By TAN EE LOOeducate@thestar.com.my
ALTHOUGH Simon Tan* craved a comfortable lifestyle, he did not want to depend on his family for his monthly pocket money.
So, Simon, 20, decided to try his hand at network marketing after hearing about the success story of a senior at his university who earned a stable five-digit monthly income merely by recruiting new members into his marketing network.
“My senior was very confident and convinced me about the merit of network marketing, so I joined,” says Simon, a third-year science student at a local public university.
Simon’s story is not unusual in today’s society where many young people look for the fastest route to earning the most money in the shortest possible time to satisfy their needs and wants.
Direct selling is a common option, for various reasons.
It satisfies the desire to achieve financial independence and have flexible working hours. The business is also low-risk in nature and requires minimal start-up fees.
Nevertheless, it is crucial that people, especially students and fresh graduates, are made aware of the difference between legitimate direct-selling businesses and questionable operations before they consider joining a company.
The pyramid scheme often comes disguised as a legitimate business.
According to the Direct Sales Act, no licence shall be granted to anyone who plans to run a direct sales business involving any arrangement for the sale or distribution of goods or services where that person receive a financial gain not dependent on the amount sold or distributed but based, to some extent, on the inducement of others to participate in the scheme.
Any licensee who operates or participates, directly or indirectly, in such an arrangement as described in Section 7(1) of the Act is guilty of an offence.
Direct Selling Association of Malaysia (DSAM) president Paul Yee says it is not wrong for students to get involved in legitimate direct-selling businesses as the legal age for joining such companies is 18 and above.
“However, it must not come to the point where students start neglecting their studies or are unable to complete their education because they are too involved in the business,” he says.
Institute of Marketing Malaysia president Datuk Sharifah Mohd Ismail says there is presently a trend for school leavers and unemployed graduates in their early 20s to get involved in direct selling.
She adds that while direct selling offers tremendous exposure in terms of networking, training and developing contacts, these are, however, probably not the first things that attract the students’ attention.
Simon had to source for funds to pay membership fees of more than RM1,000 before he could embark on his new venture.
He borrowed more than RM400 from a close friend and then withdrew the rest from his National Higher Education Loan Fund Corporation (PTPTN) loan and savings account.
Once Simon had registered with the company, he was asked to attend a one-month intensive training programme in Petaling Jaya on a weekly basis. He was taught how to present business plans to potential partners and to build up his own network.
He began to see results within a short period of time and started earning up to RM1,600 per month.
Simon says his paycheck was delivered from an address in the United States.
His parents in Perak were in the dark about his direct-selling activities in Kuala Lumpur.
According to Yee, membership fees to join a legitimate company in Malaysia are usually below RM100. One also does not need to have a regular income to join.
But he warns of the risk of getting involved in pyramid schemes, pointing out that participation in such businesses is tantamount to engaging in fraud.
“If someone comes up to you and says you can make money without putting in any effort, you should be cautious,” he says.
DSAM manager Tay Shieh May says the association has had a series of dialogue sessions with the Domestic Trade and Consumer Affairs Ministry on pyramid schemes.
“The ministry is in the process of incorporating anti-pyramid scheme laws into the existing Act because what we have now is not good enough.
“Some companies have found loopholes and manage to get away with it,” she says.
Simon says he was attracted by the possibility of earning what he describes as “passive income”.
“Passive income is the money which comes to you because of your ‘down line’. This money will be generated even though you are ‘asleep’,” says Simon, who quit after trying out the scheme for a year. He cites pressure and studies as reasons for quitting.
Looking back, he says that he did not feel that he was selling a product.
“I was selling 'hope' to people who wanted to make money,” he explains.
MCA Public Services and Complaints Department head Datuk Michael Chong says he is very concerned about students who neglect their studies because they are too involved in direct selling.
He says some parents have approached him for help after their children borrowed money from loan sharks to sign up as distributors.
“Parents are already burdened with the responsibility of financing their children’s education. Now, they have to go through this as well. Some students do not think of their parents before making decisions,” he says.
Chong says students should concentrate on, and complete, their education first.
Author on personal finance, financial adviser and self-made millionaire Azizi Ali agrees.
“Direct selling is not the only game in town.
“Students should take their time to explore other business opportunities,” he says.
He adds that students should do in-depth research on the background of companies before joining one if they are convinced that direct selling is what they want to do.
Sharifah also advises students to inform their parents if they are involved in such businesses.
Hassan Malik* admits to being influenced by his peers who asked him to join a multilevel marketing company when he was a second-year student at a local public university.
“But being able to buy healthcare products at members’ prices was a boon,” says Hassan, who is now in his third year of studies.
He quit three months later when he realised that direct selling was not his cup of tea.
“I learned that it was not easy to convince a person to buy my products when I approach them,” he says.
However, he does not regret joining the industry.
“It was a good experience for me because the company really trained us on how to approach prospective customers.
“It helped us to polish up our communication skills.
“It also helped us to understand ourselves better,” he says.
Graduate John Yong* concurs that he has learnt a lot of practical skills that will help him grow as a young adult.
Although he managed to sustain his direct-selling business for more than a year after borrowing more than RM20,000 from his parents, he eventually decided to quit after failing to generate sales volume and expand his network.
Yong, 24, is now repaying his parents the money he borrowed but still feels that he has gained valuable experience.
“I learnt something which I couldn’t have possibly have gained from textbooks,” he says.
“I learnt about the business world where communication skills, relationship management and grooming are essential to be successful,” he says.
Would he join another multi-level marketing firm again?
“Yes,” says Yong. “I will definitely give it a shot if I have another chance in the future.”
*Names have been changed