Have you ever heard someone say, “Direct selling is a Ponzi scheme” or “like a Ponzi scheme”? Such misconceptions reinforce the importance of rekindling the long-standing interest in the difference between direct selling and Ponzi schemes. The confusion is understandable. On the one hand, Ponzi schemes prey on unsuspecting victims by posing as legitimate direct selling companies, using a tiered compensation plan. Conversely, legitimate businesses are often painted with the same broad brush as their illegal counterparts, confusing the market and perpetuating misconceptions about direct selling.

Debunking this common misconception is easy. Direct selling is a business opportunity that relies on social media rather than permanent business premises for selling. You can expect to find great products and services being sold through your social networks, giving everyone in the circle a chance to be an entrepreneur. The direct selling industry has thrived on relationship marketing for over 150 years. The latest report from the World Federation of Direct Selling Associations (WFDSA) indicates that in 2021, 128.2 million people worldwide were involved in this industry, either part-time or full-time, generating $186 billion in annual sales.

Since its inception, direct selling has boosted small and medium-sized businesses around the world, taking advantage of opportunities in the gig economy and raising the standard due to its relatively low barrier to entry, high flexibility and its exclusive product portfolio.

QNET’s Malou Caluza said, “Despite the current scenario which charts a difficult path for many industries, direct selling continues to maintain growth amid the contraction in economic activity due to COVID-19.” As WFDSA reported, “The industry showed continued strength in 2021 with a 3.0% increase in global sales over the previous year, valued at approximately $186.1 billion. .”

The key thing to note here is that direct selling is a business like any other, not a get-rich-quick scheme. To be successful in this business, you need to work hard, be patient, committed, and goal-oriented. This industry gives you the opportunity to become an entrepreneur without worrying about a large scale startup cost and operational overhead like in other traditional businesses. Your success is entirely up to you and the hard work you put into it.

Differentiating between Ponzi schemes and a legitimate direct selling company, quality products and services are one way to spot the difference. Here are five key things to help you figure that out. Legitimate direct selling companies invest significantly in research and development to provide innovative, high quality products that are competitive in the marketplace to meet the lifestyle needs of people around the world. It can be a wide range of products in the fields of health, wellness, lifestyle and education designed to help people live better and healthier lives. On the other hand, Ponzi schemes may or may not have a “product” to sell, but if there is, it usually has little or no real value.

Promised compensation is another way to spot the difference. Distributors of direct selling companies earn a commission based on the sales of products and services that they or their teams have made. In a Ponzi scheme, earnings are based solely on the number of people successfully recruited into the business. This should not be confused with “network marketing”, one of the components of direct selling. It’s a way for independent distributors to grow their business and build a network of direct sellers. Simply put, it’s about marketing or selling goods and services to your networks and building your network that way.

Get-rich-quick syndrome is another way. Direct selling is not a get-rich-quick scheme. Any company that promises you an easy way to get rich quick (specifically through member-only building) is likely a pyramid scheme. Direct selling companies take the time to describe the business and give potential sellers plenty of time to make a decision: any great opportunity will be there tomorrow. However, promoters of pyramid schemes will try to pressure people to sign up immediately by suggesting that the same chance will not be available later.

Genuine direct selling companies offer comprehensive training and development systems to build long-term businesses. They support distributors not only with product and business knowledge, but also with marketing and sales tools, leadership training, personal development, and mentorship programs. Pyramid schemes have a short lifespan before going bankrupt. Their goal is to earn money for themselves and does not offer any type of support.

It is important to note that Legit direct selling companies have appropriate policies and procedures and a code of conduct for their distributors. They believe in achieving strong long-term growth and stability by creating a culture of professionalism and ethics. Any violation of their policies is handled strictly. This is rarely the case with Ponzi schemes because their lifespan is usually short and the focus is on getting more people into the scheme.

Ultimately, everyone has an equal chance of making money in a direct selling business. Ponzi schemes only work if someone loses. Only people at the top or those who arrived early can make money. In a real direct selling business, it doesn’t matter when you join. You might even earn more than your upline if you put more effort into the job.

Popular culture may make fun of Ponzi schemes, but the bottom line is that they exist. It’s important to know how to identify them for your own protection and to avoid missing out on the great products, services, and opportunities provided by legitimate direct selling companies.

Fall is QNET’s Regional General Manager for Sub-Saharan Africa