Ever since Hyderabad’s ‘Cyberabad’ IT city came into existence, there has been a surge in the innovative ways of duping people by way of fraudulent multi-level marketing schemes. After a recent heated crackdown, the Cyberabad Police has nabbed 70 accused scammers and registered 38 cases in relation to a multi-level marketing ploy carried out by QNet – a franchisee of the Hong Kong based QI Group.
But What Exactly Is QNet?
QNet describes itself as ‘one of Asia’s leading direct selling companies’. It offers a variety of products ranging from travel packages to skincare products and even watches and jewelry, and has been promoted by major Bollywood stars such as Shah Rukh Khan and especially Anil Kapoor, who addressed Qnet’s global conference in 2016.
— QNET (@QNetOfficial) 5 May 2016
What makes QNet interesting however, is its distribution and sales structure – which could be either called innovative or suspicious, depending on who you ask.
What Is Multi-Level Marketing And How Does It Work?
Also known as ‘MLM’ or ‘Network Marketing’, the world of network marketing runs on a pretty simple premise. Instead of relying on a chain of distributors, wholesalers and retailers, MLM companies simply create a cascading chain of distributors. Each distributor can recruit further distributors under them, and apart from their own sales, can stand to earn a percentage of their recruits’ sales as well – a group commonly referred to in MLM circles as their ‘downline’.
As you might imagine, it creates a tempting precedent for a lot of people wishing to escape 9-5 jobs, and the growing unemployment crisis. If you’re able to recruit enough people, you can make some pretty good money through this system. However, first, there’s the product. Most MLMs try to focus on simple, easy to produce goods with very low production costs – think t-shirts, scented candles, health supplements, skincare products – that kind of stuff. They’re easy to market. In the case of health supplements and skincare products, they target pretty obvious insecurities, and label it as ‘It Works!’
Take a closer look at the comments on this IG post – you’ll notice a bunch of ‘distributors’ trying to poach new buyers into the MLM scheme.
MLM companies have often faced lawsuits from their own distributors – many of whom feel that the sales model is unfair, and that they were coerced into joining. Other, more successful associates claim that MLM is perfectly ethical and legal, with great benefits from those willing to work hard and put their sales and marketing skills to use.
One of the biggest players in India’s network marketing is Corporate Infotech Pvt. Ltd. (CIPL). It’s National Head, Sales is Saurabh Gupta, and he understates the point succinctly and says, “not everyone can do sales. One thing that a person needs to cultivate is a mindset and a proper goal for life – it’s only these people who succeed. If you’re not able to do sales, you might blame the company, the industry… even if you’re working in a large MNC, you will not get your incentives if you don’t land your targets.”
From a business point of view, the system can prove to be immensely profitable. Amway is one of the largest companies working on an MLM model, and generated a revenue of over $8.8 billion in 2018 – nothing to scoff at. Part of the reason why these companies are able to sustain high profits is because of their low production and upkeep costs – being part of an MLM means that you don’t have to worry about infrastructure, staff and other ancillary expenses.
“This industry is amazing,” says Delhi-based Shivam Ahuja, who joined network marketing under CIPL back in 2009, and has now founded his own companies in the startup investment and edutech sectors. Across four and a half years, he worked for Amway, CIPL and other retail product companies, and claims that the experience was an enlightening one that greatly supported his personal development. “It has helped me as a professional, as a speaker, as a guy who can network with anyone,” he explains. “In terms of soft skills, no single course can teach this. There’s a lot of good skills to learn here – to groom yourself in public speaking, sales and management.”
One of Ahuja’s ex-colleagues who wishes not to be named – now an IT consultant based in Gurgaon, shares much of the same sentiment. “I’m not doing sales anymore, but even in my role today I feel like I’ve learned a lot from this experience. Good network marketing products provide value for money, and the kind of confidence and independence this work gives you is immense.” He goes on to recommend network marketing experience, especially for college students.
All of this, however, comes with a wide set of caveats. Following up on his college recommendations, our consultant explains how getting into network marketing in college can be “distracting from studies” due to the sudden availability of income, and requires “immense time and engagement for proper returns.”
I left network marketing mainly because of the products,” adds Ahuja. “90% of network marketing companies sell crap, they’re good for nothing. That’s one of the reasons why they’re sustaining in the market, low quality products allow for high product margins.”
There also is the prevalent opinion amongst the public that MLM as a whole, is a scam. “In India, there are many companies such as QNet and Speak Asia who ignored government guidelines, evaded taxes and looted peoples’ money,” explains Gupta. “This is creating a false image in the market. If out of 100 companies, if 40 are false and 60 are genuine, it’s the genuine ones that suffer. People go on social media and write on blogs about how they lost out on a scheme.”
“People who lose money, lose money due to their own fault.” he concludes. According to Gupta, “every network marketing company tells the people that this is the product, and these are the sales that you have to do – they then expect that money will just show up without them doing anything. Obviously, it doesn’t – and then they go to court, to the police and to social media with their complaints.”
“The army is not bad, only the soldiers are,” he quips.
A Final Verdict
Certainly, the future of network marketing has its facets, both bright and dark. On the optimistic side, there’s a wealth of practical experience and networking skills to hone – along with potential earnings if you’ve got a natural aptitude for sales; and on the negative there’s a history of potential fraud and a tough, demanding sales ladder to climb.
Addressing anyone looking to give network marketing a try, Ahuja says “first of all, check out the products, that’s very important. A lot of people get fascinated by the business idea – while almost all the companies have the same general strategy. The second is company legality. A lot of companies haven’t registered themselves as per India law, which is very wrong. Thirdly, you need to take a look at the CEOs behind the company. A lot of kids these days graduate from college to start their own network marketing company.”
“They don’t have the leadership skills and experience required, and therefore put all the marketers who join them in danger,” he warns.
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