While some people like To Yee find they cannot continue to sell to their friends and relatives, Kiki (not her real name), a final year university student, avoids any embarrassment by looking for customers on online forums and social networking sites. Kiki sells healthcare products from Herbalife, another direct selling company. She has set up a Facebook page solely for business purposes, because her friends are not happy with her bombardment.
The page is filled with regular updates of advertisements and slogans for Herbalife products, newspaper clippings of the dangers of being overweight and photos of people before and after weight-loss.
“My friends are not interested but other people are,” she says. Kiki started selling Herbalife products to help support her family after her father died and she came across a chapter on multi-level marketing in her business class. Herbalife requires people to buy a membership by paying $790 and they become distributors if they purchase over $4,000 worth of products in one go. After that, they can purchase goods from the company at a 50 per cent discount and sell them at the market price. Kiki says the income varies because distributors are only entitled to a five per cent bonus if they get sales of $20,000 a month, and they have to invest an average of $10,000 a month on average to stock up.
Professor Michael Hui King-man, the associate pro-vice-chancellor and former associate dean of the Faculty of Business Administration of CUHK, points out a grey area in this business model. “Distributors can purchase a piece of white paper for $10 and then sell it for $1,000 claiming it is special paper. But who can verify how much the selling price is being marked up? When a company can allow up to 50 per cent profit, what is the original worth after all?”
Professor Hui also doubts whether direct selling can be a sustainable business model in the long run. “It is hard to judge whether this is a sustainable business because this business model has existed for more than a decade,” he says. “Some people can really make a profitable business out of it, some just can’t, but the recent proposed review of the Pyramid Selling Prohibition Ordinance will certainly have a large impact on the whole business.”
He does not oppose students’ participation in selling activities because he thinks they can learn from hands-on marketing experience. But he says university students should be cautious when seeking direct selling opportunities and he believes legislation can minimise the risks of more students falling into a trap.
“Students should think clearly about the opportunity cost between their three years university life and time used on these part-time jobs, most importantly they should not be blinded by the money.”