Multi-level Marketing Companies Decline for 5 Consecutive Quarters... Decrease of 9.5% Over One Year

[Asia Economy Sejong=Reporter Dongwoo Lee] The number of domestic multi-level marketing (MLM) sellers has decreased for five consecutive quarters. This is due to the prolonged COVID-19 pandemic, which increased non-face-to-face consumption and reduced face-to-face sales methods.

According to the "Disclosure of Major Information Changes of Multi-Level Marketing Sellers" data released by the Korea Fair Trade Commission (KFTC) on the 11th, the number of MLM sellers in the first quarter of this year totaled 123, a 9.5% decrease compared to the same period last year (136). The number of registered MLM sellers dropping to the low 120s is the first time in the past five years.

Specifically, the number of MLM sellers peaked at 136 in the first quarter of last year, then decreased to 128 in the third quarter of the same year, resulting in a total decrease of 13 companies by the first quarter of this year. In the first quarter of this year, two new MLM sellers were registered, while four companies closed, making the number of closures twice that of new registrations.

The KFTC analyzed that considering the characteristics of MLM businesses, which have high entry barriers and relatively fewer closures to protect consumers, the nearly 10% decrease in the number of companies over the past year is a very significant change.

The sharp decline in the number of MLM sellers is attributed to the reduction in face-to-face sales methods due to the impact of COVID-19. The KFTC expects the downward trend in the number of MLM companies to continue through the second half of this year.

In particular, there is an analysis that the "rich get richer, poor get poorer" phenomenon will become more pronounced in the MLM industry going forward. The top three MLM companies?Amway, Atomy, and Nu Skin?accounted for 54.83% of the total MLM company sales as of 2020, and the sales share of these major top companies is expected to increase further.

This phenomenon occurred because, after the spread of COVID-19, the sales of major top companies with loyal customers showed a slight increase or remained similar, while the sales of small and medium-sized sellers decreased sharply. The KFTC explained that as sales of health supplements, a major product category in MLM sales, increase centered on top companies, this rich-get-richer, poor-get-poorer phenomenon could accelerate further.

Meanwhile, the KFTC operates a reward system for reporting violations of the Door-to-Door Sales Act, such as unregistered MLM activities. When fines are imposed, the reward amount ranges from a minimum of 1.5 million KRW to a maximum of 10 million KRW. When fines are not imposed, the minimum reward is 150,000 KRW, and if multiple violations by the same business operator are reported, the maximum reward is 5 million KRW.

This content was produced with the assistance of AI translation services.