Technology makes doing business internationally easier for multi-level marketing (MLM) companies, but there are still cultural, language, and currency differences to consider. Should MLM companies do business internationally? When weighing global opportunities for your MLM, here are five critical considerations.
1. Assess the market opportunity
Expanding your MLM business into international markets is a major decision with a significant potential upside. However, each market is unique and must be assessed individually. That’s why it’s important to do your homework first. Overall, MLM sales are growing worldwide, with global sales for direct selling companies totaling $192 billion in 2018.
After the United States, China, Korea, Germany, and Japan round out the top five global markets for MLM companies, with Brazil, Malaysia, Mexico, France, and Taiwan making up the rest of the top ten list. These top ten markets account for 78 percent of the global direct selling sales total. In addition, when combined, countries in the Asia and Pacific region account for the largest portion – nearly half – of the annual direct selling sales total.
When it comes to growth, the African and Middle East regions saw the most growth in 2019. Other emerging MLM markets include Indonesia, Kazakhstan, Philippines, Argentina, Romania, Slovenia, Norway, Russia, and Turkey.
Direct selling through a network of independent sales representatives offers a cost-efficient model for introducing a company and its products into a new market. But low startup costs are not a guarantee for success. When evaluating international opportunities, start with a deep dive into the local economy to understand the market’s:
- Gross Domestic Product: The country or market’s annual total value of goods and services.
- Employment Indicators: The size of the workforce, plus current unemployment rates.
- Consumer Price Index (CPI): An index of the retail prices paid by consumers for products and services in the market.
- Purchasing Managers’ Index (PMI): An index of the current economic trends in the market’s manufacturing and service sectors.
It’s also essential to understand local economic policies and the region’s political landscape. A country’s central bank is a good resource for learning about current economic trends and gaining insight into future policies that could impact direct selling in a region.
2. Evaluate the regulatory environment
Next, assess the market’s overall regulatory climate as well as specific regulations and tax requirements that align with a direct selling model. Research government requirements for sales tax collection, reporting, identity verification, and tax withholding for payouts to representatives. These can be different across markets and require the development and implementation of market-specific processes.
For example, Argentina, Indonesia, Colombia, United Arab Emirates, and China have more complicated regulatory environments. Taiwan has requirements tied to invoice numbers, invoice documentation, and health insurance deductions, while Korea has different tax rates based on earnings. Understanding a market’s regulatory requirements before making an expansion decision is critical.
3. Determine culture fit
Even if a market is economically viable, your company’s products and services may face cultural barriers that could make expansion difficult. Don’t make assumptions based on your domestic market. Take the time to understand the culture and gauge local consumer interest in your company’s products and services.
Language is an obvious consideration when selecting markets for expansion. For U.S.-based MLMs, English-speaking countries, such as Canada, Australia, United Kingdom, Ireland, and New Zealand, can be easier markets to enter. And, while speaking the same language across markets is not a necessity, it’s imperative that your local leaders and support teams can easily converse with potential representatives and customers. In addition, not having a good grasp of a market’s native language can cause your brand’s messages to get lost in translation.
Beyond language, learn about a country’s customs, mannerisms, and attitudes. From a business perspective, having insight into these elements of a market’s culture helps you navigate introductions, referrals, and marketing. Even the smallest insights can make a big difference. For example, while Americans are typically on a first-name basis in business settings, the more formal use of first and last names is the preference in China.
Culture should also be a consideration regarding your MLM’s products and services. Every international market will have its own unique preferences for products, foods, and quality levels. Even shapes, colors, and packaging design could have cultural implications. Consumer research can help determine product viability and avoid potential issues with packaging, marketing, or advertising.
4. Investigate technology infrastructure
Evaluating a market’s technology infrastructure is another essential step before making expansion decisions for your MLM. As a foundation, look for widespread availability and stable access to the internet, as well as mobile penetration, both of which are essential for scaling and growing an MLM business.
Experts predict that most of the planet will have at least some access to broadband internet within the next three to five years. However, the access will continue to be expensive in some markets, making it more of a luxury item, which could limit an MLM’s pool of prospective representatives and customers.
In addition to internet access, evaluate a market’s mobile penetration – aka the number of smartphone users per 100 people within a market. Markets with higher – or rapidly trending upward – mobile penetration rates are more likely to offer a viable audience to support an MLM’s representative recruiting needs while also providing the needed customer base.
Examine exchange rates
Local currencies will play a central role in any MLM’s international expansion. As a first step, explore the costs of importing and exporting goods for each market. It’s a given that exchange rates will fluctuate, which can have a dramatic impact on your company’s bottom line. If the exchange rate fluctuates widely, you could find yourself selling products at a loss. Understand your options and build a cushion into your strategy. For example, as you negotiate contracts, lock in a specific exchange rate to better forecast your revenue and expenses.
There is no one-size-fits-all strategy for MLMs when it comes to operating internationally. Instead, your MLM’s international strategy needs to take a localized view and include the necessary time and research to assess each market thoroughly. As you do, you will identify the market differences and how you need to adapt operational processes, product or marketing strategies, or back-office technology configurations. Doing an upfront deep dive before launching in additional international markets will save your MLM company time, effort, and money in the long run.
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