Okay, you might want to sit down for this one.
Fighting over MLM
The latest commotion in the influencer sphere in Singapore is a scuffle among some allegedly more famous personalities over the sale of supposedly multi-level marketing (MLM) products.
Beauty products accused of being part of an MLM scheme include shampoo, hair oil, facial masks, collagen jelly, and eye cream. The brands are mostly unheard of, such as "WOWO" and"LQ".
These products do not come cheap.
For example, six pieces of masks (one-time use each) sets you back more than S$70.
A bottle of shampoo is S$25. An entire set of hair products (shampoo, hair mask, oil) costs S$74.
Influencers who are distributors include Hong Qiu Ting (@bongqiuqiu), Tammy Tay (@ohsofickle, not Tammy NYP), and Donna Goh (@ponyyzz).
The issue with MLM
MLM, a dirty word that carries with it negative connotations, is a business model where distributors/ salespeople try to sell as much of a company's products as possible -- while trying to recruit others to do the same.
The items can range from mattresses to health supplements, and it is a commission-based kind of job.
However, commission is earned not only from sales, but also from the sales of whomever you've recruited.
This hierarchical model is also commonly known as a pyramid scheme, where usually only people at the top profit by skimming off the new entrants.
This is because after deducting expenses (e.g. paying for the products, promoting the products, giving commission to the recruiter), a lower-level salesperson rarely makes a profit.
This also means that a lower-level salesperson's financial loss contributes to the company's overall gain, which is why MLM has been on the receiving end of so much flak.
But with the amount of influence some of these influencers exert, it is safe to say that sales are doing well for them:
And this is where some lines are blurred due to the nature of the sales and the manner it reaches its audience.
Dissension among influencers
However, some other influencers are calling out these distributors for selling what are supposedly MLM products.
One of the first to do so was Sophie Willocq, who debated the ethics of advertising:
According to Willocq, plenty of consumers who replied to her Instagram stories did not know that the products were allegedly MLM.
She also pointed out that since MLM uses word-of-mouth/ credibility of the influencers selling them, most followers would take it as a personal recommendation instead of an advertisement.
Although Willocq says that she is not bothered by the cost disparity (i.e. cost price vs. selling price), it is important to know that established brands (as opposed to these unknown brands) "went through rounds of protocols and checks" that contribute to the cost.
This relates to the safety of the product's usage.
On this, she cites the teeth-whitening products that were previously sold online that were not HSA-approved (Health Sciences Authority-approved).
Xiaxue weighs in
Another more prominent influencer who spoke up was Xiaxue.
She wrote a series of Instagram Stories discussing not only the ethics of selling a pyramid-tiered product, but also poked fun at the product claims:
Xiaxue also touched on the ethics of advertising:
She has been touting transparency as one of the most important values in advertising.
She also shared a Facebook post that discussed the ingredients used in the WOWO shampoo:
Subsequently, Xiaxue said that she received a chart -- which she wasn't sure was accurate or not -- about how the product sales allegedly work:
Here is the chart, which follows a pyramid structure of profit-making (again, she's not sure if it's an accurate source):
She goes on to explain how it works:
Here's a quick summary:
- The highest-tiered distributors get the shampoo for cheap (S$8/bottle). However, they will have to purchase a minimum order of S$15,500.
- They can either sell it to consumers at S$25/bottle, or they can "supply" it to other distributors and have them sell it for you, thus earning the cost disparity.
- The second-tiered distributors will then try to supply it to another level of lower-tiered distributors.
- This goes on until the lowest-tier, where you will need a minimum order of only S$315 (forking out S$17.50/bottle as cost price) to start selling the product.
While Xiaxue concedes that it's not technically MLM (because distributors do not get commission from the sales of those below them), the tiered-pricing still bothers her:
The distributors raving about the products also do not disclose if they might earn from the increased sales, even if they are not the ones making a direct sale (i.e. earnings from tier disparity):
Thus, selling the product at S$25 to your friends/ families/ followers feels like you are fleecing them, according to Xiaxue.
But she also presents the counter-argument of economies of scale:
Disproving product claims
Next, Xiaxue goes on to point out how ridiculous the product claims are:
Distributers defend themselves
In response, there are three main arguments by other influencers (most of them are distributors):
1) The products are not MLM in origin -- they are, instead, doing direct selling. Even if they are MLM, all entrepreneurs make a profit from whatever they sell, anyway.
2) The product reviews are their genuine recommendation, and they are only selling it because they personally love them.
3) It doesn't matter where they come from as long as they live up to their claims.
@bongqiuqiu: Direct selling, not MLM
One of the allegedly more popular influencers/ distributors is @bongqiuqiu. She did several reposts debunking that the products are MLM:
According to Qiu Qiu, what they are doing is direct selling, where distributors get the products from a parent company and sell them directly to consumers.
This is one of the modes of direct selling, called single-level marketing.
However, another mode of direct selling is also multi-level marketing (yep, MLM), where distributors also earn from the commission of the distributors below them.
In this case, although the distributors do not earn a commission, the system still functions on a tiered basis.
Qiu Qiu also reposted from another influencer (@yankaykay) about the idea of profit-making behind every business:
(If anyone is as kaypoh, yes, Xiaxue was once friends with both Qiu Qiu and Kay Kay, but they have since fallen out.)
Qiu Qiu also revealed that she was previously worried that the products were part of a MLM scheme.
@ohsofickle: tried and tested the products
Another influencer who is selling the products also clarified that it's not MLM:
She also explained how she tried all the products to make sure they are good before selling them:
The influencer also reposted the same thing from @yankaykay, but added that "as long as the product is good and works for you", it shouldn't matter if it's MLM or if the WOWO bosses earn from it:
More recently, she also posted a Instagram story of her trying out a WOWO mask before deciding if she should sell it or not:
@rchlwngxx reviews product
Another influencer who is not selling the product has given her review of it:
She admits that the packaging is "dodgy", but says that the hair masks and oil are worth it for the results they produce.
MLM illegal in Singapore
Under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act, those who promote or participate in MLM schemes are liable to a fine of up to S$200,000 and/ or a jail term of up to five years.