How the pandemic has affected network business. MLM profitability in 2020

The events of this year have shown how vulnerable and dependent on external factors small and even medium-sized businesses are. Many industries have been severely affected by the crisis and downtime caused by Covid-19, but there are also those for whom the coronavirus has made no difference. Network marketing is one of the areas that has always experienced an unprecedented rise in times of crisis. But first, let's remember what it is in general:

Network marketing, also known as multilevel marketing (MLM) - is a sales system organized in such a way that each new distributor who joins can earn not only from selling the product but also by recruiting new sellers into the company.

Despite public speculation, MLM - is a completely legal and respected business, the earnings of which are subject to government taxation, just like income from any other commercial activity.

Global Network Marketing Statistics

The global network marketing market grows by 2% annually, with the number of employees in such companies exceeding 100 million people. Almost 60% of the total industry turnover is accounted for by Asian markets. The leading MLM countries in development are China and the USA, where one in twenty people is involved in direct sales. Russia is in the top ten of the global ranking, however, its potential is significantly higher.

Annually, the company Direct Selling News announces the top 100 MLM companies of the year. In April 2020, at the very beginning of the corona crisis, DSN published the ranking based on the turnover in 2019. The TOP 10 included:

1. Amway (Alticor) - $ 8.4B;

2. Herbalife - $ 4.9B;

3. Avon Products - $ 4.76B;

4. Vorwerk & Co - $ 4.23B;

5. Natura Cosmeticos SA - $ 3.66B;

6. Coway - $ 2.59B;

7. Nu Skin - $ 2.40B;

8. Tupperware Brands - $ 1.80B;

9. Oriflame - $ 1.47B;

10. Ambit Energy - $ 1.31B.

When analyzing the full list of organizations, the following conclusions can be drawn:

- from 2018 to 2019, 48% of MLM companies scaled up;

- revenue significantly increased for 2 out of the top 10 network corporations;

- indicators of turnover for young companies can rise up to 85% in a year. In particular, the revenue of the company Color Street grew by 85%, MyDailyChoice / HempWorx - by 68%, and Vestige Marketing - by 68%.

How network business is developing in Russia

Recently, the reputation of network marketing has been changing for the better. Last year, 3.56 million Russians joined the ranks of multi-level company distributors (data from the Direct Selling Association (DSA)). It is noteworthy that a huge number of young people are entering the business, as confirmed by the founder of NL International, Dmitry Khokhlov:

"They are not shy to say that networkers are catching the hype. The toolkit has changed: social networks, lead generation, sales funnels, targeting - all of this expands the possibilities of online attraction."

As the influx of new distributors into the structures grew, there was an acute need to introduce uniform professional standards and increase the qualifications of market participants; MLM education courses are being created everywhere, in which anyone interested can participate.

Among the recent legislative changes - in 2020, self-employment regime was introduced in 19 regions of Russia, allowing for official work, non-cash payments, and staying within the legal framework. Apparently, it should increase the attractiveness of MLM as the main way of earning. Also, at the legislative level, licensing of partner organizations is being introduced, which helps to improve the market and protect people from scammers.

If you want to delve into the history of MLM development, read the article Network Marketing in Russia

MLM Development Trends in 2020. How Business Was Affected by the Pandemic

First of all, the vector of motivation for entrepreneurs has noticeably changed. If previously the main incentive for working in the network was "purchasing goods at discounts" and "earning extra income", now the priority is "creating your own business" and "flexible work schedule" (data from Olga Tretyak, Doctor of Economics, Professor at HSE).

The motivational paradigm is changing not only in the CIS countries but also worldwide. Tamun Gabilaia, Executive Director of the World Federation of Direct Selling Associations, commented on this:

"People are even willing to earn less but do what they love. In the list of motivators, the desire for independence came to the fore."

For many years, all businesses have been moving online and digitizing, but the pandemic has fully revealed another advantage of network marketing - the ability to work remotely. To develop a business, it is enough to create a website, a recruiting page, and maintain activity on social networks. To attract attention - start targeting. You can train partners and conduct presentations on Zoom or Skype.

Another trend - networkers have put pressure on personal brand development. They develop pages on social networks, write blogs, actively give interviews, and write articles in the media. Coverage and trust in global brands are gradually decreasing, but influencers have entered the game, with significantly higher levels of trust.

We talked about how to develop business on social media in the article Attracting partners through social networks

There is also a clear trend of public figures transitioning into network marketing. It no longer surprises anyone that artists and famous bloggers actively use referral links, promote products, and attract partners to their teams.

Conclusions

Any crisis reveals new opportunities. Now is the time to test your skills in network marketing, implement an affiliate program in your business, or even create a new project.

Team FlawlessMLM helps develop MLM companies and launch new ones from scratch. Using accumulated developments, our specialists will quickly and qualitatively bring the project to life and develop a marketing plan of any complexity. By contacting a manager in the website chat (), you will receive a free consultation on optimal business solutions.