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Multi-level marketing set to grow

February 17, 2014

By Tanu Pandey

KUALA LUMPUR: Malaysia is poised to be one of the largest multi-level marketing (MLM) countries in Asia, with expected revenue of RM8 billion in 2020.

India-based IT company Tech Mahindra Ltd vice-president and head of Asean Ram Ramachandran said MLM is a fast growth industry with many local companies spreading well beyond Malaysia.

“When we first ventured into Malaysia in 2001, we found a unique niche in its MLM segment which actually took us by surprise.

“When we entered the market via doing work with some global multinational corporations, which are big in MLM here in Malaysia and elsewhere, we figured out that Malaysia serves as a unique position on two perspectives – its large consumers of MLM and its position in IT,” he told reporters at Tech Mahindra’s media luncheon in Kuala Lumpur recently.

He said as an IT company, Tech Mahindra is focusing on the empowerment of the MLM players through legacy modernisation.

“Malaysian MLM companies currently have outdated systems and are still lagging in digital enterprise.

“The product of tomorrow will be sold through mobile and social media in the future. Word of mouth is more effective than only direct selling. The model has changed completely.

This new model comes with the need for new technology. Malaysia is poised as a good business for us in this segment,” he added.

Two Malaysian companies are ranked among the top global MLM companies – Cosway Corp and DXN Holdings Bhd – according to an online network marketing portal, NetworkMarketingCentral. com.

The online portal said as at February 2013, Cosway is ranked 27th with DXN at the 28th spot with annual sales of US$433 million (RM1.43 billion) and US$420 million respectively.

At the top of the ranking was American-based Avon Products Inc and Amway with annual sales of US$11.3 billion and US$10.9 billion respectively.

Other than the US and European markets, India, China, South Korea, Malaysia, Indonesia and the Philippines are currently leading the Asian MLM segment in terms of revenue.

According to a merger and acquisition special-purpose vehicle, LeadAll Investments Ltd, the total turnover from Malaysia’s MLM sector has grown to RM3.48 billion in 2010 compared with RM3 billion recorded in 2003.

According to the World Federation of Direct Selling Associations, Malaysian MLM segment retail sales for 2012 increased 7% year-on-year (YoY) to US$4.67 billion. Another leading MLM country, India, grew 22.6% YoY in the same year to US$1.05 billion in terms of sales.

Meanwhile, it was previously reported that MLM is likely to benefit from an inflationary environment arising from the Goods and Service Tax (GST) and subsidy rationalisation programme.

Kenanga Investment Bank Bhd analyst Lawrence Yeo Eng Chien attributes this to the increased involvement by the lower middle-income group with MLM activities, thus providing them with higher return on spending as well as additional side-income.

He said given the weaker outlook in the broader consumer sector, it expects the investor’s interest to gradually shift towards the under-appreciated MLM sub-sector.

It anticipates the MLM segment to continue to deliver decent earnings growth where this will be achieved through continuous effort to enhance product mix, all year-long campaigns and promotions, and also to continue expanding new market channels via more distributors/ member recruitment, an earlier report by The Malaysian Reserve quoted Yeo as saying.

He said the attractive dividend yields offered by MLM companies could be another eye- catcher for investors.

This content is provided by FMT content provider The Malaysian Reserve


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