Direct selling has been quietly but steadily growing in the UAE since the global financial crisis, especially as a route to work for stay-at-home mothers.
The scheme has an individual sell directly to the public – often to friends and family – rather than products being sold in a retail store. Think Avon lady or Tupperware parties.
For some consumers this can be a confusing area of business, and is sometimes conflated with pyramid schemes. But people in the field point out that most direct-selling companies are wholly legitimate.
In the UAE, sales via direct selling reached Dh544 million in 2015, up 17 per cent year on year, according to Euromonitor.
The Irish mother-of-two Alice Cassidy, 37, based in Dubai, is a supervisor for health and cosmetics company Forever Living Products. A nutritionist, she tried its Clean 9 cleanse programme by buying via a friend, then discovered its aloe vera gel was also good for her coeliac disease.
Having left her job as a clinic manager, as a new customer she found it made sense for her to set up as a Forever Living seller to get a 15 per cent discount on her ongoing purchases.
Ms Cassidy will buy what is ordered from Forever Living and then make a 30 per cent mark-up for all retail sales she makes, as well as an 8 per cent bonus, which she gets by cheque each month.
Forever Living has been in the region since 1999 and has 200,000 sellers in the Middle East. It has offices in Dubai Airport Free Zone and product centres in Deira, Tecom and Abu Dhabi. It says a typical seller makes Dh3,000 to 11,000 but it “depends on their efforts” – last month’s top seller earned Dh91,000.
Sellers work in a virtual currency called case credits (CCs) and need to stay “four CC active” – that is, to personally sell products worth four CCs a month. There are no deposits or fees to pay, but a minimum order of Dh1,421 has to be made to get started.
The aloe vera gel, for instance, is bought by a seller like Ms Cassidy at a wholesale price of Dh59.25, retails for Dh84,50 and earns her 0.101 CC, or 1.212 CC for a case of 12. All of this is documented in a seller’s online dashboard, where they can see what they and their team are earning at any point.
Ms Cassidy has 11 people in her team – eight who are active sellers and three who are buying just for themselves. At a supervisor level, she also makes 3 per cent on anything her active sellers make, in a management and reward structure referred to as multi-level, or network marketing – where the sales force is compensated for the “down line” sales of people they recruit.
But without staying “four CC active”, a Forever Living seller will not make anything from their team sales either. “That’s why I thought this isn’t a pyramid scheme,” says Ms Cassidy. “If you don’t do the work yourself, and you don’t help your team, you’re going to stay stagnant.”
Having just had her second son, in February, Ms Cassidy earns Dh2,000 to Dh3,000, putting in around 12 to 15 hours a week. “It was enough to pay all my four-year-old son’s school fees last year, and some,” she says. “But you have to have strong legs to get there. You have to be active every day. If you treat it as a hobby and dabble, you won’t get a huge income. Put in small, cumulative efforts now and you will see the return.”
At Forever Living up to three levels of sellers will earn commission on the sales of the sellers down their line, earning from 3 to 8 per cent depending on their level. All three above Ms Cassidy are managers earning 8 per cent of her income, as well as from their other recruits.
For instance, three levels above Ms Cassidy is the company’s top Forever business owner (as they are dubbed), UK-based Natalie Heeley, who has reached the highest level of platinum manager, has some 20,000 recruited sellers in her Facebook group and earns 8 per cent from each of their sales. She has brought out a book, How Social Networking Doubled My Business.
Samantha Charlesworth, a Forever Living supervisor, is 43 and British, with daughters aged four and six. She worked as a teacher and nanny before moving to Dubai six years ago. She signed up 18 months ago and says she generally earns Dh5,000 to Dh6,000 a month. “It’s a fantastic opportunity as long as you dedicate the time to it,” she says. “Treat it as a business and it pays like a business.”
Euromonitor says the biggest sectors for direct selling in the UAE are beauty and personal care (which grew 19 per cent year on year in 2015), and food and drink, at 18 per cent – mostly thanks to the popularity of bottled water.
The local brand Oasis Water commands 13 per cent of the direct selling market – but in a sign of direct selling’s growth in the UAE, it faces a new competitor for that market share.
Stefano Iorini, managing director of Monviso Water, set up a “brand ambassador programme” in May to sell Monviso’s Italian bottled, low-sodium mineral water. For every customer referred at the “first level”, sellers will make 10 per cent on purchases, and a further 5 per cent for every customer their contacts refer.
“There are no targets or expectations,” he says, “So there is nothing to lose. There are no fees, unlike most direct marketing.” But with water prices ranging from Dh2.90 for 0.33L to Dh5.20 for a litre, you’d have to sell a lot of water to get rich.
Seven companies in the direct selling business in the UAE belong to the Direct Selling Association UAE (including Forever Living), set up by executive director Poorya Montaseri and officially formed in 2012. He himself had been a “distributor”, or direct seller, originally working in his home country of Iran before moving to Dubai, where he says he was making Dh20,000 to Dh25,000 a month from direct selling.
With his own experiences, he realised there was a gap in the UAE market when it came to understanding genuine direct selling, which had been seen with “confusion” after a 2000 crackdown on pyramid schemes in the UAE.
Sam Instone, chief executive of financial advisers AES International, says that direct selling can be a “genuine and successful business strategy for legitimate products”, as demonstrated by companies like Avon and Forever Living.
But, he cautions, “it is highly inadvisable” to buy property, investment “or other ‘guaranteed’ ways to make money” from anyone in direct sales. “At best, you will be paying high, hidden commission and, at worst, it may be a Ponzi scheme designed to steal your money,” he warns. “Time spent in due diligence on any purchase such as these is seldom wasted.”
Mr Montaseri says that direct selling is “very welcome at the higher levels of government”. The DSA UAE is one of the official members of the World Federation of Direct Selling Associations and acts as a bridge between its members and the government, most closely the Dubai Chamber of Commerce. Members pay a fee of Dh5,000 per year. The association’s president and vice-president represent US skincare firm Jeunesse and Malaysian health food supplement company DXN.
Nobody from the Dubai Chamber of Commerce was available to comment.
Mr Montaseri says companies do not need any specific UAE licences for direct selling as it is a “marketing strategy that companies employ, and no licence is needed for the way a company markets its products”.
Direct selling businesses operate in multiple sectors, from electronics to cosmetics, and need the appropriate commercial trading licence for the type of product their business sells, he adds. Forever Living, for instance, has licences to trade cosmetics and parapharmaceuticals (natural medicines).
Equally, he says, Dubai’s Department of Economic Development (DED) deems direct selling to be a part-time activity, rather than a full-time job, and the commission that distributors receive to be a “bonus for promotional activity”. Most direct selling contracts, he points out, state that “you are not an employee, this is not a full-time job and the company is not responsible for business matters you undertake”. Forever Living’s director of operations for the Middle East, Khaled Khayati, adds that their business owners “represent the company independently”.
The DED was unable to comment.
Cynthia Trench, principal lawyer at Trench and Associates, warns that permission to work under UAE labour law “applies only in regard to the position of employment specified on the application. It is not a general permission to work and/or conduct economic activity in the UAE.” Housewives, she says, should have work permits issued by the Ministry of Labour.
“Our advice is that before you engage in any profitmaking activity, consider whether you are in possession of the requisite permissions,” she adds. “Does your visa permit you to work? If so, have you been given permission to work for a party other than your main employer? Are you or the employer appropriately licensed by the DED?”
But Mr Montaseri says he believes there to be no issue under the Labour Law with someone being employed by “company A” and under their visa while also doing direct selling, as they are not “conducting a job or receiving a salary”. However, he warns distributors to check their own contracts, and not to take direct selling business to work or conduct it during work hours. “It is your own responsibility to check if you can do direct selling in your free time,” he warns.
Pyramid schemes versus direct selling – here is how you can tell the difference
Multi-level marketing, often a key part of direct selling, is also used in pyramid schemes and this is where genuine businesses can often be confused with highly suspect ones.
In multi-level marketing, the sales force is compensated for the “down line” sales of people they recruit as well as for sales they personally generate.
A key sign of a pyramid scheme, says the US Federal Trade Commission, is that its distributors sell more products to other sellers than to the public, or make more money from recruiting than they do from selling. According to the Direct Sellers Association of the UAE, a pyramid scheme “is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered.
“The distinguishing feature of these schemes is the fact that the product being sold has little to no intrinsic value of its own, or is sold at a price out of line with its fair market value.”
The DSA UAE says that a legitimate business has minimal start-up costs, requires some commitment by you (it is not a “get rich quick” scheme), does not demand that you buy large quantities of product and makes money for you relative to what you sell.
The US Federal Trade Commission has a series of tips to help people.
• Is the product priced competitively? Are there similar products in the market? (The product itself is unlikely to be available in stores.)
• Don’t believe hype about “miracle” ingredients and verify that there is research to back up the claims the company makes about its products.
• Check the business’s track record – search the name of the company plus words like “review”, “scam” or “complaint”. How long has the company been in business? Has it been sued for deceptive business practices? How satisfied do its customers seem?
• Don’t pay or sign anything in a first meeting. Ask your sponsor for the terms and conditions, including the compensation structure and, crucially, any expenses you are expected to carry personally. Ask for some proof of claims about the money you could make. Get all of this in writing. Remember, your sponsor is probably making money for you to join up.
• Get the company’s refund policy in writing – if you return unused products, will you get a full refund and how long will it take? How much are you expected to pay for training or marketing materials, at the start and on an ongoing basis? Ask other sellers about what they have paid.
• How much time or “sweat equity” will you need to put in? Ask your sponsor and other sellers how many hours a week they put in at the start and now.
• Also ask your sponsor how many people they have recruited, how much product they sell on to sellers, what their annual sales are and what percentage comes from recruiting other sellers or selling them inventory. A genuine seller will be transparent.
The usual rule applies – if it looks too good to be true, it probably is.
pf@thenational.ae
