? If so, it might be an illegitimate MLM/direct-seller. The Ministry of Trade and Industry advises that you ask for records of “the maximum, minimum, mean, mode and median earnings of their salespeople in the past” to ensure the validity of such claims.

Hope this helps!

Are you a reader that has experiences with illegitimate MLMs/Pyramid schemes to share with Digital Senior? Please comment below!

Review your course Have something to say about your course? Help other people with your review and get rewarded at the same time. Find out more about submitting a review to Digital Senior.

LEAVE A REPLY