Interesting Facts about Direct Selling

1
Word of Mouth

• Used and Abused Where the Consumer/Investor may
  be a Victim or/and a Perpetrator

2
Points covered

• Understanding the fine differences between
  different types of operations using Word of mouth
  - Single level and MLM compensation plans
• Common features in various operations using the
  word of mouth publicity
• What is direct Selling ?
• Identifying un viable operations
• Way ahead

3
Some popular Economic crimes exposed in India

• Stamp paper Rs.32000 crores
• Satyam Rs.7200 ( as per Additional Director CBI
  )
• National Spot Exchange Rs.5600 crores
• Travel Ventures International /TVI Express
  (deploying MLM compensation plan) Rs.6000
  crores
• Saradha Group( using single level compensation
  plan agent model as insurance ) official
  figure not known Under Investigation
  Possiblity of more than Rs.3000 crore
• Speak Asia (deploying the MLM compensation plan)
  Rs.2460 crores
• Ketan Parekh Securities Rs. 1,250 crores
• Aryarup / A.T.C.R (deploying the MLM compensation
  plan) Rs.1200 crores
• Stock Guru India (deploying the MLM compensation
  plan) Rs.800 crores
• KBC Multi Trade ( deploying the MLM compensation
  plan) more than Rs. 200 crore
• These scams make up for the tip of the iceberg
  while some have not got exposure in the media
  and more are waiting to be exposed .

4
Scam India turnover in calendar year 2013

• About Rs. 11,100 Crores

As per the data of WOM operations ( deploying
the MLM compensation plans) available with
Strategy India http//www.strategyindia.com/blog/s
cam-alerts/
5
Weekly - New operations in India

• 25-30

As per the data available with Strategy India (
Early warning system) of various operations
deploying the MLM compensation plans
6
Some Commonly used terms among types of WOM
operations

• Direct sellers/ Distributors/Agents/Affiliates or
  Similar
• Compensation plan Single level(SL) and Multi
  level(MLM)
• Incentives/ Commissions
• Events Trainings / Business opportunity meetings
  
• Products/Services
• Website and Online/Offline software
• Crypto currency Virtual currency
• Customers/Investors
• Rewards/Awards
• Foreign tours

7
Single level Structure

• Important Points
• The agents are also known as distributors/
  associates/ direct sellers
• The agents may be employed by the company (
  salary and incentives) or may be working with
  the company on commissions (based on the
  investments collected)
• This type of structure is also preferred by un
  viable operations to keep their activities under
  the radar
• The cost of acquisition of customer/ investor
  may be tuned anywhere in the range of 5-70
• This type of structure is more common across
  India
• They are more prevalent than the operations
  deploying MLM compensation plans

8
Multi level Structure

• Important Points
• The agents are also known as distributors/
  associates/ direct sellers/ affiliates, etc
• All the agents earn commissions on sale by self
  and their teams
• Despite of the structure being multilevel the
  companies may use single level compensation plan
  to incentivise the agents ( the agent earns on
  basis of sales done by him and his personally
  introduced agents only)
• This type of structure is preferred to increase
  distribution network fast
• They commonly deploy the multilevel marketing
  compensation plans to incentivize the network of
  agents

9
Genuine one ?
10
Under UV light ?
11
Genuine ?
12
Guidelines by the Reserve Bank of India
13
What if ?

• Guidelines for WOM operations are notified by the
  Central Government this would help people
  differentiate between the Genuine and the Fake

• Save millions from getting Scammed
• Save the country from corruption
• Save thousand of man hours of the law
  enforcement agencies
• Reduce the circulation of Black Money
• Reduce the chances of money being siphoned off
  the country

14
Different (WOM) operations deploying the Single
level (SL) Multi level (MLM)
Compensation plans

• Viable operations Product/Services Direct
  Selling
• Un Viable operations Intentional Scams Naked
  Pyramids promote commitments of returns on
  investments
• Un Viable operations Un Intentional Scams
• Un Viable operations Un Marketable Product/
  Services - Product/Service based Pyramids
• Un viable operations Product/Services highly
  priced Offer Returns on Investments
• Un viable operations - Help/Donation plans
  Offer ROI

15
1) Viable Operations PromoteProduct/Services

• Products promoted have established market value
  and therefore purchased by people not related to
  the company
• Direct seller/s earn their commissions only when
  the products or services are purchased for
  consumption or for retail to others.
• The amount committed and therefore distributed in
  the compensation plan per product sale is fixed
  and is generally lesser than 40 of the
  commissionable value of the product
• Performance based payouts which are fair
  reasonable and not skewed.
• Focus on sales of products/services and therefore
  have good amount of product trainings
• Cost of entry is quite low
• Offer satisfaction guarantee on products
• Have an exit option

16
2) Un Viable operationsIntentional Scams

• Commonly known as Ponzi Schemes ( Naked where
  only commitments of returns are given)
• Claim to generate money from sources like
  Deposits / Investments - in / for / in form of-
  Stocks, Shares/I.P.O, Debentures, Gifts / Help /
  Assistance / Support / Donations, Currency,
  Preferential shares, Forex Trading, Plantations,
  Farming, Infrastructure projects, Resorts,
  Trading in commodities, Crowd Funding , Birds
  (Poultry, Emu, Quail, etc), Livestock (Rabbit,
  Goat, Sheep, Cow, Buffalo, etc), Media and Real
  Estate, Currency ,etc
• Buy in to earn - to click, to give surveys, to
  watch advertisements, to receive SMS and to
  receive emails and to invest in advertising
  medium, etc .
• Compensate their distributors on investments
  bought in against commitments.
• Start with money circulation and then move on to
  generate their own virtual currency to survive
  longer

17

• They are unviable because they commit payout
  which soon exceeds the amount of investment they
  manage to collect .
• They are well connected and organized
• The real promoters operate from the background
  and have access to other scamsters and their
  resources
• Maintain real time intelligence on corrupt
  political leaders and government officials who
  are used to stall Complaints/investigations
• Have database and access to brokers and
  advocates
• Operate 2-3 sites simultaneously
• They have consultants who help them design the
  compensation plans , prepare software and set up
  offices with bank accounts abroad

18
3) Un Viable operationsUn Intentional Scams

• Initiated by novices( First timers)
• Copy the business model of the scam without
  understanding the viability
• Generally operate in open as directors of the
  company
• 20 close down in first 3 months
• Maximum graduate to become full time-intentional
  scammers to pay off earlier committed amount to
  investors or sell the database of investors to
  other companies to make money

19
4) Un Viable operationsUn Marketable Product /
Services

• Known as pyramids (product/services based)
• Claim to be like other direct selling companies
• People enrolled at the beginning earn the most
• People buy in the opportunity to earn and not the
  products/services( which are unmarketable or not
  of any use for them)
• Products promoted generally are online courses ,
  e-learning packages , e-zines , quiz packages ,
  online marketing tools , web space , Bid
  coupons/Vouchers , Discount coupons/vouchers ,
  Holiday vouchers, Time shares, etc. or any other
  high priced low value tangible products.
• Start up cost range can be anywhere between INR
  100 INR 15,000
• Focus on recruitment of new members only because
  no retail viability
• Start generating virtual currency once their
  income is lower than the amount committed as per
  the MLM compensation plan

20
5) Un viable operationsProduct/Services highly
priced Offer Returns on Investments

• Commonly known as Investment/Growth plan
  companies
• Advanced types of Ponzi schemes
• Products/ Services are offered at over inflated
  cost to discourage people from asking of
  deliveries
• Higher ROI is offered to people not opting for
  products
• Products and Services are shown to conceal
  intention therefore escape scrutiny
• Start generating virtual currency to sustain
  which makes if difficult to gauge the real size
  of the scam ( since the investigating agency
  takes into consideration the money deposited in
  the company account )

21
6) Unviable business modelsHelp/Donation plans
- Offering ROI

• Newest type of Ponzis to avoid PCMC(B)Act 1978
• No company exists
• Money changes hands among the agents directly
• Promoters offer ROI(Returns on investments) on
  various amounts invested
• The promoters short change investors by sending
  their own account details many times to collect
  maximum investments
• Promoters claim to be victims once the show ends

22
Direct SellingType 1) Viable operations
promoting Product/Services

• Type of retail model like the Traditional brick
  and mortar , ecommerce , etc with added features
  where consumers have the opportunity of buying
  the products at a discount and selling it to
  others.
• Marketing and Retailing of products/services to
  people in places other than fixed retail
  locations
• Individuals join the direct selling company to
  consume the products at a discount or to earn by
  retailing the products/services to the people
  they know .
• They also have the opportunity to earn when the
  products/services get retailed for consumption by
  the people in their team .

23
Common misconceptions about Direct Selling

• An un-viable business model Money rotation
  /Money circulation
• More the levels more the payout
• Person who joins earliest earns the most easy
  money
• Products/Services are purchased by Agents/ Direct
  sellers only and not people outside the network
• All operations using single level / multi level
  marketing compensation plans are direct selling
  operations
• Products are overpriced
• All operations deploying the MLM compensation
  plans are the only scams robbing our countrymen

24
Interesting facts about Direct Selling

• Promotes Self employment , Skill development and
  Entrepreneurship
• Ensures performance based payouts which are fair
  reasonable and not skewed.
•  Does not require people to migrate to other
  areas and therefore gives a chance to work from
  home without putting stress on life and finances.
• Creates markets for new product concepts (as
  personal guidance on usage and benefits from
  known person instills greater confidence in
  products rather than off the shelf purchases)
• Gives fair opportunity for people from all walks
  of life to have a chance to learn to earn a
  decent income without investing a fortune.

25
Identify Type 2),3),4) 5) 6)

• No genuine/marketable product or service.
  Exercise caution if there is no underlying
  product or service being sold to others, or if
  what is being sold is speculative or appears
  inappropriately priced.
• Promises of high returns in a short time period.
  Be leery of pitches for exponential returns and
  "get rich quick" claims. High returns and fast
  cash may suggest that commissions are being paid
  out of money from new recruits rather than
  revenue generated by product sales.
• Easy money or passive income. Be wary if you are
  offered compensation in exchange for little work
  such as making payments, recruiting others,
  reading SMS/Emails and placing advertisements.
• No demonstrated revenue from retail sales.
• Buy-in required. The goal of a direct selling
  program is to sell products/services. Be careful
  if you are required to pay a buy-in to
  participate in the program, even if the buy-in is
  a nominal one-time or recurring fee (e.g., INR
  100 or INR 100/month).
• Complex commission structure. Be concerned unless
  commissions are based on products or services
  that the direct sellers sell to people outside
  the program.
• Emphasis on recruiting. If a program primarily
  focuses on recruiting others to join the program
  for a fee, it is likely a pyramid scheme. Be
  sceptical if you will receive more compensation
  for recruiting others than for product sales.
• Early bird rewards . Be extra cautious if earlier
  you join , the more you earn is buzz word

26
Scam Alerts updated weekly - http//www.strategyin
dia.com/blog/scam-alerts/ Report scam -
http//www.strategyindia.com/blog/report-a-scam/