Will Direct Selling Ever Successfully Differentiate Itself From Pyramid Selling?

In the 9 years that multi-level marketing (MLM) has been legal here, it has witnessed phenomenal growth in dollar value of the industry and number of people signing up to sell everything from vitamins to kitchenware. More than 400,000 people in  Singapore are involved in direct selling, compared with just 57,000 in 2001, which was when MLM was legalized. The industry has attracted a vast web of people, from bored housewives to professionals like laywers. Many easily draw a six-figure income every year, if they do the job well. However, there is a 97% failure rate for MLM.    

Sales revenue generated has also increased by a multiple. In 2001, sales revenue generated was US$117million (S$187 million), as reported by the Direct Selling Association of Singapore (DSAS). But even as the industry thrives, there is still much space for improvement in the standards of practice, and doing more to shed its bad reputation, or in other words, distancing itself from its illegal counterpart – pyramid selling. 

Differentiating itself:

Direct selling mainly involves door-to-door selling of a product or service. It can either be single level, where a distributor earns only from what he sells, or multi-level where the distributor earns from what his downline distributors sell as well. Pyramid selling, however, pays a person for recruiting other people to the operation regardless of whether they sell the product.  

Now the MLM sector wants to shake off the stigma that has dogged it ever since multi-level marketing and pyramid selling were lumped together. That was in 1974, following the Holiday Magic fiasco when hundreds of distributors invested in a cosmetics company which eventually wound up. It was one of the “big three” scams investigated by the United States in 1974.