The Lunar New Year vacation had just ended when Alice Wu began to worry about COVID-19. Not long after, on Feb. 10, Wu — who didn’t give her Chinese name to speak freely for this story — received the first of several coronavirus-related sales messages through her smartphone.
The pitch came from an acquaintance who represents Amway, an American multi-level marketing (MLM) company that’s been active in Taiwan since 1982.
“I’ve only met her once, and I’ve never bought from her. If her sister wasn’t one of my daughter’s teachers, I’d probably block her,” says Wu, who lives in Taichung.
Photo: AP
MLM, sometimes called direct selling or network marketing, is usually presented as a two-in-one business opportunity. Distributors can make money by selling the firm’s products, and also by getting other people to sign up. Every sale made by a “downline” you enlisted adds to your income; if your “downline” goes on to introduce someone to the MLM, you’ll also get a cut of that new recruit’s sales.
To protect the public from pyramid schemes, Article 18 of Taiwan’s Multi-Level Marketing Supervision Act states that representatives’ major income should come from “promoting and selling goods or services… instead of earning mainly by introducing new participants.”
‘THE CURRENT DANGER’
Amway, Taiwan’s number one MLM firm in terms of total sales, is best known for nutritional and home-care products. The message sent to Wu, however, promoted an air-treatment machine priced at NT$41,000.
“While it didn’t mention COVID-19 by name, it did claim that the air purifier could help protect my family from ‘the current danger,’” she says.
Salespeople in other countries have been less subtle, some even promising potential buyers that machines of this kind are effective against coronaviruses. According to experts, air purifiers won’t help much against a virus that isn’t airborne as such, but spread through respiratory droplets deposited on surfaces.
“Educating our distributors to refrain from exaggerating product efficacy has always been a fundamental and vital task. We strive to prevent any possibility that distributors capitalize on the COVID-19 crisis to make money erroneously,” says Patrick Chang (張明德), managing director of Amway Taiwan.
On March 20, the company’s global headquarters issued a memo titled “Amway products and the Coronavirus: What you need to know.” According to Chang, it was translated into Chinese and e-mailed to distributors (which the company calls Amway Business Owners or ABOs) on March 28.
ABOs “aren’t allowed to claim that our products can treat or prevent the spread of COVID-19 in any ads, leaflets, promotional materials or other ways. We also require [them] not to make any connections between COVID-19 and Amway products, brands and business on any media platforms and during face-to-face conversations,” Chang says.
Since then, he adds, Amway Taiwan has warned “dozens of ABOs who claimed on their Facebook pages that our air-treatment system could remove COVID-19. After they followed our instructions to delete those posts, we didn’t really punish them, but we continue to monitor their behavior.”
Nevertheless, some questionable posts made before March 28 remained visible as recently as Tuesday. In one, dated Feb. 28, a Taipei-based ABO surnamed Lin (林) wrote: “A frightening day, a new pneumonia is out there… luckily I have [Amway’s air purifier].”
“Heightened awareness of the need for self-care for immunity during the pandemic has helped us increase sales,” says Amway’s Chang. “Q1 sales grew around 10 percent year-on-year. Immunity-related products contributed more than 40 percent of incremental sales. Cleaning products also saw growth.”
Within the MLM industry, the shift from person-to-person sales to marketing via social media began several years ago, and the pandemic seems to be accelerating that trend. For Amway Taiwan, 73 percent of overall sales were online in Q1 this year, compared to 65 percent in Q1 last year, Chang says.
Social distancing practices have made it difficult for MLM representatives to sell and recruit in the traditional way.
“Since the outbreak started, opportunities for face-to-face promotion at both consumers’ households and in public places have decreased significantly. Routine gatherings and training courses have been suspended,” says doTERRA Taiwan & Hong Kong President Shawna Wang (王世芳). “But the environment is motivating our members to learn. For instance, older consumers who used to order and pick up on the spot have learned to place orders online.”
doTERRA sells essential oils, and Wang says the pandemic has been good for businesses selling this kind of product.
“Demand for health-conscious products is becoming more urgent, so the number of new doTERRA members has been growing for several months. Essential oil products have become a self-protection option, in addition to sanitizing alcohol and masks,” she says, while pointing out that “at the beginning of the epidemic, we provided very clear guidelines to our members, reaching a consensus to never make any claims about curative effects in relation to COVID-19.”
Herbalife, a prominent American MLM enterprise which specializes in nutritional supplements, has reinforced the training given to members when they sign up. Documents sent out by the company’s Taiwan head office remind distributors that they must not “claim that Herbalife products can prevent or treat COVID-19, enhance immunity or help people resist viral infections.”
On April 11, a Facebook account belonging to Derek Chan (詹世豪) and Joanne Chang (張嬌雁), a husband-and-wife Herbalife team, shared a translation of a post by pharmacologist Louis Ignarro, co-winner of the 1998 Nobel Prize for Medicine. The post discussed an experimental treatment for coronavirus victims and the role of supplements. It also featured a picture of one Herbalife product, and hashtags such as #HerbalifeNutrition and #Covid19 — but failed to mention that Ignarro is a member of the Herbalife Nutrition Advisory Board in the US.
Wu says that most of the coronavirus-related sales messages she’s seen haven’t come from MLM distributors, but from people hawking rubbing alcohol or toilet paper, or boasting about the efficacy of patent medicines. However, she singles out people involved in MLM as “annoyingly persistent.”
LITTLE PROFIT
If they’re pushier than other salespeople, or more inclined to stretch the truth, it could be because making a livable income through MLM is so difficult.
People good at selling, or able to gather a large team, may strike it rich. But according to the results of a survey published by the Fair Trade Commission (FTC) in July 2019, just 27.15 percent of Taiwan’s 3.08 million MLM participants earned any money at all in 2018, and the average payout over the year was NT$46,427.
Many who sign up do so to enjoy discounts, and have no intention of building a business. Even so, budding entrepreneurs who look at the FTC statistics and think they’ve a fighting chance of real success are probably mistaken.
Unlike in Canada and certain other places, MLMs in Taiwan aren’t obliged to reveal any details about distributors’ earnings. Amway Taiwan doesn’t publish income disclosure statements to protect ABOs’ privacy, Chang says.
By contrast, Herbalife’s “Gold Standard Guarantees” document provides a comprehensive breakdown of earnings, albeit using 2016 data. In that year almost 78 percent of Herbalife’s members in Taiwan bought products for personal use only. Within the minority trying to develop an income stream, the top 3.5 percent — some 353 individuals — received payments from the company averaging NT$3.86 million. In the same period, mean earnings for the lowest 83 percent (8,385 people) were just NT$17,635.
Neither the FTC nor Herbalife factor in expenses which distributors may incur while developing their businesses. These can include travel, training, and tickets to motivational rallies.
Each year, hundreds of thousands of Taiwanese quit MLM enterprises. Some critics of the industry say one reason it thrives is that failures are usually invisible.
If three bubble-tea shops on a street close down, it’s obvious the market is saturated. But those who crash and burn after joining an MLM scheme typically keep quiet about it.
Ex-distributors might feel especially embarrassed, because MLM enthusiasts often claim that people who don’t try hard are the only ones who fail. On his Web site, www.herbalstyle.tw, Herbalife’s Chan puts it like this: “Effort is the only rule of success… What is the chance of success? It depends on how much hard work you put in!”
In 2018, total sales by the MLM companies included in the FTC survey fell 6.3 percent to NT$83.03 billion. This year may turn out to be better, and economic uncertainty may spur more people to try their hand at MLM.
Recruitment messages on social media include hashtags which range from the mundane (“business partner recruitment”) to the inspirational (“you are the one, and time is precious”). But some, like one sent to Alice Wu, are more urgent.
“The economic impact of COVID-19 will be great. Don’t wait to lose your job. Join us now!”
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