QNET has weighed in on the proliferation of pyramid companies around the world—and on the crucial difference between pyramid companies and legitimate direct selling companies. This is a topic that has risen to the level of public consciousness in Egypt, thanks to an investigation by the Public Funds Authority into eight companies that have been accused of involvement with pyramid scheming. This investigation has been both good and necessary, but the media buzz has led to a great deal of confusion.
Of course, this problem is not restricted to Egypt. Around the world, misconceptions over direct selling versus pyramid scheming abound.
In particular, several related terms have become jumbled and confused. Direct selling (DS), multi level marketing (MLM), network marketing (NM), and pyramid schemes—these four concepts are all unique from one another, yet recent media speculation has caused them to blur together in the minds of many consumers.
In the paragraphs that follow, Zaheer Merchant—Director of Corporate Affairs for QNET—explains what makes these concepts unique from one another. He also emphasizes the need for regulation to keep these entities separate, and to protect consumers in nations across the world.
The QNET executive begins by making some important distinctions.
- Direct selling, he says, is simply the process of marketing products and services directly to consumers—face to face, away from a conventional retail location.
- Beneath this broad umbrella term there exist many varieties of distribution methods.
- Multi level marketing and network marketing are two examples. All are legitimate means of doing commerce—unlike the pyramid scheme.
Direct selling is not only legitimate, but—as the QNET executive hastens to add—it is also simply huge. Right now it is an approximately U.S. $154 billion industry, with more than 91 million people involved as product and service distributors.
The Dangers of Pyramid Schemes
Nevertheless, there remains much speculation that direct selling and pyramid scheming are cut from the same cloth. “Based on media reports, it is clear that there are several misconceptions about this industry,” Merchant affirms. This is why he and the QNET team are strongly in favor of legislation that might better govern the industry.
For a nation like Egypt to impose regulations along these lines would hardly be unusual. Fast-growing economies such as Malaysia, Thailand, and Singapore have all adopted specific statutes that regulate and facilitate direct selling. These statutes and regulations are designed to keep a legitimate industry from being corrupted by pyramid schemers.
“We are more than willing to help the relevant ministry with draft guidelines based on our experience in other legislated markets,” Merchant offers.
QNET and the Pyramid Ban
Merchant goes farther than suggesting that his company would help formulate regulations; he says QNET would truly invite regulations against pyramid scheming. “We would welcome a ban on pyramid companies,” Merchant states. “Genuine direct selling companies like QNET will benefit if pyramid schemes are banned.”
As it stands, the lack of regulation means that many legitimate direct sellers are unfairly lumped in with pyramid schemes, many of which disguise themselves as direct selling companies. The negative impact of this on the direct selling industry is difficult to overstate.
Direct Selling vs. Pyramid Schemes
Until the day when regulations come about, Merchant says consumers need to be extra vigilant to protect themselves against pyramid schemes. There are several ways in which consumers can tell direct selling companies apart from pyramid schemes—among them:
- Direct selling is not a get-rich-quick scheme, and will never be promoted as such. While working via a direct seller like QNET can prove lucrative, it is not easy or instantaneous; in fact, it can prove a tough business, and results only come when the seller puts in some real time and effort.
- Direct sellers deliver products and services of true quality. Pyramid schemes do not deliver legitimate products or services, whereas a company involved with real direct selling can offer a number of consumer goods, usually in several different categories.
- The QNET executive says that direct selling companies will always have restrictions in their compensation plans. The number of people who can earn a commission through sales is limited, leveling the playing field for members; this is distinctly different from how pyramid schemes typically work.
- In direct selling, sellers do not earn their commissions solely through recruitment. “Recruiting new members is not a requirement for real direct sellers to earn a commission,” comments Merchant. “Legitimate direct selling companies are structured to reward people for promoting their products.”
- Direct selling companies like QNET will usually offer solid training opportunities—and in fact, Merchant says his company has qualified trainers on hand to truly empower those who join its direct selling network.
- Finally, Merchant notes that direct selling companies have policies and procedures in place to ensure ethical behavior at all times. “Direct sellers can only achieve sustainable growth through building a culture of ethical and honest marketing,” he remarks.
The Future of Direct Selling
Though the proliferation of pyramid schemes has taken its toll on direct selling, Merchant believes that the industry will weather the storm—especially when new regulations finally transpire. Until then, the QNET executive says his company will continue offering great products through honest marketing.