The world is open for business to MLM, network marketing, and party plan companies. Worldwide revenues now exceed $110 billion generated by 59 million distributors and consultants, according to the Direct Selling Association (DSA) (www.dsa.org). Some of the largest and best direct-selling companies produce more of their revenues outside of the United States than inside our borders.
Each country has its own unique set of rules, challenges and opportunities. Some of the companies that have pioneered international MLM and global Party Plan business have taken decades to discover and refine the process. There is absolutely no need to make the same mistakes!
When to go international for your company requires a careful look at a variety of issues that include the following:
- Which method(s) of entry will work best for your company?
- Which legal, tax and business issues demand your attention?
- Do your products require registration?
- How do logistics and distribution best support your model?
- Are you prepared for fast growth?
Methods of Entry
MLM, network marketing and party plan companies enter foreign markets through different methods and avenues, some of which include the following:
- Joint ventures and in-country partnerships
- Licensing and supply agreements in the international arena
- Establishing a presence in the foreign market
- Combinations of these
One company was heard to say, “Canada is just like another state. No big deal.” The executives decided to work out details in time to receive products that they boxed up and shipped into Canada. They felt extreme pressure from distributors who had begun recruiting and pre-enrolling on promises of fast action by the company. Without a clearly defined expansion plan, the company took the proverbial “ready, fire, aim!” approach to entry into Canada. Sadly, but all too common, that company was soon stonewalled, no doubt because of its cavalier attitude toward expansion, and it now faces challenges and staggering expense to both backtrack and undo the harm as well as to do it right going forward.
Some countries allow MLM companies and Party Plan companies to send products across their borders provided that they are consumed by those who receive them and not resold. This model is sometimes referred to as “Not-for-Resale” or “NFR” and is supported by import laws that allow products to come into the country “as is” with labeling and formulation from the originating country. This method creates an opportunity to test market a product and to gradually build a base of product users upon which the company can expand.
Perhaps the most important lesson learned over the years is that the NFR approach is not intended (not permitted) by foreign governments to be a channel for circumventing registrations and compliance with their various regulations and laws. By carefully following the rules for NFR, you have the best chance to keep open the important doors through which your company can pass for a longer-term welcome into the country. As a practical matter, executives should ask the threshold question about NFR: does this country permit NFR sales? Not all countries are open for business to NFR sales by MLM and party plan distribution and sales systems.
Legal, Tax and Business Issues
Taxation and legal considerations should be foremost of the considerations. There exist proven, effective, and unique tax and legal strategies that require constant updating but that can make or break years of success for your company as it attempts to glide into the global markets. Each country has its unique set of requirements and peculiarities, and overall strategies for global expansion allow for effective launch and profitable growth.
One of the wisest strategies employed by several of the very best companies, learned the hard way, is to time global expansion to coincide with the fulfillment of the company’s overall growth objectives. In other words, as a company approaches, for example, $300 million in US revenues, it is poised to open key foreign markets that will contribute to the company’s 8-year growth trend, showing steady, solid growth. In these cases, the companies will exchange short-term flash for longer-term stability. Of course, the aggressive builders advocate that the better approach is to have it all at once. And some succeed at it.
Product Registration
Product registration ranks in the top three questions to ask of your decision team. Most products must be registered with local ministries and health departments before they can be introduced into a market. This is especially true for foods, cosmetics, nutritional supplements and many personal care products. Armed with an understanding of the regulatory environment in a target market and a willingness to comply and jump through designated hoops can protect your company from legal and regulatory actions, potential financial penalties, or even permanently closed doors in a given market. Imagine the disappointment and financial impact when an MLM company or party plan enterprise has an international door closed, locked and bolted and must move past that market. For simple reference, product registration can take several years but as a general rule should take 3 to 6 months when it is approached correctly.
Logistics and Distribution
Logistics and distribution for global MLM and party plan deliveries is unique among countries. Unlike the United States, most countries do not favor use of credit cards as the preferred method of payment, requiring alternate forms of payment for orders and starter kits. Not surprisingly, physical delivery addresses are sometimes not available, and the local method of delivery is a drop point where payment is exchanged and product is picked up.
These are two examples that should challenge you to think through the level at which you cannot assume that what is working in the United States will automatically work in a foreign market. In Mexico, for example, a prominent US company supports distributors who serve as remote distribution centers from their homes and who purchase product inventories and then resell the product at retail to their local clientele. This model, and variations of its kind, allow product to be sold and distributed where reliable services do not exist for collecting cash payments or for product delivery. On the other hand, however, growth and expansion can be limited in these regions and the company does not collect data on customers to track retention and activity.
In countries such as Singapore and Hong Kong, regional distribution centers can be used for warehousing and distribution, bulk storage, and variable labeling for fulfillment on demand to support multiple countries from a central distribution center.
For reference, logistics and distribution will take up to 6 months to arrange, sometimes shorter or longer. As with many services, the more a company commits in up-front capital and/or ongoing fees for speed and accuracy obtained through the right MLM international consultants or party plan distribution services, the investment can save time, money and aggravation in the long run.
Fast Growth
With mounting pressures to be everywhere, company founders and entrepreneurs find it difficult to follow the discipline of proper planning and structured launch into international markets. MLM and party plan international growth has been like a barn on fire for some companies, creating magnificent wealth and momentum for many.