I will try and explain whatever little I know about Qnet. I have a close friend having been tricked into becoming a member and also got know a few other people. Since I was very curious about the Qnet Scam I researched and got my answers. Its a pyramid scheme in the disguise of an MLM business model.
Q1. What is the Business of Qnet?
The business of Qnet is to sell the epic dream of 'Work for a couple of years and earn forever, doing nothing'. Needless to say, there are millions of people across the world, who buy into this dream.
To become a Qnet member you have to buy products between INR 40K -120K. Qnet sells its products at crazy margins, for eg my friend bought their bestselling product A Healing Biodisc 2for INR 22,000. In reality, it is just a 3 Inch glass disc that can be procured from China for nothing more than INR 100.
The gross margin is whopping 21900%.
Q2. What is the greatness in products that Qnet sells?
The greatness of a Qnet product is that it contains magic. Or atleast a promise of magic.
And most magic is perceived rather than reality. How do you know if a health shake you just drank increased your immunity or not. The Qnet members who buy these products believe in them because THEY WANT to believe in them.
I will give you a few examples. The top 3 categories for Qnet are Energy, Nutrition and Personal Care.
A Qnet biodisc for INR 22K is supposed you make you feel fresh. There is no measurable/ visible effect of freshness. You might as well buy a Tibetan ring for INR 250 that also claims to make you feel fresh.
Similarly Qnet's Nutriplus protein powder costs INR 4000 and improves immunity and builds Muscle. But one can also buy a horlicks for the same and it costs only 150 bucks.
You get the drift.
Q3. Who makes these products that Qnet sells and what is the relationship of Qnet the Company and the manufacturers? Is it Vendor - Principal, Self Manufactured or a combination of Both?
It’s a combination of both.
In my discussions with one of the estranged senior member I got to know that most of their products are manufactured or sourced from China. A few products are sourced from other countries as well.
For their travel package product they have a couple of self owned resorts in Thailand.
Q4. What margins are possible to be earned on such products?
Answer with world examples of similar industries and quote some publicly available data. Product level gross margins are upwards of 10000% in most products.At a company level the cost structure looks like follows :
As a percentage of revenues, 20% are operating expenses. MLM companies are heavy on marketing and sponsorships, international and local seminar with celebrities, promotions, IT, Trainings etc. For eg Qnet is associated with F1, Donates to Unesco, Is the sponsor of Indian Davios cup team etc.
40% is distributed as commissions between the 'Upchain' members. All those people who have led to this member are paid. People higher in the chain get paid less per transaction but will have higher cumulative earnings and vice versa. Qnet follows a MLM model known as Binary Tree Structure. The commission models can be disguised in many forms but broadly the payouts remain the same.
Remaining 40% is operating profit of the company (Qnet)
These percentages (20:40:40) differ for different companies. Qnet chooses to spend more money on marketing and promotions to increase its member network. With time it is becoming increasingly difficult for MLM companies to make members. A decade back a large MLM company could have done with (10:30:60) model.
ROIs, ofcourse are crazy since this business is not capital intensive. Its scam intensive smile emoticon
I am surprised on how media and government are quiet on such large scale scams.
The product level margins are as follows
A Biodisc2 Costs, INR 100 and selss for INR 22,000
A Nutriplus costs INR 4000, comparable Horlicks costs INR 150
Qnet will debate that their product has some magic that horlicks does not have , but it’s just sales talk.
Q5. How can these margins be remunerative by sharing across multiple levels of people? If margins are finite, how can sharing be infinite? (It is possible)
A successful binary tree model MLM company can reach 1 million members in 24-28 layers and 10 million members in 30-34 layers.
If a company has say 10 million members, the commission from a new transaction will be divided between 30-40 members in the Upline. Its infinite only in theory.The commission models can be disguised in many forms but broadly the payouts remain the same
Before starting Qnet promoters used to run a company called Goldquest , which is a known scam and is now banned in many countries. Most MLM companies have a shelf life of 5-10 years. Once the pace of signing up new members becomes really slow, the promoters will start a new company. They can either wind up the current company or let it linger on for sometime.
After winding up, promoters usually restart with a new product and new name. Their top distributors move with top 3-5 layers of downline to the new company. This is exactly what has happened with Glodquest promoters started Qnet.
I also want to touch upon the phenomenon of Qnet members trying to make a new member. We all have been approached by some friend/ relative for some MLM company or the other. An active MLM member does not look at his relationships as relatives and friends, he only starts looking at them as downlines. He also manages to convince a few only to realise a few months/ years later that he has lost/ strained that valuable relationship.A newbie however is different, he is still trying to understand the people and business and once he realises the truth drops out of the chain. 50% of the MLM members become inactive in the first year itself.
The members do not themselves believe that they are doing something wrong because of 2 reasons. Firstly they don’t know that they are part of larger scam and take it to be genuine business proposition. Secondly even if they know about the scam they don’t mind since they see a few senior members making a lot of money. The senior members are ‘demi god’ figures in the network. They are idolised and spoken about in every conference. What members fail to realise is that big money is only made by people who are way higher up in the chain and this money will keep flowing in to them only for a few years till that scam survives. After a few years these distributors will move along with their key team to another company and start rebuilding their downlines.
So the mantra is that if someone really wants to make money from the MLM scam, they need to ensure that they are early members of the chain in their country, Milk the cow and then move on to the next new company and product.
This can only be avoided by an active media and government. MLM is highly regulated in western countries and hence you will see that most fraud MLM companies are active in Asia/ MENA region.
6. Why can’t Qnet sell its great products (with its great margins like Walmart) and become the biggest retailer in the world?
Please refer answer 2.
There is no real need for these products, they are bought not for their benefits but to as a ticket to the evil /epic dream.
Ans 7) In the disguise of empowering people, Qnet only fools them. Even the acts of good faith are done to gain publicity.
Ans 8) In last decade or two network marketing has become an evil word, the mention of the same itself will make people run away. The Qnet members are trained not to give any indication of the business early on to a prospect. The real sales pitch only comes from a senior member in a face to face meeting.
Ans 9) Most fraud MLM companies sell dubious products at obscene prices. These products can only be sold by push that comes naturally in Pester Marketing. Many members buy a product simple because someone who is dear to them has harassed them enough to buy it. These members are not even looking at this buying to become a part of the network. The only other people who buy these product for logical reasons are members looking for further income.
-- Source : https://www.facebook.com/BanQnet/posts/455766931245741
