Direct sale or multi-level marketing companies have witnessed significant growth over the past decades and analysts have it that due to its strength so far, the concept may not be fading anytime soon. According to a 2012 survey released by direct selling industry, its global sales arrived at $166.9 billion which was above the $158.3 billion sales recorded in 2011. Statistics also stipulated that more than 103 million people around the world worked for multi-level marketing companies in 2015, and brought in approximately 183.7 billion US Dollars as retail turnover.
Generally, Network marketing is a business model which leverages on person-to-person sales by with the help of sales representatives who in most cases depend on their network of friends and families. Network marketing companies mostly rely on tiers of sales people who are encouraged to recruit their own networks of sales people. Those who create a new layer of sales representatives are paid a commission on their sales and on sales made by the people they recruited known as their downlines. The earnings made by the sales agent depend on his recruitment of other agents as well as product sales, thus, the more people recruited, the more commission you receive, thus paving your way to financial stability.
Today, Africa is fast becoming the next network marketing hub with several such companies operating in most countries. For instance we have Amway which is operational in South Africa, Avon, present in South Africa, Tunisia, Morocco and Egypt and, For ever living present in Cameroon, Angola, Benin, Botswana, Ghana Gabon Rwanda South Africa Togo and, Uganda etc. it is also important to note that most of these companies specialize in the health and wellness business which is worth several billion dollars yearly. Despite the fact that these companies deal in diverse products, their mode of operation and compensation plans functions the same.
Unfortunately, a good number of these network marketing companies in Africa are now operating pyramid or Ponzi schemes. These pyramid schemes focus more on the recruitment of people into the business rather than on sales. Money from these new recruits is then used to pay those at the top of the business.
Unfortunately, with the high unemployment rate of Africa, youth are delving into this form of income generation without much knowledge on the system and how it functions.
Authentic networking marketing and Pyramid scheme
A lot of arguments have been raised pertaining to the genuine nature of some network marketing companies. There is divided opinion as to whether the operations of these companies are legal and ethical. From research, legal network marketing structures have well-defined compensation plan and focus on generating sales for the company by creating a line of distributors for their products.
But however, there are several other structures which have infiltrated the sector such as pyramid schemes which focuses on getting several people to register so as to use the money from new recruits to pay people at the top level rather than those who perform the work. Hence, such schemes turn to focus more on the recruitment of people rather than sales. The objective of such businesses is to recruit new downlines for the business to be sustainable instead of putting emphasis on sales. Thus, the money taken from these new members is used to compensate the older members.
The paradox of Network marketing in Africa
In Cameroon, a lot of people especially the youth are becoming enthusiastic about networking marketing. It is not very certain if at all most of them understand the functioning of the business but a whole lot of them are carried away by the promises of easy wealth and financial stability. According to some of them, the details of its operations are not necessary as long as they somehow make money from the business.
The reason for most people to join network marketing is fueled by the promise of easy riches which stems from the get-rich-quick mentality in the society today. Unfortunately, the hard reality is that very few of those who join the scheme get the desired result. According to a report published by News24, 95% of recruits who join the multi-level marketing system fail. Research also indicates that the very few members who earn money from the system are the early adopters. At end of the day, those who get involved in network marketing encounter a different experience than what they expected. Critics of such schemes have clearly indicated that network marketing is not a get rich quick business as people may think.
Despite the growing controversy surrounding the business model, network marketing can still be beneficial. But Africa can only benefit from it if the business is operated the right way, without which the poor and vulnerable masses will continue to remain victims to fraudulent schemes.
Article from AFRIC editorial
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