Get rich quick
MALCOLM LIM used to earn over $3,000 per month when he was a
teenager, by selling health products to his friends through
multi-level marketing (MLM). Now in his mid-20s, he has quit the
business for good because, in his words, "I don't want to be a
legal conman."
Malcolm (not his real name) is among the thousands of Singaporeans
who had been lured to join these schemes in the hope of getting
rich quick. He made - but also lost - lots of money. Now he wants
to "expose MLM's dirty tactics."
Malcolm reckons there are about 10 big MLM companies here, plus
another 50 to 80 smaller firms.
Because of the recession, many people have joined these schemes -
from clerks and secretaries to doctors, bankers and stock
brokers.
What, exactly, is MLM?
Also called Network Marketing, it is a system of selling products -
usually health supplements or beauty care products - through
friends and relatives.
The emphasis is on building a large network. If you get 10 people
to join, and each of them get another 10, you will have 100 people
selling the products under you.
If each of the 100 recruits another 10, you will have 1,000. They
are your "downlines". The commissions you earn from their sales can
be substantial.
MLM companies commonly claim that a person could EASILY be earning
$10,000 per month within six months.
"That's in a perfect scenario," Malcolm says. "It never happens in
the real world."
They further claim that the products are sold at reasonable prices
because shop rentals, advertising and other high costs have been
removed.
Malcolm reveals that the typical profit margin is at least 500 to
1000 percent. The bulk of the profits go to the MLM bosses. Only
about a quarter is distributed as commissions.
--------------------------------------------------------------------------------
Pyramid selling
MLM is similar to "pyramid selling", which is banned in Singapore.
But most have been modified to operate within the law and the
Singapore government is now reviewing the ban, to avoid penalising
companies that are legitimate.
Malcolm argues that the government should impose stricter controls
instead. "Even if the companies operate legally," he says, "they
cannot control what their members do."
Malcolm joined his first MLM programme when he was at the
Polytechnic. "The response was fantastic," he recalls. "Young
people are not interested in health products, but when you tell
them they can make money, they all join.
"In three months, I had more than 1,000 downlines. I was a
money-making machine for them.
"But as I rose up the ranks, I began to discover things that I did
not know before. For example, the 'consultant' who made the
presentation.... his big house and big cars, they are all sponsored
by the MLM boss. It's a false front, to give the impression that he
is successful.
"Once, I was aiming to reach the manager level. They told me I
needed 8,000 points. I was doing so well that I could achieve
80,000 points. But if I did that, the extra 72,000 points would go
to the person above me.
"So I slowed down my activity. Then, just before the month was up,
they said there was a computer error and actually I needed 20,000
points. They use dirty tactics like this to prevent you from moving
up."
Then there is a monthly maintenance. "Every month, you have to buy
$200 to $300 worth of products. If you are in a higher level, you
may have to buy more than $1000 worth.
"You either keep recruiting new people, or you keep buying.
Otherwise, they forfeit your commissions.";
Malcolm left the company and joined another. After attending more
than 10 presentations, he thought he picked the best. It turned out
to be even worse.
--------------------------------------------------------------------------------
Ran away with money
"They cooked up a story that one of the shareholders had run away
with the money. So they withheld about $30,000 worth of commissions
and bonuses from me."
Is he sure the story was cooked up? Perhaps someone did run away
with the money?
"I had friends in secret societies," he reveals. "They managed to
catch this guy and he admitted that he took some money. But not all
of it. About $2 million was missing, but he took only $500,000. The
other shareholders must have taken the rest.
"To succeed in this business, you need to have absolutely no
conscience," Malcolm says. "Do you seriously think they sell health
products on the concept of health? Everytime I tell my customers
how good the product is, my conscience keeps telling me what an
asshole I am.
"I decided to quit. When my children go to school, I don't want
their friends to say, 'Wah... your father is a legal conman!"
Published version in TODAY
was edited and cut by about half
