MLM - Multi-level Marketing, or network marketing, is a strategy some direct sales companies use to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits' sales. The main idea behind the MLM strategy is to promote a maximum number of distributors for the product and exponentially increase the sales force. The promoters get commission on the sale of the product as well as compensation for sales their recruits make thus, the compensation plan in multi-level marketing is structured such that commission is paid to individuals at multiple levels when a single sale is made and the commission depends on the total volume of sales generated.
According to a representative of the Vietnam Competition and Consumer Authority (under the Ministry of Industry and Trade), multi-level marketing is an industry recognized by the world and is strictly regulated by Vietnamese law. Legitimate multi-level marketing enterprises in Vietnam have existed and developed for nearly 20 years, and up to now, the multi-level marketing industry has basically been shaped and operated in a regulated manner, under strict management.
Specifically, by the end of 2020, there have been 22 businesses in the market granted legal certificates of multi-level sales activities. Those businesses achieved a revenue of more than 15,400 billion VND in 2020, with a total number of more than 800,000 participants. The total amount of tax paid by enterprises to the state budget reached more than 1,800 billion VND.
However, besides legitimate businesses, many businesses take advantage of the multi-level business model to attract investment and conduct illegal activities such as the operation of the Gold Time Coffee system, project OWIFI, My Aladin; financial investment models, foreign exchange such as Lion Group, Liber Forex.
Economic experts believe that legal multi-level business activities can bring income and success opportunities for many people, but people need to be alert to distinguish between mainstream multi-level business models and illegal multi-level business to have the right perception, avoid unnecessary risks both in terms of property and legal.
In fact, in recent years, there have been many successful people participating in multi-level marketing, earning a high income, but there are also some people who do not understand multi-level marketing well and are lured to participate in various forms of illegitimate multi-level marketing schemes.
According to Mr. Ngo Tri Long, former Director of the Institute for Price and Market Research (under the Ministry of Finance), multi-level marketing is a very popular and successful business model in many countries in the world.
"This is a form of sales where goods are distributed directly from manufacturers to consumers without going through retail stores or intermediary agents. Consumers directly introduce and distribute products to others acquaintances such as friends, relatives.
The consumer in multi-level marketing is both a seller and a supplier, advertising the product, thus saving costs for the manufacturer, that amount is divided among the levels in the distribution network. distribution of buyers and investors to improve products", Mr. Long analyzed.
However, according to Mr. Long, multi-level marketing is still not a popular business model in Vietnam. Most Vietnamese often have a negative view of this network-based business model. In Vietnam, multi-level marketing appeared in 1999-2000. Currently, this activity sells over 7,000 products, mostly 80% functional foods.
According to this expert, enterprises will face many opportunities when participating in multi-level business as recognized by law, such as no investment costs, no premises, no need to hold goods, no pressure on sales, no time constraints. Businesses can also join easily, regardless of education level, where they live and can also create an automatic money-making channel.
Talking about the potential of business granted in Vietnam, Mr. Long has a rather optimistic view. According to Mr. Long, Vietnam's population is nearly 100 million people, people's living standards are always improving, income tends to increase, especially the middle class. Therefore, the potential of the multi-level business is still very large.
Vietnam is also in the Top 5 world markets with the fastest growth in multi-level sales revenue in 2019. The number of multi-level sellers ranks fifth in Southeast Asia, after Indonesia, Thailand, the Philippines, and Malaysia.
Compiled by VietnamCredit