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Direct Selling: A Multi-Billion Dollar Opportunity

Direct selling companies have had mixed fortunes. Some have been incredibly successful globally, with Amway and Avon being household names from the cities of America, to the villages of China. Some have, through dubious pyramid schemes, painted the industry with a less than pristine reputation.

"The industry itself, unfortunately, suffers from reputation faults," explained Richard E Zinklewicz, Director for International Operations at QI Group of Companies. "There are very few places to look for blame except in the mirror."

He likens the industry to the insurance sector a few decades ago, when dubious practices forced governments to regulate insurance companies. Zinklewicz said direct selling companies will, sooner or later, have to come together under an international governing body to improve the sector.

Globally, network marketing sources attribute the industry to be currently worth US$120 billion, with over 60 million distributors. In the United States, direct sales make up about 1%, or $29.6 billion, of consumer sales, according to Direct Selling Association. With the market there saturated, companies are eager to break into developing markets, particularly China. Industry giants Avon and Amway, have legions of sales people all over the country. Avon purportedly recruits up to 50,000 women a month and now has over one million agents.

Direct selling has creating hundreds of thousands of jobs, often for disadvantaged or poorly educated young women. Some direct sellers in China have been accused of operating sophisticated pyramid schemes and other sales swindles. Because of such concerns, China banned direct selling in 1998. It also said they were often used as a cover for "evil cults, secret societies and lawless and superstitious activities."

But in 2006, China lifted its ban. In the past five years, direct selling has flourished into an $8 billion industry. QNet, a subsidiary of Hong Kong-based QI Group of Companies, is one of the newer direct marketing kids on the block.

Although it has expanded incredibly quickly across Asia, Africa and the Middle East since Vijay Eswaran and Joseph Bismark decided to set up the company in 1998 in Manila, it is only just starting to look at the China market.

"Our company headquarters is in Hong Kong, but we have not aggressively pursued the Chinese market," he said. "Sales are not driven by the company. The company provides the products and the platform, but the sales are driven by the people in the network. If it happens it has to happen through the network by itself, not through the company."

Unique business model

Instead of starting out with bargain consumer products in developed markets, QNet was born as a multi-level marketing company offering a diverse range of luxury collectibles, including watches, coins and medallions in developing countries. In 2000, QNet procured the official rights to distribute commemorative coins for the Sydney 2000 Olympic Games, and produced record sales for Olympic coins.

Recently, the company has entered skin, beauty and wellness product categories. "We knew we would eventually go there, because we understand that while it is good to sell a US$600 product, because you make more commission than you do on a US$50 product, you cannot keep selling these high-value products to the same person. For US$50 beauty products, however, they will keep coming back to buy more," he said.

There is no doubting the company's strategy, as it has flourished throughout Asia since its establishment. Zinklewicz attributes QNet's success to the multi-level marketing scheme that enables an entrepreneur to establish their own little business with very little outlay.

"Multi-level market enables people to become an entrepreneur if you have leadership skills, and for many people it is a life-changing move," he explained. "When a person wants to change their position in life, or if you are not happy where you are -- maybe you are too young so promotion prospects are not there, or maybe you have reached a glass ceiling, or maybe you are too old to be considered for promotion -- where do you find opportunities to use your talents and energy? Multi-level marketing is one way to do it."

The average age of QNet's agents is 30-35. Unlike traditional direct sales companies whose agents are predominantly females, 60% of QNet's agents are male, apart from Japan where 90% are female. With the introduction of new a skincare line, Zinklewicz expects more women to join its ranks.

Shaking trees

The potential to grow your sales network in multi-level marketing is huge. Zinklewicz said top people have thousands in their network and hold regular conventions to celebrate everyone's achievements. But he points out that it - like any success - requires a hefty dose of hard work and a pinch of luck.

"It is like the definition of luck. What is the meaning of luck?" he asked. "It is hard work. You have just got to keep shaking trees until an apple drops, and for those who work hard, the rewards are far greater." 

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