What’s the meaning of MLM or multi-level marketing?

MLM is a type of marketing strategy which lets a company earn money by recruiting salespeople. These sales people are not paid but instead earn through commissions. In practical terms, MLM companies in Singapore usually get their members to pay an upfront fee for their products. They are then told that they can make back this money from commissions earned by recruiting new members. The company’s main source of revenue is thus not the sale of actual products, but rather the recruitment of salespeople. Remember, most MLMs will vehemently deny that they are MLMs, but if their mechanisms sound like the pyramid structure mentioned above, then they probably are one.

Is Multilevel Marketing a Pyramid Scheme?

Multilevel marketing is controversial and often compared to pyramid schemes. While some multilevel marketing operations are legal, others have come under investigation. This typically occurs when the majority of the operation’s profits funnel up to the top, leaving little for the rest of its members. When an organization focuses primarily on recruitment, rather than selling products, this may also signal that it is operating under a pyramid scheme. Sometimes, members of these schemes will number in the hundreds or even thousands.

Are MLMs illegal in Singapore?

MLMs or pyramid schemes are technically illegal in Singapore. However, there are certain companies that use MLM-like mechanisms that do operate legally. There are two types of companies that are excluded from the MLM ban, namely direct sales companies that are registered with the Direct Selling Association of Singapore (these include big names like Tupperware and Amway), and master franchises. Direct selling comes in many forms as well. If the distributor does not earn commission from recruits, it’s technically not an MLM and is allowed in Singapore.

4 Tips on Spotting MLM Companies

“Hi, this is Dominic! You can earn up to $10 million USD per year by just working 2 hours a day!”. I’m sure many of us have heard or seen the golden duo: Imran and Dominic. Both promised quick returns for those who are willing to join their company.

The “rag to riches” story is normally used by Multi Level Marketing Companies (MLM companies). Some of you may have heard of the “pyramid scheme” which places each MLM worker into a hierarchy system. The higher an MLM employee’s ranking, the more downline, aka “worker bee”, he/she has.

For example, Person A is a new recruit in the MLM company. He makes money by selling goods/services; commissions are based on his sales. As he/she slowly climbs up the ranks, the compensation is also dependent on the number of family and friends they can rope into the business. Person A will be able to gain a certain portion of his network’s share of profit through commission. The cycle continues where newer employees tap into more of their network through referrals and the upper brass will get the biggest slice.

How are MLM Companies Detrimental?

Detriments of MLM pyramid scheme.

According to HuffPost, as few as 1% of the workers actually make money from MLM companies. Most MLM employees incur losses from purchasing the goods and services from their company. Yes, you heard it right. Employees would have to pay for their goods/service before making any profit. If the employee could not sell his/her goods, he/she will have to absorb the losses by selling it at a cheap price.

All being said, WorkClass.co has researched and found out the 4 tips that will help you spot these MLM companies.

4 Tips on Spotting MLM Companies

1) No Qualifications Required to Join

No qualification needed to get employed by MLM companies.

Most companies will interview and read the resumes of their candidates. This is to ensure that the prospective employee is the most suitable person for the company.

However, MLM companies do not interview or look into their candidates’ resumes. They will literally accept anyone to boost their network of clients.

Be very careful when the recruitment process seems sketchy and random. For instance, when a “recruiter” tells you to attend their company’s meeting rather than an interview, you should be cautious of the company and do some background research on them. Many MLM companies recruit through company “meetings”, which are cult-like sales pitches that narrate “rag to riches” stories to the attendees. If you feel something off about the company, it is advisable not to contact the “recruiter” or attend their “meetings”.

2) Outrageous Product Claims

Outrageous Product claims.

Most of the products sold by the MLM companies are marketed as “Wonder Drugs” or “Youth Elixir”. They normally will provide you with many “testimonials” that have ridiculous claims like “boy cured of cancer because of this wonder drug”.

If you realised that your job training is minimal and is only a handbook with all the miraculous tales of their products, it is very likely that the company is from the MLM industry.

Please steer away from the company immediately or contact local authorities if you feel threatened by them.

3) Buy Your Own Inventory

Buy your own inventory.

The most definite evidence of an MLM company. Once the company requires you to buy your own goods/services, you can safely say that it is an MLM company.

A normal salesperson does not need to buy their company’s goods and services. The products and services are provided to them by the company. The MLM companies pass on the stock holding costs to their employees. That is the reason why 99% of MLM employees make losses.

4) Cult-like Environment

Cult mentality in MLM companies.

You can feel a strange cultish vibe from the members right away while attending the company’s “meeting”. There will be a leader who can be either charismatic or persuasive. Most of the time, the leader shares his/her rags to riches stories and covers little on the company’s operations. The members may also show signs of extreme reverence to the leader. Leave the meeting immediately if you notice any mentioned signs above.

Choose us

At WorkClass.co, we pride ourselves in choosing the most reputable employers. Be rest assured that you will not encounter any MLM companies in our job portal.

Remember to try the entrepreneur development program for those who like to learn about entrepreneurship and get paid.

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