THE controversial sales system of multi-level marketing (MLM) has come up with what it hopes is a gem of an idea - flogging diamond jewellery through franchisees.
Mr Fred Ho, who heads the upscale Jewels Defred store at Grand Hyatt Singapore, has linked with MLM company LFI (Singapore) and Hong Kong businessman Ho Wing Kong to sell diamond jewellery.
'Just Diamonds by DeFRED' involves Jewels Defred's Mr Ho bringing his collection to consumers here exclusively via franchise associates, who promote the collection to personal contacts.
Hinging on what he terms 'robustness of the diamond market', Mr Ho, who has more than 20 years of experience in the jewellery industry, believes in the collaboration's potential to grow his business.
'Branching out with the Just Diamonds brand is a natural extension of Defred's core jewellery business to garner a higher market share,' he said.
Individuals who buy $10,700 worth of diamond jewellery - deemed a 'package' - become franchise associates.
They can then enrol additional friends into the business as new franchise associates and earn 20 per cent of what these referrals spend at Just Diamonds.
So a franchise associate who convinces a friend to become a franchisee will receive more than $2,000 in commission.
More than 500 franchise associates have signed up since the collection's April launch.
Franchise associates also receive sales training and get access to the Just Diamonds showroom at LFI's head office in Geylang. Customers can only visit the showroom by appointment and when accompanied by a franchise associate.
MLM is a controversial process, due to its reputation for hard-sell tactics and unrealistic claims for returns for sellers.
But LFI, which is mainly known for marketing health-care products, says the link with Mr Ho will improve the reputation of MLM, or network marketing as it is also known.
'The main reason for the expansion of our product range into the luxury sector is in line with our strategy to position ourselves as a premier network marketing company regionally,' said Just Diamonds co-founder and LFI managing director Eldee Tang.
'By aligning ourselves with reputable business partners...LFI hopes to win over the public to give the much-maligned network marketing industry a second look.'
About 25 per cent of the franchise associates are undergraduate students, a demographic usually not associated with MLM. The rest are homemakers and 'blue- and white-collar workers', said Ms Eleen Tang, LFI's branding and communications manager.
The Straits Times uncovered a number of young Internet-savvy people hawking the venture on their personal blogs and advertising portals.
'I believe the business is worth the investment of my time and effort,' said an undergraduate student who declined to be named and who has yet to introduce new franchise associates to Just Diamonds.
Another undergraduate, who is helping her franchise associate friend spread word of the business online, sees the jewellery as a 'good deal', adding that the quality is comparable to high-end retailers.
A check with the flagship Jewels Defred store at the Grand Hyatt Hotel found that its range of jewellery is markedly different from that offered by Just Diamonds.
Jewellery from Jewels Defred is more elaborate while the Just Diamonds collection is better suited for everyday wear, according to Ms Tang. All items at Just Diamonds retail for less than $20,000.
Pieces from Jewels Defred cost anywhere between $8,000 and upwards of $1 million, according to a spokesman.
The new MLM venture has had a mixed response from competitors.
Taka Jewellery and Lee Hwa Jewellery said that Just Diamonds will find that consumers will only buy when an item is perceived to be value for money.
'It's all about rolling out the right products at the right price,' said Mr Kean Ng, assistant business director of Aspial-Lee Hwa Jewellery.
Mr Ng noted that there was a risk that diamonds could be commodified when sold outside conventional business models and may attract a different market segment to the one that the luxury sector is used to.
'Luxury items are a means of self-expression,' he said. 'Therefore, building brand equity is key as customers will still prefer to be associated with more exclusive brands rather than new entrants.'
