What is livestreaming and why should direct sellers do it?

The applications for livestreaming are endless. Gamers, artists, intellectuals, pundits, and entertainers of all stripes have been using it to capture audiences for more than a decade. But today the big thing in livestreaming is livestreaming commerce—selling products to your audience while livestreaming.

It’s clear from our conversations with some folks at company headquarters that not everyone knows the difference between livestreaming and video conferencing. The distinction is important. Livestreaming works differently and your distributors should be using it differently.

A livestream is usually public. Unlike video conferences which are open only to those with an invitation, livestreams are open to a broad audience. Viewers can pop in and out at random. Depending on the platform viewers might be limited to the streamer’s friends but the stream might equally be totally open to anyone in the world who wants to participate.

This means that when your distributors livestream, they need to be on their best behavior. They must assume that the FTC—and any other unfriendly viewer—might be watching.

You might wonder why direct sellers should use livestreaming platforms when they invite this level of risk. The answer is the reward.

Livestream commerce is booming in China and the rest of the world is catching up. In 2020, about 265 million Chinese consumers shopped via livestream—that’s 47 percent of livestreaming users in China.  While the sales method is still somewhat new in the United States, it’s growing fast. “The number of live events grew by 1468% between January and August 2020” (Uscreen). Livestreaming allows for the personal touch between people who don’t know each other, and that social engagement between streamer and customer also increases likelihood of purchase.

So how does livestream marketing work?

Behind the scenes of a livestream

Picture this. A friendly woman comes on screen. She knows your name (or your screenname) and some details about your personality and your life—the name of your dog, the ages of your kids, your hobbies, and even your sense of style. You’ve never actually met her, but when you type a message in the chat box, she sees it and she respond out loud to you like you’re friends.

Now imagine that woman is a fashion enthusiast. That’s part of her personal brand. When she streams, she talks to you about fashion—maybe she talks about fashion history, designers, news, trends. But some portion of the time she spends streaming, she spends talking about her favorite clothing brand. She models outfits from that company. She talks about the fabric quality, the feel of it, the way it hangs. She talks about the way the garments are constructed, the stitching, the silhouettes. She shows you the way it moves with her body when she does different things. She knows everything about the product and she loves to talk about it and, when you buy the product, she gets a little bit of money.

That’s livestream marketing. And many direct sellers are itching to get in on it. At MLM.com we started talking about it years ago—as early as 2016. But the technology and the adoption of the technology wasn’t there yet. These things take time. Today seems to finally be the day of the livestream.

How livestream commerce allows for interaction

Interraction through livestream

Distributors hold parties on livestreaming platforms where they broadcast video, from their phones or webcams. They bring catalogs to life by modeling clothes, jewelry, accessories. They demo make-up looks and skincare products on live models laughing and chatting and bringing the social experience of the salon into the viewer’s phone screen.

Meanwhile an audience of viewers sends chat messages in response.

And now and then a viewer gets the thrill of the livestreamer calling out their screenname and responding to them verbally.

There’s something bigger and better about being spoken to by a person on camera—a person who’s being watched by an unseen, potentially worldwide audience. There’s a mystique to the livestreamer that didn’t exist with an in-person party. And smart direct sellers grabbed hold of that mystique and made it their own.

The secret is in the parasocial relationship between the livestreamer and their viewers.

What are parasocial relationships and what do they have to do with livestreaming?

Parasocial relationships through livestreaming

Parasocial interaction has been the subject of psychological research since the 1950s. In a parasocial relationship, a viewer feels a connection to a celebrity or, for example, a TV character. There’s an illusion of intimacy. I might feel that Villanelle from Killing Eve is my friend and that might help me to feel emotionally invested in the season finale. But Villanelle doesn’t exist in the real world.

This is a very common experience. We’ve all gotten attached to television characters or celebrities.

This same type of bonding occurs between viewers of a livestream and the livestreamer. It’s probably obvious how this could supercharge the magic that already exists in direct selling. If I can convince people that they know me and have a relationship with me without actually meeting them or bonding with them in the traditional way, my warm market for sales can grow exponentially larger than it could in traditional direct selling.

But it seems livestreamers don’t just have an advantage over regular direct sellers. It may be that livestreamers have a greater ability to form parasocial relationships than traditional celebrities and characters. Why?

Livestreamers can reach more niche, targeted audiences and they can interact more directly with those audiences. Furthermore, livestreamers might have a greater ability to influence the way their audiences shop.

What the research says about livestream marketing

How can livestreaming increase your sales?

The data supports the idea that parasocial bonding on livestreams can be a powerful tool for marketing products. A study of Facebook Live shows that familiarity and similarity increase parasocial interaction that in turn connects to intention to purchase. A study on Taobao Live (a Chinese livestream shopping platform) shows that parasocial activity increases brand loyalty—the greater the interactivity, the greater the parasocial bond and in turn the greater the loyalty.

Before we conclude our review of the research, we have to take a step back and look at the counter points.

First, a lot of the data comes out of China and other parts of east Asia where cultures are quite different from that in the United States (for example, China is much more community focused while the US is more individualist). It’s difficult to know how cultural differences might impact this data.

Second, there is some data showing downsides to marketing on livestreams. For example, one study showed that viewers perceive the product recommendations of livestreamers as less credible if they are sponsored (or put another way, if they are paid to make those recommendations). This has obvious negative implications for direct sales companies looking to get into the livestreaming space. 

Conclusion

Livestreaming might be a great addition to your sales strategy but before you jump in with both feet, there are a few things you should consider.

  • Is your product a good fit to the livestream? Is there a way for your distributors to demonstrate the product on livestream?
  • Have you done your due diligence to train your distributors on legal compliance in their messaging? As your distributor force works more and more online, you must be careful to keep them from making illegal claims.

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Ever-Changing PII (Personally Identifying Information) Regulations

Photo by Nadine Shaabana on Unsplash

The outcomes from the technological revolution of the last ten years have not all been good. Some have streamlined the way we do business, but others have added incredibly hairy and tangled layers of complexity to them. Take for example the ever-changing regulations around personally identifying information (PII for short). PII is any information that can be used to distinguish or trace an individual’s identity (for example, names, Social Security numbers, driver’s license number, bank account numbers, etc.). PII regulations are a major outcome of the tech boom we’ve been witnessing.

As our reliance on technology has grown, so too has the storage of information. The amount of data storage used worldwide is growing.

When you create an account with a company—any company—your personally identifiable information (PII) goes into their databases, and they hold on to that data forever unless the company has a reason to delete it.

There is an abundance of PII data. In countries with full internet adoption, the average person has many accounts online. In 2017, the average American internet user had 150 online accounts that require a password.

The consequence of PII regulation

The big outcome of that abundance of data has been positive: it has allowed companies to create better and better experiences for their customers. But from the perspective of the user—the little guy—it’s created a lot of fear of vulnerability. That fear has led to increased government oversight. Consequently, industry—not just our industry, but all industries all over the globe—face an incredible challenge to continue to provide the high-quality experience users have come to expect while simultaneously meeting the shifting expectations of government bodies.

Dealing with PII regulations

Let’s look at some examples of PII regulations that impact direct sales companies at the time of the publication of this article.

  • In Japan, an MLM customer’s data can be transferred to a third party (as long as the customer doesn’t opt out) but the third party can’t re-transfer that data to anyone else. In other words, you can show a customer’s data to their sponsor, but that sponsor can’t legally share that data with anyone else. This presents not a software problem but a training and compliance problem.
  • California has The California Online Privacy Protection Act which requires that your website have an easily found privacy policy and regulates what that privacy policy must detail. You must follow the regulations of this act if your website is accessible by California residents—regardless of whether you operate in or use a web server in California.
  • The biggest, most extreme example of PII regulation to date is the European Union’s General Data Protection and Regulation (GDPR) law. GDPR is complex and still in flux. One example requirement is that if a user of your software asks you to delete them from your records, you have to completely remove all references to them that have PII data—from your sales ledgers, from your distributor tree, from every single database you keep—in the space of one month. Failure to meet the EU’s requirements can result in fines as large as €20M or even larger, scaling to your annual revenue.

If you aren’t prepared to respond to these specific regulations, you aren’t prepared to go into these markets. Furthermore, you have to be prepared to respond to whatever regulations replace them tomorrow.

Your system has to have the agility to deal quickly with everything that your field throws at it. That means you must look harder at your MLM software provider to make sure that they are keeping up with the times.

You can’t just hope for the best. You have to know you’re working with a partner you can trust.


At MLM-CC we help our clients navigate the complicated series of decisions behind choosing a software provider. We know the big players, and we can help you get the best system for your unique needs.

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Record breaking Q2 2021 direct sales

Recently we’ve been blown away by the sales numbers of MLM companies. 2020 was a good year for direct sellers—especially those in the United States but for the global industry as well. And with Q2 2021 results from direct sales companies, the good news keeps coming.

On the podcast we’ve talked about how well companies in the United States did during the pandemic. A Q2 McKinsey report indicated that overall consumer spending recovered. I assumed that sales would level off in the second quarter of 2021. For a surprising number of direct sales companies, sales continue to grow and, in some cases, reach record breaking levels.

Let’s take a moment to look at the sales data and to applaud those companies that are thriving.

2020 Sales data

First let’s look at who grew in 2020. According to DSA.org, the US industry’s retail sales went up 13.9% in 2020.

Source: DSA 2020 Industry Overview

The World Federation of Direct Selling Associations reports a 2.3% increase in worldwide retail sales in 2020. In their regional break down, North America saw the greatest improvement with Canada reporting the largest single-nation increase, 26%. Not everywhere in the world did as well as North America; Asia and the Pacific dropped by 3.6%. However, all other regions saw some increase in sales.

Source: WFDSA Global Direct Selling – 2020 Retail Sales

Q2 2021 sales data

As I said, I assumed that sales would level off. Unemployment has dropped back to around 5.4% (down from the high of almost 15% last April 2020). I assumed that as people got back to their regular jobs, their gig activity would decrease. However, for a number of companies, sales keep going up.

A few weeks ago, company after company posted significant increases and, in some cases, record breaking increases in Q2 of 2021.

Company Q2 revenue or net sales Percent increase
Nu Skin (source) $704.1 million revenue 15%
Medifast (source) $394.2 million revenue 79.2%
Primerica (source) $654.7 million revenue 25%
Herbalife (source) $1.6 billion net sales 15%
USANA (source) $336.8 million net sales 30.1%
Nature’s Sunshine (source) $109.0 million net sales 25%
Tupperware (source) $464.7 million net sales 17%
Mannatech (source) $42.5 million net sales 12.9%

These Q2 reports suggest that 2021 may follow last year’s growth. 

To what can we attribute this incredible Q2?

Wellness continues to trend upward

According to dsa.org, wellness companies appear to have had the most sales in 2020.

Source: DSA 2020 Industry Overview

Four general wellness companies showed increases in Q2 of 2021, Nu Skin, USANA, Nature’s Sunshine, and Mannatech. It makes sense that wellness companies would be on the rise. We are all trying to figure out a way to get or stay healthy. Many of us have tried to boost our mental and physical health and direct selling companies helped fill that need.

Weight loss products are trending too

In addition to the increased desire for general wellness, many of us are specifically trying to lose weight gained during the pandemic.

You may have heard of ‘the COVID 19’ in which the 19 refers to the number of pounds people gained while shut away in their houses for the last year. A recent survey found that 42% of U.S. adults reported an undesirable weight gain during the pandemic (although the study found people gained around 29 pounds, not 19).

Companies like Medifast and Herbalife who specialize in weight loss saw record Q2 results. Medifast reported an increase of 31% in 2020 over 2019 and then in Q2 of 2021 reported 79.2% increase from Q2 in 2020. Herbalife reported a 14% increase in 2020 and then in Q2 reported 15% increase over Q2 in 2020.

Conclusion

These numbers are incredible. Not all public direct sales companies reported increases. However, it is clear to me that many wellness or weight loss companies can capitalize on the shifts in consumer attitudes and behaviors.

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Direct Sales Online Revolutionized the Industry

Over the last ten years, the world of direct selling turned upside down. Direct sales moved online and now everything is different.

It happened so quickly, some of you reading this slept through it. You woke up on your head, and you’re rubbing your eyes wondering what exactly is going on.

If you’re lost, I’m here to tell you what is happening.

What’s happening?

Social media has revolutionized the way people interact with and relate to each other. Eager, early-adopter distributors rushed right in, finding new opportunities to meet people and spread their message.

Social media brings us together, divides us, and influences the way we buy. Are your direct sellers online yet?
Photo by ROBIN WORRALL on Unsplash

Video conferencing, video calling, and livestreaming revolutionized the way people consume information and connect. Pioneering distributors started finding ways to hold parties and meetings online; They started demoing products, training their downlines, and offering social support virtually.

Ecommerce and especially Amazon revolutionized the way people shop for and buy just about everything. Direct selling companies have been forced to keep up. Some have done better; Some have done worse. Which camp are you in?

Meanwhile, the FTC did their part to keep up too, and their job has gotten easier every year. Companies and distributors have put more and more content online on YouTube unprotected so anybody can look at it. All the FTC has to do is click the play button and watch.

The FTC pushed direct sellers to focus on customers. In the same cultural moment, the customer’s need to receive that focus skyrocketed.

Fake news and false reviews

A proliferation of information, misinformation, conflicts of opinions, and outright lies online led to radical divergence in behavior in every category from how we think, act, behave toward one another, to yes how we shop. As more and more of our lives happen online, we fall deeper and deeper into ourselves. We’ve become more vulnerable to misinformation and more desperate for connection.

We're scared and we're isolated. But your direct sellers can do something about that.
Photo by Ariana Tafur on Unsplash

Are your distributors providing that connection or are they spamming people with annoying, emoji-cluttered, compliance-nightmare Facebook posts?

Amazon offers us cut-rate products of every possible kind, but we can’t know if the seller we bought from yesterday is the same one Amazon is serving us today. We can’t know if the review we’re looking at came from a real person or a review farm in India. Are the ingredients in this product pure? Is this a knock off? Is this green?

You don’t have these problems. Personal connection and purity of product are two advantages that direct selling companies have always had. Your distributors are real people who your customers already know. They live right down the street. And your product came from the same farm that you’ve been strictly regulating for three decades.

Direct sellers were poised for massive growth but some of them didn’t know it yet.

And then came the year 2020

COVID-19 arrived and kicked everyone who wasn’t already online over the cliff. Now everyone is using social media, video, and ecommerce to get what they need.

COVID-19 turned laggards into adopters. Online commerce is at an all time high.
Photo by Obi Onyeador on Unsplash

Ecommerce now accounts for 21.03% of total retail sales in the U.S., up from 4.2% in 2010. Online sales are more reliable and trusted than ever. That percentage is even higher in the MLM world. Many direct selling companies do over 70% of orders online. For a lot of people that would have been inconceivable twenty years ago.

The direct sales world is almost unrecognizable. It’s not going back to the way that it was, and it’s not done changing.

The change is both good and bad. If you’re moving along with the tides, then it’s great. For many companies, business is booming. Out of the top 111 direct selling companies in the U.S. only 15 did not see increases in revenue in 2020. If your company was one of the lucky ones that went up, you may not understand what drove all the new business. You might worry that the increase could lead to more FTC scrutiny. We know that early on in the pandemic, the FTC got after companies for their distributors making income claims. The companies that don’t adapt, won’t survive.

But why is all of this happening?

Here we have to speculate. You might point to any one of the things I’ve already mentioned as the “cause” of the revolution. Or you might point to the law that first allowed commercial activity to happen on the internet. That law only went into effect in 1996. Before that it was illegal to conduct business online.

Everything is online. Is your direct sales company?
Photo by Compare Fibre on Unsplash

In twenty-five years, ecommerce has gone from being illegal to being the driving force behind the industry. Everything online is now commercial in some way or another. So, virtually nothing you touch when you go online—social media, email, video conferencing, and ecommerce—could exist without that law.

You could make an argument that that single event triggered this revolution, but I don’t think that’s it. The real trigger of the revolution is something else entirely. Something happened that caused a whole bunch of changes—ripple effects across the planet. Changes that we’re still running as fast as we can to catch up to. What was that single trigger event?

Broadband Internet.

Back when the internet was young

Many of you reading this don’t remember old dial-up modems—the technology that preceded broadband, that is: 56k internet. Oh, man, when it first came on the scene, we thought 56k was so cool.

Back in the day, it could take several hours for a single article to download. Nancy, the academic among us, used to go to the library to download articles to use in her research papers. Back then, you didn’t own the computer, and you could only do one thing at a time on the computer (and you of course had to walk up hill both ways through the snow). It took so long to download one article, she would take a book with her so that she could read a couple of chapters while she waited. In comparison to waiting two weeks for interlibrary loan, she was happy to sit in the library that long. That’s how far we’ve come.

Today almost nobody uses dial-up. According to Pew, broadband surpassed dial-up in 2005.

The usability difference between broadband and dial-up is obvious but the technical difference might not be. If you’re on Google Fiber, you might be getting 150 megabits per second (Mbps). That’s 150 million bits per second. According to speedtest.net, 86.04 Mbps was the average internet speed in the US in 2020. A paragraph ago, we reminisced about using a 56k modem. 56k is 5600 bits per second. We’re talking many orders of magnitude of difference.

The impersonal internet became personal

Nancy remembers a meeting in which executives of a big and famous party plan company told her they would never use the internet to connect with customers. Never. At the time, they believed it was too impersonal. That was 2001. Direct sales is a social business and without the possibility of being face to face—that is, without video—the internet could never be personal enough for it to be a viable platform for direct sellers. Even into the 2000s, video calling the way that we do it today was just unimaginable.

In the 1970s, AT&T ran a series of ads with the slogan “Long distance. The next best thing to being there.”

During COVID, video conferencing became the present day “next best thing to being there.” But it wasn’t COVID that made video conferencing possible—COVID just popularized an option that we already had and were afraid to use. Part of why people were afraid to make video calls was the tools came into existence before the bandwidth to support them was widely available. We all have memories of sketchy video calls that were awkward, pixelated, and uncomfortable.

If you don’t have at least five megabits or 5000 KBps of download and upload, then you can’t run a decent quality video conference. It’s just not possible. In 2007, the average connection speed was around 4000 KBps. For five years, bandwidth was basically flat just below the threshold necessary to make video calling smooth and pleasant.


source: tradingeconomics.com

We didn’t reach that crossover point until 2012. You can see from the graph above that the average was 5000 KBps in 2012. That means half of internet users were above that, half of them were below. But by 2014, the average doubled meaning virtually everyone was able to have a smooth and pleasant video call. That’s the moment in time when video conferencing really starts to work, and it’s the same moment when the internet becomes personal.

From then on, keeping your direct sales business 100% offline becomes a pipedream.

An insatiable hunger for bandwidth

After that, internet speeds just went into hyperdrive. Look at the curve of that upward climb. The rate at which internet speed increased is unbelievable. It’s hard for us as human beings to wrap our heads around big numbers, so I’m going to use an analogy.

Think about it like this:

Imagine if the speed of jet travel had increased at the same rate as the speed of the internet to the household between 2007 and 2014.

You’d be able to fly from New York to Japan in a few minutes.

What would you do with this kind of speed?
Photo by Jezael Melgoza on Unsplash

Imagine that in the span of just seven years it became possible for you to make that flight in less time than it takes you to get to your best friend’s house or go to the grocery store. How would that change the world of business? Travel? Leisure? Everything else? It’s just an unimaginable change. It would change the whole world economy. That’s what happened to the speed of the internet.

Yes, the 1996 law was important—essential—to the revolution we’re living through. Other changes have been enormous. But nothing compares in triggering the revolution more than the average speed of the internet in the home.

Our hunger for bandwidth is insatiable, and it’s all about connection. Now Google Fiber is spreading megabit (and even gigabit) internet from one urban area to the next. Tomorrow Starlink will take megabit internet to the middle of nowhere with low earth orbit satellites. And it will become ubiquitous. No matter where you go, you will be able to connect—top of the mountain, bottom of the valley, it won’t matter.

What will that kind of connectivity give us?

It’s not over yet

The point is, the revolution is not over because the cause of the revolution hasn’t stopped churning. Bandwidth keeps growing and as it does the ripple effects across the globe will continue. The more bandwidth people get, the easier it will be to connect to others. The easier it gets for people to connect; the more ways people will find to connect. Human beings are social animals. We are built to connect to one another. And the direct sales business is all about connection.

People move fast. Is your direct sales company moving slow in the race to modernize and go online?
Photo by Timon Studler on Unsplash

If you’re trying to run an MLM the way you ran it 10 years ago, you will miss the boat.

How do I know that’s true?

We have seen huge changes like this in the industry before. When I was starting out in this industry it was right at the brink of a different revolution—the multi-level revolution. Before the 1980s, direct sales compensation was all single-level (or very nearly). When multi-level compensation came on the scene, they kept “those MLM people” fenced off in a corner where nobody else had to look at them.

Now multi-level compensation is ubiquitous; There’s hardly a direct sales company anywhere around with true single-level compensation. The old school direct sales companies that didn’t adapt to the new way of compensating distributors went the way of the dinosaurs. I can pretty much guarantee that if you ignore this new revolution the same will happen to you. If you don’t have a strategy for your company to use these new tools and for your distributors to use these tools, you’re dead.


We’ve discovered a continuing need for our experience and guidance in the MLM world, so we’ve not only relaunched MLM.com to keep giving you our insights for free, we’ve opened a new firm, MLM Compensation Consulting. If your company needs compensation analytics, we’d love to hear from you. Check back weekly for more articles and podcasts from MLM.com!

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Where in the World is Direct Selling?

Is your company in multiple markets? Do you want to be? Direct selling is a worldwide business model. Many direct selling companies do business in multiple countries. If you run an MLM, chances are you’re operating—or want to operate—in more than one country.

When you’re looking to expand internationally, you need to do your homework. Before you move into any country, you need to study that country—study their culture, their sales numbers, their economic realities, and their regulations. Mark Rawlins wrote an in-depth guide on these considerations.

Today let’s take a close look at the latest worldwide network marketing facts and statistics from the World Federation of Direct Selling Associations (WFDSA). The WFDSA represents 63 national direct selling associations and provides a wealth of information about direct selling and multilevel marketing around the world. The most recent worldwide MLM statistics comes from 2017.

Note: All monetary data included throughout this article is adjusted to USD.

Regional network marketing statistics

2017 worldwide industry sales were $189.6 billion—up 1.6% (adjusted to 2017 USD). That sales data breaks down into four regions:

Asia and the Pacific generate most direct sales worldwide, followed by the Americas and Europe.

  • Asia & Pacific $85.4B (46%)
  • Americas $64B (33%)
  • Europe $38.5B (20%)
  • Africa & Middle East $1.8B (1%)

Although Africa and the Middle East (represented in WFDSA data as one region) produced the least sales, they showed the greatest amount of growth in 2016—up 9.9%. Wondering what products sell in these growing markets? Check out this Africa-based MLM, Solar Sister.

Although Africa and the Middle East saw the most growth, other regions grew in 2017 as well. Europe grew 3.5%, and Asia & Pacific grew 1.8%.

On the other hand, the Americas sales numbers decreased but only by 0.1%. I don’t imagine this decline comes as a surprise to many of our readers. It seems like a lot of folks are nervous about the trend and that this is part of the drive toward international business models. But the sales numbers for the Americas are still high. In 2018, Allan Pollard of PayQuicker came on our podcast to argue that the dip is a natural part of the sales channel’s lifecycle—that the US is a maturing market for network marketing and that the business is in an evolutionary step.

Let’s take a minute to talk about distributors.

The total number of distributors increased from 103.3 million to 116.7 million. Proportions of distributors in each region follow the same order as sales numbers (largest to smallest) but they don’t line up in size. Let’s look at a comparison of the two:

In one region, the total sales might be greater and the sales effort each distributor needs to do might also be greater.

Africa and the Middle East offer a standout example of the disparity between sales and distributors. Together these regions produce 1% of worldwide sales, but they are home to 3% of worldwide distributors. It makes sense if you think about it.

I mentioned Solar Sister above. Their business model is selling small, solar electronics to poor consumers in rural Africa. If the product is for poor consumers, the price point is going to be very low. If the average price point is lower than in other regions, it will take a larger number of distributors to make the same amount of sales.

On the other end of the spectrum, the highest sales region, Asia and the Pacific produce 46% of all sales, but 56% of all distributors live there. Again, more distributors producing lower dollar amounts.

In both examples, individual distributors contribute less sales on average than their American and European counterparts.

Let’s look at a visual representation of the sales per distributor for each region:

  • Asia & Pacific: $1,310.31
  • Americas: $1932.43
  • Europe: $2,553.00
  • Africa & Middle East: $519.89

Note that this is a mean, not a median. In other words, it’s very likely that high-end distributors are skewing the numbers. Mean isn’t the most accurate measurement of what the “typical” distributor makes. But it’s a much easier number to come by and it’s still an interesting number to look at.

While Asia and the Pacific are racing ahead in total sales numbers, their sales per distributor are lagging behind the Americas. The Americas, in turn, are behind Europe. Asia’s collective buying power is greater, but on an individual level they have less buying power.

If you take your products from Europe to Asia, you might need to rethink pricing, packaging, or even the product itself to maximize your potential in those markets. In one region, the total sales might be greater and the sales effort each distributor needs to do might also be greater.

And it might go without saying, but if you want to sell in the Middle East and Africa, the most competitive product might be completely different.

By the way, that’s not a caution against entering those markets. You must tailor your strategy but if it makes sense for you to do that, do it! Individuals in Africa and the Middle East might have the least buying power, but the non-monetary benefit of operating there can be substantial. Remember the work that Solar Sister is doing selling low-end solar tech in Africa. Sure, they’re making less per-sale than they would selling high-end solar tech in the US. But that’s not what matters most to their business.

Network marketing statistics by country

Let’s look at how direct sales data breaks down by country. 79% of all direct sales take place in the top 10 countries:

  • United States $34.9B (18%)
  • China $34.3B (18%)
  • Korea $17.2B (9%)
  • Germany $16.7B (9%)
  • Japan $15.3B (8%)
  • Brazil $11.9B (11.9%)
  • Mexico $5.9B (3%)
  • France $5B (3%)
  • Malaysia $4.7B (2%)
  • Taiwan $3.9B (2%)

The United States and China are neck and neck—both generating 18% of worldwide sales. The US still has an edge of about $600M.

Several countries outside the top ten grew dramatically in 2017. Indonesia, Kazakhstan, Philippines, United Arab Emirates, Argentina, Romania, Slovenia, Norway, Russia, and Turkey all had double-digit increases in retail sales.

Very few countries saw a substantial decrease. Only the Netherlands and Belgium had double-digit drops in sales.

The WFDSA also shows us the number of distributors in each country. Unlike the regional numbers we looked at above, these numbers don’t track the sales numbers for each of the top 10 countries.

While these ten countries produce nearly 80% of the sales, they comprise less than half of all worldwide distributors. This is a powerful visual representation of an important lesson:

Not all distributors will be able to generate the same sales numbers. And some of that disparity has to do with the practical circumstances surrounding distributor lives.

Again, let’s look at total sales per distributor for each top ten country. (You can of course go through the full data on the WFDSA report to do the same analysis of any country we didn’t look at here.)

German distributors are so far ahead, it seems like an error. (We triple checked our math.) China, France, and Japan also have what I would consider high per-distributor sales.

Another issue you need to look at when expanding into a country is the average income of a person living in that country. There are different kinds of averages that you can look at. Again, median income provides a more accurate picture of the average person’s salary, but up-to-date data on mean income (specifically gross national income per capita) around the globe is easier to come by. Let’s look at those numbers for the top ten countries—excluding Taiwan for which there is no reported GNI.

A few things stand out here.

Income isn’t a strong predictor of whether direct sales will do well in a given country.  From left to right, these countries are graphed from greatest total sales to least sales. Their per capita incomes are all over the place.

That said, all the top ten countries (the ones that reported GNI anyway) have a per capita income greater than $8000 USD. Which makes sense if you think about it. Most (though not all) MLM products are “luxury” goods. They’re typically things consumers want more than they need. In countries where people are struggling to survive, they’re not likely to buy luxury goods.

Income also isn’t a strong predictor of average sales per distributor. The US has the highest per capita income ($58,270), but it’s among the lowest in average sales per distributor ($1,876).

The take away from these numbers seems to be that when you’re deciding if a country would be worth entering, you can’t look at the numbers alone and think you’ve done your homework. You have to learn more about the people you’ll be selling to than their income and buying power. You have to know who they are. In other words, culture—interest in and compatibility with direct selling—accounts for the prevalence of the sales model.

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International Expansion for Network Marketing Companies

These days, a lot of network marketing companies are in a rush to expand internationally. Markets outside the U.S. are gathering steam and technology is making the leap easier and easier.

My first experience working with an MLM company that was going international was nearly thirty years ago. Back in those days, companies were slower to expand overseas. Most companies waited until they were doing $50–60 million dollars a year in business and until they had been in business for several years.

Now, we have clients that have been in business less than a year moving to open two or more international offices almost immediately. In the last three decades, the international landscape has changed dramatically.

The process of opening an international market used to take a year of planning and preparation. Now companies are turning it around in mere months.

Is this a good thing?

I don’t know. But it is a reality.

There’s a wild west mentality about international network marketing—a follow-the-business mindset. Distributors expect you to go where they can sell. It’s their business, and it had better go where they want it to go. Sound familiar?

It’s true, you need happy distributors and—to be happy—your distributors need to sell. But you need to remember you have skin in the game. You also need to remember that what’s best for that one squeaky-wheel distributor might not be best for your entire field.

How do you do what’s best for the most people?

You have to balance the demands of your distributors with the economic, legal, and practical realities specific to opening each market. Don’t get me wrong. There are good things happening in this “wild west.”If opening a market makes sense for your company, do it! But, if you’re rushing in before you’ve done your research and carefully considered all of the issues surrounding a market, you don’t know if what you’re doing makes sense.

Let’s get into some of the issues you’ll face as you expand your company’s reach internationally.

Where are network marketers making sales?

Do the math. Make sure a market will be worth the trouble it takes to break in. Don’t pass up the value of the markets you’re already in to chase after less lucrative markets overseas. If California were a separate country (and sometimes it seems they are), it would be in the top 5 largest economies in the world. If you’re in the US, you’re in California. Are you selling there? Could you sell there?

This is something that a you must keep in mind as you plan to take your company into the international marketplace.

People see that network marketing sales numbers are rising in other parts of the world and they forget the fact that the US is still holding down first place. Instead of listening to the talk, look at the numbers.

According to WFDSA, in 2017, direct sellers’ world retail sales numbers reached over $189.6B (in U.S. dollars). Almost 80% of the revenue came from the top 10 countries in which direct sales take place:

  • United States $34.9B
  • China $34.3B
  • South Korea $17.2B
  • Germany $16.7B
  • Japan $15.3B
  • Brazil $11.9B
  • Mexico $5.9B,
  • France $5B
  • Malaysia $4.7B
  • Taiwan $3.9B

Here’s the deal. You don’t have to avoid smaller markets. You do need to educate yourself as to why some countries do better than others. Many factors influence how well an MLM will perform in a country—laws, technology, distribution systems, and social networks. Do your homework.

We see MLM companies opening offices in 10, 20, even 50 different countries. This is a very expensive way to do business. Each different country has different laws. The labeling requirements for products are different. You have to deal with each country’s equivalent of the Food and Drug Administration (or whichever organization regulates your product). That’s a lot of work and its only part of what goes in to opening an office in a new country.

You might be thinking, you’ve gotta spend money to make money. Well sure, but you can also spend a lot of money without getting any return. Remember, almost all the direct sales business in the world is conducted in 10 countries. Be choosy! Don’t set up base in every country possible—set up in the countries that show true promise for your company.

What legal issues will you face in new markets?

When you open multiple international offices you create new legal issues for yourself. Although there are some ways to get around labeling and product approval laws, you still need to plan for different legal environments and regulations in each country.

For example, the “Not for Resale” business model allows people in other countries to buy product directly from a U.S. based company, as long as they don’t resell the product to people in that country. The company ships directly to them and thus bypasses the labeling, import, and product approval laws. But this strategy isn’t legal in all countries.

China restricts network marketing commissions to a single level. Multi-level marketing is unlawful in China. And, on-the-ground direct sellers in China can only sell certain types of products. But China’s economic power has been growing steadily. And as I already mentioned, their network marketing sales are second only to the United States. Some MLM companies work around the restrictions on direct sales by selling to Chinese consumers through cross-border ecommerce. Of course, this method doesn’t allow distributors to build lucrative downlines on the mainland.

Although changes have been (and are being) made, Korea strictly regulates the total percentage a company may pay out in commissions; a company cannot pay more than 38% of the wholesale price paid. This is a vigorously enforced law. So any company that enters the Korean Market that pays more than 38% must change their commission plan to meet this requirement.

How average income impacts your company’s viability

In different marketplaces, the way direct sellers do business is very, very different. One of the biggest reasons for that difference is the income of the average customer.

Let’s look at the top two countries in the list above: The United States and China. The per capita income of the United States is around $60,000 per year. In China, it’s less than $9,000 (USD). (Of course, you’ll have to adapt to more than the average income, if you want to sell in China.) In some countries popular among direct selling companies—like Peru, Thailand, and Columbia—the average per capita income is closer to $6,000 per year.

You must adapt your business model with this in mind. You might have to change the product, it’s price point, or (if it’s a consumable good) the size of its packaging. On the other hand, your product might not be viable at all—even if adapted—in a low-income country. You might also have to change your distribution method.

Income differences can be especially problematic for the commission plan. A plan that works well in the U.S. won’t work well in Argentina (per capita income: approximately $13,000). And it may not work at all in Peru. Why? The qualifications for personal volume, group volume, and organizational volume are all designed around the consumer buying patterns of a country with an income of $60,000.

If you try to use a commission plan with roughly the same qualifications in Peru and the United States, your Peruvian distributors must sell to ten times the number of customers just to meet the qualifications!

But there’s more to meeting the needs of distributors who are living on $6,000 a year. The basic needs of these distributors are totally different from those of distributors in the U.S. Here, the distributor may be in the business to make some extra money each month—”mad money” that is outside of their family budget. On the other end, a distributor may be in the business to make a living and replace their entire yearly income! These are meaningful differences. If you’re not taking them into account, you’re not doing right by your field.

Forget worldwide commissions—think worldwide downline

In the last 15 years, the standard in the industry has been for companies and distributors to push for seamless, worldwide commission plans. Companies bragged about their worldwide plans, and distributors demanded them.

Hopefully, I’ve dispelled the idea that one compensation plan could serve the needs of every market in the world. The same commission plan will not work everywhere. Instead of a seamless commission plan, I’d argue that the real goal for companies should be a seamless worldwide downline. What do I mean by that?

With a worldwide downline, your distributors can sponsor new recruits anywhere that the company is doing business. You then pay commissions based on the commission plan of the country in which the sale was made, rather than where the commission recipient lives. So, Charlie lives in the United States, but he goes overseas to build a new team in Malaysia.  Here’s his organization:

For the volume generate by Charlie’s U.S. team, you’ll calculate his commissions using the rules of the U.S. compensation plan. For volume generated by his Malaysian team, you’ll calculate commissions using the Malaysian compensation plan.

This allows a company to make changes in the commission plan for each country’s specific needs, but still allows the distributors to sponsor whomever they want.

By the way, the adaptations you make to your commission can be small. Your new plan can stay as close to the original plan as is reasonable given the new market. In most companies, the different commission plans will still be recognizable from country to country. The different permutations of your plan will most likely be based on the same general ideas.

 

Making the transition takes patience and maturity and a good hard look at the issues that will come up in each country. I’ve detailed what some of those issues are. But it is a big and ever-changing world. I can’t warn you about every problem you’ll run into. My hope is to put you on course to ask the right questions and commit to finding the answers. Best of luck as you expand your company into international markets!

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