Discover how merchants in the MLM sector can increase their revenue using innovative payment technologies.
Direct selling is a business model based on person-to-person interactions involving a network of independent sellers who buy goods from the parent company and then sell them to other individuals (single-level marketing), also recruiting them to become independent sellers (multi-level marketing). This business practice takes place across the globe but is especially successful in the Americas and Asia Pacific region.
The MLM sector embraces digital technologies to keep up with the evolving customer demands and engage new customer segments successfully, especially using new channels like mobile. However, MLM companies face several challenges on the way to realizing these goals. Technology innovations offer a helping hand, at the same time opening the door to many new business opportunities.
How can merchants in the MLM sector increase their revenue and keep up with key industry trends and dynamics shaping the sector today? Read on to learn more about key strategies and market challenges MLM merchants need to address to stay ahead of the game.
Table of contents:
MLM market today – an industry snapshot
Key challenges of the MLM sector
Opportunities in the MLM market
Summary: MLM is evolving to match the demands of tech-savvy customers
The MLM sector is resilient to economic shifts and downturns. Between 2019 and 2021, the global retail sales volumes of the direct selling market ranged between $179.1 billion and $186.1 billion, with forecasts indicating a 6.1% CAGR growth from 2022 to 2028.
How many community members (including sellers, buyers, and customers) does MLM involve? In 2021, the size of the global direct-selling community was almost 130 million, with nearly 33 million people making up the direct-selling community in the Americas. Interestingly, women make up almost 70% of the MLM community.
The largest MLM market is in Asia, followed by the Americas and Europe. The top 5 MLM markets are the US, Korea, Germany, China, and Japan.
Asia-Pacific accounted for over 40% of the world’s direct selling retail sales.
36% of the retail sales of the direct selling industry were generated in the Americas, generating $68 billion. More than half of this amount was specifically generated by direct sellers in the US.
Regarding LATAM, Brazil and Mexico were among the top 10 direct-selling markets around the world.
Globally, the top product category in the MLM sector is wellness. Last year, the global direct selling industry generated nearly 35% of its retail sales through wellness product sales, followed by cosmetics and personal care (25%), household goods and durables (16%), and clothing and accessories (5%).
During the same year, direct sellers in the Asia Pacific region generated 64% of their retail sales from cosmetics, personal care, and wellness products alone.
Source: Statista
In many areas of the world, significant portions of local populations may not have access to banking products and services. Unbanked distributors experience serious limitations when purchasing products within MLM programs. In such a scenario, they must have all the funds available upfront, have no possibility of taking credit, and may experience cash flow challenges. The big challenge is their limited ability to transact on the underbanked or unbanked consumer side.
A serious blocker in the distributor’s relationship with the MLM company is related to delays in payment made to the distributor. Late payments affect the distributor’s working capital, preventing them from ordering more products and growing their business.
How to solve this issue? MLM merchants can address this issue by adding specialized payment options such as Buy Now, Pay Later (BNPL), offering financing options, and installment payments.
Distributors often need help managing cash and reconciliation processes offline. That’s why MLM companies should do their best to leverage the available technologies and provide distributors with online reporting capabilities. Such solutions streamline the reporting process.
MLM companies, on the other hand, often need help with the reconciliation process, which may easily become a serious roadblock in paying commissions and impacting the experience of distributors. An easy reconciliation process with online reporting capabilities offers a good solution to this problem.
Some distributors may not be used to making purchases online. Modern MLM companies can provide training sessions to fill this knowledge gap and improve their distributors’ digital skills related to e-commerce.
Some MLM companies delay product shipping until the payment is validated, which might hurt the customer experience. To address this problem, merchants should implement modern payment solutions and payment optimization strategies that offer advanced configurable features to optimize payment traffic. Naturally, they also need to fix product shipping delays and take advantage of shipment tracking to monitor product delivery and share key information with customers.
An MLM e-commerce platform may be considered as competing with the traditional direct selling flows based on interpersonal relationship building. Offline MLM marketing strategies have been around for much longer than their online counterparts. However, it doesn’t have to end here. MLM merchants should do their utmost to incorporate distributors in the online purchasing process so that their representatives can match the e-commerce expectations of their customers and improve the e-commerce capabilities of their business.
Tech-savvy MLM companies today take on a mobile-first approach when creating and delivering online shopping experiences. They jump on the mobile bandwagon because this channel has become essential for the e-commerce sector: 73% of e-commerce sales come from shoppers using smartphones or tablets rather than desktop computers.
By embracing mobile channels, MLM businesses can reach new customer segments and drive more engagement with their offer in real time, with personalized messages delivered directly into their customers’ pockets.
MLM companies should follow industry-wide trends and focus on customers like never before to increase their customer-centricity by simplifying interactions and delivering truly personalized experiences. This is possible by leveraging data analytics and reporting capabilities. Just like other sectors, MLM stands to benefit significantly from access to reliable sources of customer intelligence, which is essential to making strategic decisions and creating customer-specific experiences.
In an ideal scenario, an MLM company can achieve a significant level of repeat sales from a single customer. How can direct selling companies that reach online channels motivate customers to purchase alternatives or complements of products they have already purchased? One-time buyers might be persuaded if the merchant offers an option such as an attractive promotion, a membership, or a few months of delay on payment without any added interest.
MLM businesses should keep an eye on the latest innovations and quickly invest in those that stand to make a real difference to their operational efficiency. For instance, blockchain technology and cryptocurrency payments improve payment flows and help win new customer segments. The usage of AI-powered advanced chatbots and voice assistance delivers a great experience to MLM customers, allowing these companies to leverage data to improve business operations with intelligent insights or multi-lingual support.
Seamless selling via social media platforms offers massive potential for MLM companies and their representatives. Social networks offer many opportunities for engaging with new prospects directly, building strong communities of distributors and end customers, and spreading brand awareness. There’s a reason why social commerce is growing three times as fast as traditional e-commerce – younger shoppers consider social channels reliable and exciting shopping platforms.
It’s only natural that consumers have different payment preferences depending on their location. Take a company like Oriflame as an example. This large social selling company sells natural beauty and wellness products in over 60 countries through nearly 3 million independent sellers, with around 100,000 transactions per day. As expected, 98% of these transactions happen online.
“The ability for Oriflame to provide a seamless payment experience to any of their customers or end consumers through the same integration that they have with us in any market that we serve is ultimately what we … do,” said PayU CEO Mario Shiliashki. To drive approval rates higher, it’s essential to give buyers the opportunity to check out using a broad range of payment options.
New technologies also help MLM companies to provide an e-commerce experience that meets customer expectations, especially around these four essential areas:
The spread of digital technologies reinforced the importance of digital integration and building future-ready businesses. MLM is no exception to this trend. Even as offices open up fully in the near future, the majority of direct-selling companies will still leverage these innovations to communicate with and engage customers. More and more MLM companies will continue to focus on faster digital adoption of processes and overall approach to provide convenience to consumers and consultants alike. Implementing modern payment solutions will surely be part of this evolution.