Tuesday, 21 Nov 2017

Bring multi-level marketing back to its true nature

Updated at Friday, 01 Sep 2017, 18:30
The Hanoitimes - Multi-level marketing (MLM) is a famous business model all around the world. MLM reduces many costs during the good distribution process, so that both sellers and consumers can earn benefits.
According to the statistics provided by the World Federation of Direct Selling Associations (WFDSA) in 2010, even though the gloal economy encountered many difficulties, the revenues of MLM in the world still achieved over 110,000 million USD, an annual growth rate from 20 to 30% and the number of participants at nearly 75 million people. In 2015, the retailing revenues following MLM model reached 183,729 million USD. Since its first appearance in Vietnam, MLM activities have attracted the participation of over 600,000 people and brought a revenue of over 7,800 thousand billion VND. Vietnam is a newly emerging market of the MLM activity. Therefore, the Vietnamese market needs to be developed further in order to bring benefits for participants, enterprises and the funding of the Government. 

MLM means the more products are sold and bought, the greater the economic profit is. In order to sell more goods, participants need to construct their own networks, with individual distribution system. With more participants in the network, goods will be distributed throughout the market and the consumption market will also be expanded. As a result, MLM may result in some twisted transformations, in which selling, increasing revenues are not the main goals. Instead, some companies strive to admit as many participants in the network as possible, force them to pay membership fees and to buy goods with high price so that the companies can get benefits directly from participants. 

With the current situation, the MLM market in Vietnam has passed the most depressing period in the development time of the field. Many MLM enterprises stopped functioning because the business environment in Vietnam for MLM still has many obstacles, from the public’s perspectives on MLM activities to strict governmental policies.

According to the statistics of MLM activities in 2016 from enterprises, the number of MLM firms has significantly reduced in 2016 (45% decrease), the number of people taking part in MLM also reduced (25% decrease), while the revenue of this sector has decreased 200 billion VND, equivalent to a decrease of 2.5%. Since the beginning of 2016, there are no new enterprises taking part in the MLM market, showing the concern of enterprises toward this sector, combining with the current regulations restricting the development of this sector. Credible foreign enterprises have also expressed their concerns over expanding operation in Vietnam. As a result, it has a negative impact to the employment and revenue of the state budget. 

Moreover, in reality, there are enterprises established one year ago, but have not really gone into operation, due to difficulties in getting license for multi-level marketing activities. At present, the number of enterprises having to pay for daily expenses, but are not allowed to operate is increasing. Per calculation, newly established enterprise has to spend approx. 2 billion VND per month to maintain daily operation in these situations.

Decision No.35/NQ-CP dated May 16, 2016 of the government on supporting the development of enterprises to 2020 stated, the government ensure the rights for business operation, and equal access to resources and opportunities of enterprises. In which, specifying the Ministry of Trade & Industry to cooperate with related agencies in research, revise and remove current regulations on policies of issuance licensing for import, market management, competition, supporting industry in the direction of creating convenience, reducing expenses for enterprises in accordance with international commitment.

As such, administrative agencies need to increase efficiency in their responsibilities of management to timely identify and deal with multi-level marketing firms exploiting this kind of model to violate the laws. At the same time, it is necessary to finalize regulations and laws on MLM, punishing MLM firms which violates the law and related public agencies. 

With the objective of turning Vietnam into an attractive business environment and generating revenues for enterprises, the effort of enterprises alone are not sufficient, but also requires supports from the government.
Nguyen Tung - My Ngoc
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