Billion Venture International Review: $1000 lamps?

Billion Venture International is the name given to the global operations of the Digital Crown Holdings Limited (DCHL).

DCHL was founded in 2000 and is headquartered in Taiwan. The company primarily operates in the Asian region although recently, under the name Billion Venture International, DCHL has begun a global expansion specifically targeting the US and Canada.

At the time of publication, DCHL claim on the Billion Venture International website that they have ‘an extensive network of 26 branches across 11 countries in the Asia region (and) more than 500,000 business partners‘.

On the executive side of things DHCL is headed up by Chairman Kim Huynh (right). In his executive bio Huynh is credited as having been “educated in France”, with DHCL coming about following Huynh’s bringing the French brand “Lampe Berger” (fragrance lamps) to “the Chinese community”.

Following the success of Huynh’s marketing efforts he established DHCL to sell Lampe Berger’s products through. which are credited with generating ‘half of (Lampe Berger’s) global revenue‘. This resulted in Lampe Berger granting Huynh “exclusive agent rights” for the Asia-Pacific region.

Since then DHCL has expanded out into a broader Asian market and added several other brands to its product lineup.

Read on for a full review of the Billion Venture International MLM business opportunity.

The Billion Venture International Product Line

Despite appearing to be the flagship brand under DHCL’s Asia-Pacific operations, Lampe Beger is absent as a product on the Billion Ventures website Not sure what the story is there (DHCL unable to market Lampe Berger in the US due to prohibitive existing distributor rights?).

The brands that are featured on the site though include Estebel (personal care), Ed. Pinaud (cosmetics), DeMelville (wine) and Inovital (micro-nutrients).

All of the brands marketed by Billion Venture International are located in France, reflecting Chairman Kim Huynh’s connections there.

The Billion Venture International Compensation Plan

There seems to be some confusion in Billion Venture as to what constitutes a retail sale. Going over the official Billion Venture International compensation plan material, it seems that the company groups both affiliate purchases and actual sales to retail customers as one.

This is naturally problematic and misleading, as only sales to genuine retail customers (non-affiliates) can be classified as retail sales.

Affiliate Membership Ranks

There are six affiliate membership ranks within the Billion Venture International compensation plan and along with their respective qualification criteria, they are as follows:

• Member – entry level affiliate rank
• Franchisee – accumulate at least 10,000 PV from affiliate who recruited you
• Baron – generate at least 90,000 PV in personal sales or recruit at least five Franchisee ranked affiliates
• Count – recruit at least 3 Baron ranked affiliates and have a downline generating at least 20,000 GV (5000 must be PV)
• Marquis – recruit at least 5 Count ranked affiliates, generate at least 5000 PV a month and have a downline generating at least 3,750,000 GV over three consecutive months
• Duke – recruit at least 5 Marquis ranked affiliates, generate at least 5000 PV a month and have a downline generating at least 40,000,000 GV a month

“Retail” Commissions

When a Billion Venture International affiliate recruits a new affiliate who then purchases products from the company, Billion Venture pay them out a commission on the sale. The same is paid out if an affiliate makes product sales to retail customers (non-affiliates).

How much of a commission is earnt depends on the affiliate membership rank of the affiliate who did the recruiting:

• Member – 10%
• Franchisee – 20%
• Baron – 29%
• Count – 38%
• Marquis – 41%
• Duke – 42%

Residual Commissions

Residual commissions in Billion Venture International are paid out using a unilevel style compensation structure.

A unilevel compensation structure places an affiliate at the top of the structure, with every personally recruited affiliate placed directly under them (level 1). If any of these level 1 affiliates go on to recruit new affiliates of their own, they are then placed on level 2 and so on and so forth:

Using the above unilevel compensation structure layout, Billion Venture International pay out commissions on the sales volume generated down six levels of recruitment.

• Level 1 – 5%
• Level 2 – 3%
• Level 3 – 2%
• Level 4 – 1.5%
• Levels 5 and 6 – 1%

Note that an affiliate must be at the Count affiliate level or higher to qualify for unilevel residual commissions.

Personal Group Bonus

Although not explicitly clarified, a 2% Personal Group Bonus is paid out to all Marquis and Duke ranked affiliates.

I believe the Personal Group Bonus is paid out on the sales volume generated by personally recruited affiliate (level 1 in the unilevel).

Generation Bonus

A Generation Bonus is mentioned in the Billion Venture International compensation plan material for Marquis and Duke ranked affiliates. Other than the percentage paid out however (6%), no further information is provided.

Profit Sharing

Presumably some sort of global volume revenue sharing scheme, Marquis and Duke affiliates share in 1.5% and 1% pools made up of this volume.

Again, the Billion Venture International compensation plan material fails to explicitly clarify and explain what these Profit Sharing pools are.

Joining Billion Venture International

Affiliate membership to Billion Venture International is $25 USD.

Conclusion

I’m not sure exactly what the standard is for MLM companies operating in Taiwan and China but there’s a lot left to be desired with Billion Venture International’s online presence.

I’m not sure when exactly DHCL launched Billion Venture but the largely incomplete flash-based auto music playing website feels pretty dated.

Of particular concern is a complete lack of a retail storefront, with affiliates only able to enter something called an e-calculator in order to purchase product directly from the company.

All in all, this appears to be the focal point of the Billion Venture International business. You sign up as an affiliate, buy a bunch of products from the affiliate that recruited you and then go out and recruit new affiliates who buy from you.

Retail does exist but it seems the affiliate has to place the order with the company and then enter the customer’s shipping address.

The compensation plan is strongly geared to this, requiring all new affiliates to buy from the affiliate who recruited them to generate personal volume (PV) for them.

It is only after an affiliate has purchased 10,000 PV from the affiliate that recruited them that they can progress to the rank of Franchisee. I imagine an argument that if an affiliate sells this purchased product to customers or other affiliates that this counts as sales (retail in particular if it’s to non-affiliates), however revenue wise all money going into Billion Venture is coming from affiliates.

I suspect revenue wise Billion Venture International would be generating revenue overwhelmingly sourced from affiliates.

Typically I’d recommend prospective affiliates enquire with their uplines as to how much product they bought themselves and had recruited affiliate purchases vs. retail customers. Whilst this is still solid advice, one of the advantages in looking at a thirteen year old company is that some additional information is made available to us.

DHCL markets the brands they carry throughout many Asian countries but the company’s stronghold appears to be the Chinese market. Unfortunately for DHCL Chinese law prohibits them from operating openly on Chinese mainland soil.

To get around this, DHCL set up shop in Hong Kong (China… but not China) and ship out. In a series of articles penned over at the South China Post, how DHCL is operating in Hong Kong pretty much confirms concerns over the business model revolving around recruitment of new affiliates who buy products from their upline.

A magic lamp promising health and wealth has captured the hearts of tens of thousands of mainland visitors flocking to Hong Kong on ‘business inspection trips’.

But lurking inside the six Causeway Bay sales centres of Digital Crown Holdings (HK), known as DCHL, is not an Aladdin’s genie but rather a multilevel marketing (MLM) strategy.

‘Do you want to be a millionaire owning deluxe villas and luxury cars like BMWs and Audis while you are still young?’ an instructor nicknamed ‘Muscle Man’ asks a room filled with at least 100 people aged from their late teens to their 60s.

‘Is your current salary too little for you to afford a home amid today’s soaring property prices?’

Several loud voices quickly answer affirmatively, swelling into a chorus.

Muscle Man tells them he was earning more than HK$60,000 a month just a few months after signing up as a distributor three years ago.

Some of the mainlanders look shocked, sitting with mouths agape. Some whisper that they earn just 3,000 yuan (HK$3,650) a year back home.

Muscle Man assured his group, saying: ‘We are not running chuanxiao, but a modified MLM model tailor-made for Chinese.’

In another room, Muscle Man’s upper-level ‘referrer’, known as ‘Big Brother Tong’, is talking to another group.

‘I have never found such a perfect, profitable and sustainable business as that set up by DCHL,’ says Tong, who claims to have been a successful entrepreneur in Zhongshan.

‘If you start your business here, you will become Hong Kong-based businesspeople, enjoying the lowest tax rate in the world.’

He and Muscle Man say they are now ‘marquis-level’ distributors, earning at least HK$1 million a year.

‘Hong Kong is a legal city. Some people tried to call the police and reported that we were operating chuanxiao, but the police refused to deal with the complaints because MLM is legal here,’ Tong tells new participants.

if you want to know how effective and powerful our system is, you should pay a HK$62,608 franchise fee to become a ‘count’ first,’ Tong tells one newcomer.

A new member must pay a membership fee of HK$360, followed by an annual fee of HK$210 after the first year of membership. A member who buys goods valued at HK$5,000 becomes a distributor, enjoying a 20 per cent discount on products.

A distributor will then be promoted to ‘baron’ after purchasing more than HK$24,000 or recruiting at least five new members – who are also keen on developing their own networks.

Senior distributors encourage new participants to make purchases totalling HK$62,608 – enough to become a ‘count’, saying the ‘big investment’ is the first step towards earning your first million.

Over several months, DCHL has failed to reply to repeated requests by the South China Morning Post for comment.

Legal in Hong Kong or not, that certainly doesn’t sound like MLM to me. I can see retail commissions in the compensation plan but from the sounds of it revenue wise it’s all coming from new affiliates.

Reading on, it isn’t long before the same old tired arguments that pyramid scheme operators elsewhere in the world love to use are dragged out:

‘All negative information was either made up by our competitors or the media … journalists don’t like us because we never give media outlets advertisements,’ Tong tells mainlanders at a training conference.

‘Our system is a perfect system to help the poor out of poverty, so the mainland authorities will soon lift the ban and allow DCHL to enter the huge mainland market.

‘Our business model is different from other inferior pyramid schemes that are banned on the mainland because we have products, while others are just aimed at raising funds without selling any products.’

Right. Because no pyramid scheme ever had a product attached to it.

Meanwhile on the political side of things in Hong Kong:

Democratic Party chairman Albert Ho Chun-yan, one of the lawmakers who passed recent amendments to the pyramid sales law, has received hundreds of complaints from people claiming to have been cheated.

‘I believe [they are] running a pyramid scheme … the distributors’ income depends on the number of people they recruit,’ he said.

And the experience of your typical Chinese DHCL affiliate?

‘The so-called efficient franchise system, which they claim is similar to the one used by McDonald’s, is an absolute scam,’ said Angela Zhang, a former DCHL distributor who invested more than HK$67,000 in December to become a ‘count’ level distributor.

‘It is just an elaborate hoax, teaching senior distributors how to drag in more friends and relatives to take in more money.’

Zhang, a doctor from Taiyuan, the capital of Shanxi province, was brought to Hong Kong by a friend in mid-December for a three-day ‘business inspection trip’. It was her first visit to Hong Kong.

Her friend told her that she had set up a ‘very profitable business’ in Hong Kong and needed more partners, but refused to reveal more.

‘I was finally convinced by her because Hong Kong has such an irresistible lure for simple people like me from the mainland,’ said Zhang, the mother of a two-year-old boy. ‘We just know that Hong Kong has a perfect legal system, and shops there would never sell products like milk powder with melamine.’

On her first day in Hong Kong, she paid HK$5,360 to join DCHL as a distributor after confirming that it sells real French-made products. Her friend received HK$1,000 as commission after the deal.

Zhang was then taken to Zhuhai, where she was persuaded to sign an agreement to entrust a law firm to help her remit HK$62,608 to Hong Kong for a ‘big investment’.

‘In Zhuhai, I was convinced after being taken to the luxury homes of some senior distributors. They kept trying to persuade me and other new participants to seize a ‘rare opportunity’ by making a ‘big investment’ to become a ‘count’,’ Zhang said.

‘They pushed us to make a decision within a week. They said it took God only six days to create the world.’

After investing HK$62,608, she found that her referrer had been given further commission of HK$12,521. Meanwhile, Zhang was taught the secrets of the ‘franchise system’.

‘They wanted me to list 20 relatives and friends who I could either potentially recruit or borrow money from,’ she said, adding that she was reminded to remain tight-lipped about her business to everyone, including her husband.

Zhang said new participants were taught that if they wanted to earn their investment back quickly, selecting the right 20 people was the key.

DCHL – MLM company or a professional grade racketeering outfit?

With what clearly appears to be an affiliate-funded scheme with little to no retail activity, at this point you’re probably wondering why authorities in Hong Kong (and Taiwan) haven’t shut DHCL down.

Well, why haven’t they?

DCHL claims to have more than one million distributors in Asia, but everyone is independent and in its partnership regulations it says it will not take any legal responsibility for illegal business deals.

Many mainland-based distributors say they realise that MLM operations are illegal on the mainland and so bring potential targets to Hong Kong in order to make their deals in the city.

Senior DCHL distributors say Huynh has told them that Beijing will soon allow the company to develop on the mainland because it has made many charitable donations.

In video footage posted on the company’s website, Huynh claimed in 2009 that DCHL aimed to expand to the mainland and India, as well as the European market and even make inroads into the home of MLM – the United States.

“Charitable donations” to legitimise a pyramid scheme might be par for the course in China, but good luck flying that flag in the US and elsewhere.

Convincing people living in China to pay $1000+ USD for an oil lamp on the promise of pyramid scheme riches is one thing, taking the same message global is another entirely.

One can only hope that “Chinese communities” elsewhere in the world aren’t as gullible as some of those living on the mainland seem to be.