Number of multi-level marketing businesses drop to half
The number of multi-level marketing businesses has halved to 37 by end of March, following Government crackdown over the past two years to ensure that they are operating correctly.
The Ministry of Industry and Trade has been closely monitoring multi-level marketing businesses across the country to prevent illegal operation.
The latest statistics with the Ministry of Industry and Trade (MoIT) shows that the licences of 15 multi-level marketing firms were revoked, while 12 others closed down themselves, and three others temporarily halted operations last year.
The number of people involved in multi-level sales total 637,637, a drop of 25 per cent compared to the end of 2015.
However, despite a significant decrease in the number of multi-level marketing firms and sales people, the sector’s revenue dropped by only 2.5 per cent to VNĐ7.8 trillion (US$346.7 million) in 2016.
The Competition Management Authority said this indicates that social responses towards illegal multi-level marketing do not have significant impact.
The revenues of multi-level marketing firms mainly came from sales of supplementary food (59 per cent) and cosmetics (24 per cent).
About 31 per cent of the total revenue was used for paying commissions. On average, each sales person earned just VNĐ3.8 million per year, the Competition Management Authority said.
Significantly, the returns of multi-level marketing firms were low, averaging 2.2 per cent, with more than 50 per cent of the firms reporting losses last year. The authority said these firms have not contributed much to the State budget.
It is difficult to determine the true value of multi-level marketing products as all transactions are made on the basis of an agreement between sellers and buyers, so the Government cannot intervene, the Competition Management Authority said. So consumers should be sensible and study products carefully before purchasing anything, it advised.
Since mid-2015, the MoIT has been closely monitoring multi-level marketing businesses across the country to prevent illegal operations and to maintain a healthy business environment in the sector.