VietNamNet Bridge – Avon, one of the three foreign invested enterprises which distribute products in Vietnam under the mode of multi-level marketing (MLM) has announced the withdrawal from the Vietnamese market. However, others still keep optimistic about the market.

The announcement said Avon would leave Vietnam and South Korea, and would cut down 1500 workers globally in 2013 in an effort to cut down expenses.

Avon’s business performance has been worsening recently. The company’s profit had plummeted by 81 percent by the end of the third quarter of 2012, from 164.2 million dollars to 31.6 million dollars. The sharp profit decrease has forced Avon to announce the decrease of 75 percent in dividends.

In Vietnam, Avon would stop operation and stop selling products after January 31, 2013. The service contracts would terminate on January 31, 2013, while the obligations in the contracts would be settled by March 21, 2013 at the latest.

Daniel Lee Ryalls, Vice President of Avon, in charge of developing markets, said the decision has been made after the thorough consideration of the market conditions and the development potentials in Vietnam.

He said Avon Vietnam could not bring the expected turnover and profit, while the growth potentials in the future remain unoptimistic.

However, other investors have heard that the MLM market in Vietnam has witnessed the high growth rate of 150 percent in recent years, the highest growth rate among the retail channels in the country.

Explaining the high growth rate, Vo Dan Mach, Chief of the Secretariat of the MLM Association, said great potentials of the market have not been fully exploited. To date, only one million people have joined the network, while Vietnam has 90 million consumers.

Mach said that the scandals recently relating to MLM have made many people keep away from MLM. However, the situation is getting improved, while management agencies have committed to set up a legal framework to ensure the healthy operation of the market.

How Kam Chiong, General Director of Amway Vietnam, one of the three foreign investors in MLM, does not think about the Vietnamese market the same way as Avon.

“Vietnam is a young and potential market for MLM. I am optimistic about the growth of the market,” he said, adding that Amway has drawn up a long term business plan in Vietnam.

In general, MLM companies in Vietnam mainly distribute cosmetics and supplement foods, while Avon only distributes cosmetics. Commenting about this, analysts said Avon might have met a lot of difficulties when its products had to compete with counterfeit goods and the real goods carried to Vietnam through different sources which have lower sale prices.

Mach of the MLM Association said that difficulties still exist, because of which newly set up companies need to be cautious when doing business in Vietnam. However, the companies which have been operating for a certain period and have set up their distribution networks there have been operating very well.

“I strongly believe that the Vietnamese market is very attractive and a lot of foreign investors would eye the market,” Mach said.

He has predicted that some 10 MLM enterprises would set foot in Vietnam in 2013, mostly from Asia (7 enterprises) such as Malaysia, China, Singapore, New Zealand, and the US (2 enterprises). They would bring cosmetics and supplement foods.

Compiled by C. V