Up to 400,000 people in multi-level marketing; boom follows end of controls to set it apart from pyramid selling

By Lorna Tan

SELLING products from home - in which your neighbor, friend or relative might try to sell you skin-care products, for example - sounds small-time but is rapidly becoming big business in Singapore.

Sales from multi-level marketing (MLM) soared 64 per cent last year to US$192 million (S$331 million) as more hopped onto the networking bandwagon, figures released yesterday show.

The sales were generated by 255,000 full and part-time distributors.

And this year, sales are expected to have jumped to US$300 million (S$517.2 million), while the number of distributors could reach 400,000, said the chairman of the Direct Selling Association of Singapore (DSAS), Mr Benjamin Tan.

He attributes the expansion to a growing awareness of the income opportunities presented by MLM, as more people become aware that it is no longer illegal.

'The reasons include the liberalisation of the law... People are more acquainted with the opportunities and legitimacy of multi-level marketing.'

Restrictions on MLM were lifted from June 2000 when the Multi-level Marketing and Pyramid Selling (Prohibition) Act of 1973 was amended. The change also set MLM apart from pyramid selling, which is still banned.

The key difference is that in pyramid selling, commissions are derived largely through recruitment, and not from product sales to consumers, which is the case in MLM.

MLM salesmen, depending on their level, are able to earn commissions ranging from 1 to 20 per cent. They also get a cut for sales down the line, up to a certain tier.

Advocates of MLM say that it is a low-risk way of starting your own business and it can also provide a second source of income.

As the typical initial capital outlay amounts to only $65 to purchase products such as for Nu Skin beauty care, workers can start as part-timers.

According to the president and chief executive of the United States Direct Selling Association, Mr Neil Offen, the MLM industry generated a turnover of more than US$86 billion worldwide last year and there are currently some 47 million sales people globally.

'About 450,000 sales people are joining direct selling companies in 170 countries every week,' said Mr Offen, who was in Singapore yesterday for a one-day visit.

He is bullish about the growth of MLM in Asia, particularly when China lifts its ban on MLM, which is expected to take place by December next year.

This represents an opportunity to Chinese-speaking MLM sales people in Singapore who can expand their reach into China to recruit members, he adds.

Asia alone accounts for more than 40 per cent of the industry's global sales.

Last year, US was the top market, raking in US$28 billion. Japan was next with US$24.5 billion.

However, the MLM experience has its downside as well as its pluses.

An ex-MLM sales person, who declined to be named, lamented that he gave up after nine months as he was unable to grow his 'downlines', or teams of new members. Another problem is that some MLM distributors end up buying the products for their own consumption just to meet pre-set sales quotas.