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Direct marketing makes comeback
Direct marketing was once better known in Viet Nam as multi-level selling, and the practice became largely discredited as a sort of pyramid scheme, with poor-quality goods at high prices and many sellers left unpaid.
According to the Viet Nam Competition Authority, some companies used the sales model to dupe consumers, and its initial appearance left many Vietnamese suspicious of the practice.
But a new wave of direct selling by companies with more legitimate products is trying to change attitudes.
Companies like Amway, Forever Living and Oriflame now sell in Viet Nam using direct marketing, which can be defined as person-to-person selling without a fixed retail location.
Some of these companies prefer to call it direct selling as opposed to direct marketing because it is about individual sales agents reaching and dealing directly with clients. Direct marketing, on the other hand, is typically about business organisations seeking a relationship with customers without going through an agent or retail outlet.
The Viet Nam Competition Authority recognised direct selling as a legitimate practice in Viet Nam with the passage of the Law on Competition in 2004 and the issuance of Decree No 110 in 2005.
"Initially, I disliked direct selling because of the bad publicity about it," said Tran Lan Anh, now an Amway Viet Nam distributor. "But after studying many direct selling companies, I knew I could be successful in direct selling and joined Amway."
"Direct selling is modern business model and it is easy to earn a good income," said Le Van Chi, a distributor of Oriflame cosmetics.
One distributor of Avon, a popular cosmetic company, said many of the cosmetics company’s distributors were people without a job or steady income.
"Others get a stable second income without having to lease a store space, like me," she said. "However, each distributor must invest time and co-operate with other members in the direct selling system in order to earn a good income from it."
Sales are frequently made through a party plan, as one person demonstrates the products to a group of friends and acquaintances, and through other personal contacts. Avon and Tupperware are other companies that have had success with this model.
Most of these companies use a multi-level compensation plan by which the agent is paid not only for their own sales but also a percentage of the sales of other representatives they introduce into the organisation and help train.
Euromonitor International Plc, a market researcher, said Viet Nam had high potential as a market for direct selling and cosmetic industries.
Avon also saw great potential here, so the company opened a plant in the Viet Nam - Singapore Industrial Zone in 2004 to make products domestically, according to Avon Viet Nam.
By 2008, 31 direct-selling companies nationwide had made a total revenue of VND1.2 trillion (US$67 million) and had 450,000 distributors. In 2007, they achieved an average sales growth rate of 16.8 per cent, according to the Viet Nam Competition Authority
"These figures are quite modest as opposed to the size of the Vietnamese population and the entrepreneurship of the Vietnamese people," said Looe Chee Seng, general director of Amway Viet Nam, acknowledging that the global economic crisis had affected consumer spending behaviour, not only in direct selling but throughout the retail sector.
"However, this is only a short-term trend and not expected to impact the evolution of consumer lifestyles, and we believe the market will soon recover. Moreover, our experience in other markets has shown that in difficult circumstance like this, Amway comes out even stronger," he added.
The reason is that, with economic difficulties, people look for ways to generate additional income and see direct selling as minimal-risk business opportunity that gives them a fair chance to own their own business and make extra money, he said.
The people of Viet Nam were enterprising, and Vietnamese consumers were becoming more sophisticated, brand-conscious and demanding, he added.
"We need to raise public awareness on the legitimacy of the industry and at the same time direct selling companies should encourage and enforce compliance [with the law] by industry members and direct sellers."
Hoang Ha
vietnamnews
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