multi level marketing

In today’s digital world is MLM yesterday’s business model?

Let me start by saying I’m not in the MLM (multi level marketing) business. However I work with many clients who battle for market share against MLM competitors.

The biggest category is health-nutrition like weight-loss, vitamins, minerals and supplements, and personal-care and toiletry.

Whilst these products are pervasive offline in drug stores, pharmacies, supermarkets and online in marketplaces like Rakuten, the elephant in the room is MLM.

MLM is hard to see and not easily spotted on traditional market research radar screens, however it’s big business in Asia.

Take Amway whose global sales are said to be around $8.9bn. Amongst its top 5 markets, 4 are in Asia (China, Korea, Japan and Thailand). The US, Amway’s home market is No.2

Amway China event

The pandemic changed many shopping and buying habits. On one hand the stay-at-home mandates engendered greater health awareness, then there was the boredom factor. These factors favoured MLMs in the short term.

There is a fine line in MLM between selling to consumers and recruiting new distributors. When is it pyramid selling? Perhaps this is why MLM executives prefer the term ‘network marketing’?

Many of the distributors who joined during the pandemic have never been to a in person even

Herbalife Executive

Tupperware, an early pioneer in MLM is currently in severe woes saying,

“some recent financial statements should be restated and no longer relied upon.” Tupperware has been experimenting selling in new channels (read non-MLM) which demotivated many of its distributors.

Regulators too have been taking a closer look at MLM. Last October in Japan, authorities issued a partial business suspension order to Amway Japan for illegally recruiting a new member. This suspension lasted 6 months. Amway’s Business Owner (ABO) network prior to the order exceeded 690,000 persons apparently. How the suspension has dented this base I can only wonder.

Amway is privately held – actually one of America’s largest privately owned enterprises. However with Amway Japan sales exceeding US$700m, I don’t think we’re talking single digit declines.

Herbalife’s stock price is down almost 50% post pandemic. Medifast and WW International, formally Weight Watchers, are suffering too.

Often clients take too narrow a view of their competitive set. Yes tea is a different category to coffee but if I chose to drink coffee instead of tea, my share of throat has changed.

Digital wearables and even health apps on Instagram and TikTok are new, and significant competitors to nutrition and weight loss businesses. Don’t let anyone tell you otherwise.