Currently, network marketing, or multi-level marketing (MLM), a new business model in Cambodia, has become widespread around the city. This business model raises public concern because it is risky and makes it easy to lose money if not done properly.
Network marketing is about selling by word of mouth and getting as many members as you can to join the network and sell the products. People who start at the beginning will get commission from recruiting new distributors; the more people you can get to become distributors the more profit you can make out of it, so the profit comes from the commissions on the number of members you can get to join.
Thearith Seng, owner of Samkok Restaurant & Beer World, established a network marketing business two years ago but had to stop the investment after just one year. Seng said it made a good profit at the beginning but after a while, it sharply declined.
“This business model is usually not as successful in Cambodia compared to developed countries like the US or Singapore where citizens have higher incomes and thus, can purchase more,” he said.
Seas Raksmey, a fourth year student at Pannasastra University of Cambodia, majoring in business communication, said she first heard about network marketing in 2011.
“Most of my friends joined in network marketing for only two months and then they give up because they don’t have many networks to buy their products and they found out that there are a lot of negative aspects to it. They tend to regret the experience.”
Sann Hourharo, a marketing professor at Pannasastra University of Cambodia, said in some countries this form of business is considered illegal. The network marketing can be negative when structured as a “Pyramid Scheme”, a marketing strategy with many layers that focus too much on recruitment and training rather than selling the actual products.
“This form of business model cannot sustain long term because each distributor has to find at least two distributors under them, at the end it will collapse when they cannot find any more people.”
MLM business is known to operate all over the United States. Unicity Cambodia is a network marketing company with its main shareholder in the US. Unicity International, Inc, registered as a business in Cambodia in 2010, according to the deputy chief of a Department of Business Registration, Ministry of Commerce.
Kong Bo who claimed to be a director of Unicity Cambodia said he has known about Unicity for a long time because of his foreign friends while he took out a pile of documents and put them on his desk. The documents are about the background of Unicity, the process of executing the network marketing model and selling the products.
“Chance, success and failure are in the hands of the business owner. They have to use their own thinking and effort. People fail with this business because they don’t know about this project or how to clearly implement it,” Kong Bo said.
“I have a lot of members after two months who have joined in Unicity. There are users, sellers and network builders that can profit from this project. This business is good for those who have less capital,” Kong Bo said.
Professor Haro said network marketing also has positive side, depending on its operation. He suggested before investing in it, you should know the products inside and out, study about the company reputation and know where it came from. Also we should understand how it operates in Cambodia. If it relies solely on recruitment and training instead of the products or the product is unreasonably overpriced, the business could end up failing.