Know What Is Direct Selling To Avoid Being Cheated

| 30/12/2009 | Reply

By Nurul Halawati Azhari

The fourth article from the series relating to consumer issues

KUALA LUMPUR, Dec 29 (Bernama)– The direct selling business if carried out earnestly promises lucrative returns.

The Direct Sales Association of Malaysia(DSAM) reported that in
2008 the direct selling industry was worth RM5.6 billion with RM3.15
billion being contributed by 55 multinational and local companies who
are members of DSAM.

Malaysian consumers may have come across direct selling schemes
involving health supplements, cosmetics and body trimming pills and
their success is often attributed to the direct promotion and
satisfactory services.

Nonetheless, the irresponsible acts of some who want to make a
quick profit have robbed the credibility of the direct selling industry
to the extent many members of the public nowadays view direct selling
with skepticism.

There are many instances where the direct selling strategy is used
as a ploy to recruit or sponsor members, hence giving rise to Multi
Level Marketing (MLM).

ENDED UP IN DEBTS DUE TO MLM

Proponents of MLM use ingenious ways in their membership drive and
the allure is lucrative returns. This has prompted many to invest their
life savings and only to realise too late that they have invested in
another typical `get rich quick’ scheme.

Some of the MLMs apply the `front loading’ concept that forces
members to pay at a higher cost for the products or services that they
are to distribute prompting many to borrow from the bank or use their
savings.

The business proposition may seem too good but those who invest
will only realise of the problem when they cannot sell the products or
services.

As for Mohd Shah Lamat, 23, conscience forced him to withdraw from the scheme and he now has debts totaling RM23,000.

“It began to dawn on me whether what I was earning was halal
because the profit that I was making was on the expense of others. To
put it succinctly those in the so called ‘downline’ are the ones who
will be financially burdened.

“So what I’m doing now is just selling the products that I have in
hand earning profits from there and not through membership drive. I
have given the same advise for those in my downline,” he said adding
that proceeds from the sales are helping him to pay up the debts.

Mohd Shah, who previously has tried his luck with five direct
selling companies, is confident of the benefits from direct selling as
long as it is carried out properly without burdening others.

“It is acceptable to me if it really involves direct selling and not anything like the pyramid scheme,” he said.

BETWEEN DIRECT SALES AND MLM

Despite the risk of being cheated many consumers do not know the
difference between Direct Sales and MLM with most believing that they
are the same.

Direct Sales Act, 1993 defines direct sales being selling from door to door or mail order sales.

The products for sale are not exhibited anywhere and instead
trained agents go around explaining the product and selling them.
Therefore under the genuine direct sales scheme, the proceeds come from
the sales of the products or services and not through membership.

On the other hand, the MLM’s marketing strategy depends on membership drive by its sponsors.

For example existing members (up line) would look for or sponsor
new members who become their downline. This is where the existing
members bring others to talk on the product and the returns offered to
win them over.

The MLM is also dubbed as the pyramid scheme when one only needs
to do a single payment and promised huge returns over a period of time.
The pyramid scheme is where the early investors profit from the
investment made by those who come later.

Thus to earn more, the downline membership must be expanded and hence this is where the pyramid concept comes in.

Unfortunately, often individuals fail to differentiate the fine
line between genuine business venture and deception in these schemes
and end up losing millions.

CHOOSE THE BEST

The efforts by the Ministry of Domestic Trade, Cooperatives and
Consumerism to come up with rules governing pyramid schemes is timely
when looking at the scams happening under the guise of direct selling.

However, genuine direct selling schemes are still a worthwhile
option for those seeking additional income. Most importantly, if
members of public are keen to participate in direct selling they have
to find an appropriate product or service. They have to make sure that
they are confident of the chosen product’s potential so that they could
easily sell them.

Also, always make sure that the chosen business promises reliable
rewards from the sales. Do not choose direct selling schemes that calls
for membership drives as such business models will not last long.

For those who are interested to know more or need to lodge a
complaint on Direct Selling, please call 1-300-888-255/1-300-888AJL or
go to the ministry’s website at www.kpdnkk.gov.my

.

— BERNAMA

Category: Asia, Finance & Investment

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