Direct selling in Malaysia includes door-to-door sales, mail-order sales, and sales made through online channels.
Direct selling is a type of sales channel that allows manufacturers to sell their products or services directly to consumers without involving intermediaries such as wholesalers or retailers.
It has become a popular business model in Malaysia, with many companies using it to distribute their products and services to consumers. There are different types of direct selling in Malaysia, and in this article, we will discuss the most common ones.
The body in charge of overseeing the direct selling industry is the Ministry of Domestic Trade and Consumer Affairs. The Direct Sales and Anti-Pyramid Scheme Act of 1993 and the direct selling regulations set the rules for the direct selling industry.
THE DIRECT SALES ACT 1993 OR DSA 93
No one is permitted to operate a direct sales business in accordance with Sections 14 and 42 of the DSA 93 unless such business is incorporated under the Companies Act 1965 and has a valid license issued under Section 6.
Direct sales are defined in this Act as door-to-door and mail-order transactions.
A person or someone they have authorized to represent them goes from place to place to conduct a door-to-door sale of goods and services. There is no established place of business.
In addition, they can use the telephone to contact anyone willing to sign contracts to sell goods and services. The sale contract can then be finalized through negotiations between the buyer and the seller.
Mail-Order Sales are transactions in which the offer-for-sale contract is delivered via mail.
TYPES OF DIRECT SELLING IN MALAYSIA
There are several types of direct selling in Malaysia. Some of the common types are:
Single-level direct selling
Single-level direct selling is the most basic form of direct selling in Malaysia. In this type of direct selling, a salesperson sells products or services directly to consumers and earns a commission on each sale. The salesperson is usually an independent contractor and is not employed by the company. They can sell products in various ways, such as through door-to-door sales, personal contacts, or online platforms.
The company pays the salesperson a commission, a fixed amount, or a percentage of the sales price. Single-level direct selling does not involve recruiting other salespeople, and the salesperson works independently to sell the products.
Multi-level marketing (MLM)
Multi-level marketing (MLM) is a form of direct selling that involves recruiting other salespeople to join the company’s sales team. In MLM, salespeople earn a commission not only on their own sales but also on the sales made by the people they recruit into the sales team. This creates a network of salespeople who work together to sell the company’s products.
Network marketing is similar to MLM, but the focus is more on building a network of customers rather than just a sales team. In network marketing, salespeople earn a commission on their own sales and the sales made by other salespeople in their network. The goal is to build a network of loyal customers who regularly purchase the company’s products.
Party plan selling
Party plan selling is a form of direct selling where a salesperson conducts a demonstration or presentation of products to a group of people at a party or event. The salesperson typically provides samples of the products and explains their benefits to the attendees. At the end of the presentation, attendees can place orders for the products they are interested in purchasing.
Party plan selling is popular in Malaysia, especially for beauty and skincare products. It allows salespeople to reach a large audience in a short amount of time and generate significant sales. However, finding hosts for the parties and convincing attendees to purchase can be challenging.
Online direct selling
Online direct selling is a form of direct selling where products are sold directly to consumers through an online platform, such as a website or social media. Online direct selling has become increasingly popular in Malaysia, especially during the COVID-19 pandemic, where many people are hesitant to shop in physical stores.
Online direct selling allows companies to reach a broader audience and sell their products 24/7. It also allows salespeople to work from home and reach customers all over Malaysia. However, online direct selling has its challenges, such as competition from other online sellers and the need to build trust with customers who cannot physically see or touch the products.
Telemarketing is a type of direct selling that involves making sales calls over the phone. It is a popular method of reaching potential customers, especially in industries like insurance, telecommunications, and finance.
Telemarketing has several advantages. It is cost-effective compared to other forms of direct selling since it does not require the salesperson to travel to meet the customer. This saves time and money, making it an ideal choice for businesses looking to expand their customer base. Telemarketing also allows businesses to target specific groups of customers based on demographic or geographic data. This targeted approach increases the chances of making a sale and can lead to increased customer loyalty.
CONDITIONS OF ESTABLISHING A DIRECT SALES BUSINESS IN MALAYSIA
The applicant must be a business established in accordance with the Companies Act of 1965/2016.
Have paid-up capital according to marketing category:
|CATEGORY||Not 100% Bumiputera||100% Bumiputera|
|Single Storey Marketing||RM500,000||RM100,000|
|Postal Order Sales||RM500,000||RM100,000|
|Companies with foreign ownership||RM5,000,000|
CHARACTERISTICS OF THE MARKETING PLAN AND MECHANISM
The following guidelines must be followed by the company’s marketing strategy:
The company does not operate a pyramid scheme, as stated under Section 7 of DSA 93. The Direct Sales (Scheme and Behavior) Rules of 2001 must be followed, which prohibit the following:
- The scheme is presented in a misleading manner
- In an effort to deceive participants, overemphasize any disproportionately high bonus or bonus payout when presenting the direct sales strategy.
- Each participant must receive a sales kit, including the company code of conduct and marketing strategy.
Rewards must be given based on the volume or amount of goods and services sold, not on the enrollment of new participants in the direct-selling program.
In addition, participants shouldn’t be required to spend more money than they can afford on items or services that can be reasonably expected to be resold after a respectable amount of time.
This indicates that in accordance with this rule, the distributor should buy goods and services to resell for a profit at a higher price. He or she should receive the proper level of commission and incentives for the reported sales.
The network shouldn’t in any manner or primarily depend on member introductions or recruitment to grow, as this could turn the program into a pyramid scam, which is against the law.
It shouldn’t in any manner force the member to buy an excessive number of items that might be hard or impossible to resell in the future.
There shouldn’t be any requirements for minimum payments, sales, or purchases in order to qualify for a given bonus.
Direct selling license Malaysia requirements
To obtain a direct selling license in Malaysia, you will need to meet certain requirements set by the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP). Here are some of the main requirements:
REGISTERED WITH THE COMPANIES COMMISSION OF MALAYSIA (SSM) OR THE REGISTRAR OF SOCIETIES (ROS)
The company must be registered with the relevant government agency and have a valid business registration number.
Refer to our page, Malaysia company registration, for more information.
The company must have a minimum paid-up capital of RM100,000 for a private company or RM200,000 for a public company. The paid-up capital is the amount of money that has been invested in the company by its shareholders.
The company must have a registered office in Malaysia, which is a physical address where the company’s official correspondence and documents are kept.
The company must have at least one local director who is a Malaysian citizen. The local director is responsible for managing the company’s operations and ensuring that it complies with all relevant laws and regulations.
Good financial standing
The applicant’s company must be in good financial standing, with audited financial statements for the past three years. Foreign companies applying for the licence must provide their overseas company audited financial statements.
The products being sold must be legal, safe, and of good quality. The KPDNHEP may require additional certifications or approvals for certain products.
Training for direct sellers
The applicant must provide training for their direct sellers on the products being sold, direct selling techniques, and ethical practices.
Direct selling insurance
The applicant must provide direct selling insurance coverage for all direct sellers.
DOCUMENTS REQUIRED FOR DIRECT SELLING LICENCE IN MALAYSIA
To apply for a direct selling license in Malaysia, you will need to submit several documents to the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP). The required documents include:
- Completed application form – This form can be obtained from the KPDNHEP or downloaded from their website.
- Copy of the company’s memorandum and articles of association – This document outlines the company’s legal structure and governing rules.
- Audited financial statements – You will need to submit audited financial statements for the past three years to demonstrate that your company is financially stable.
- Business plan and product catalog – Your business plan should outline your marketing and sales strategies, while the product catalog should include details about the products you plan to sell.
- List of directors and key officers – This list should include the names and contact details of all directors and key officers of your company.
- Training manual for direct sellers – This manual should provide information on your company’s direct selling practices and policies.
- List of proposed direct selling locations – You will need to provide a list of all the locations where you plan to conduct direct selling activities.
WHAT IS THE APPLICATION PROCESS FOR A DIRECT SELLING LICENSE IN MALAYSIA?
The application process for a direct selling license in Malaysia involves several steps. Here is an overview of the process:
- Prepare the application documents – Before applying for a direct selling license; the applicant needs to prepare all the necessary documents listed above.
- Submit the application – Once the applicant has prepared all the necessary documents, he can submit the application to the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP).
- Application review – The KPDNHEP will review the application and supporting documents to ensure that they meet all the necessary requirements.
- Site inspection – The KPDNHEP will conduct a site inspection to verify that the proposed direct selling locations meet the required standards.
- Approval or rejection – If your application is approved, the applicant will be issued a direct selling licence. If the application is rejected, he will be informed of the reasons for the rejection.
- Licence renewal – Direct selling licenses in Malaysia are valid for two years. The applicant will need to renew the licence before it expires to continue operating as a direct seller.
It’s important to note that the application process may take up to 90 working days to complete, so it’s recommended to start the process well in advance of when the applicant plans to start the direct selling business.
Please see the KPDNHEP website for a list of necessary documents for NEW and RENEWAL applications for a direct selling licence.
The annual licence price is RM 500. It must be paid in the name of the Ministry of Domestic Trade, Cooperatives, and Consumerism’s Secretary General via bank draft or money order.
Contact us at Relin Consultants for more information or assistance with Direct Selling license applications in Malaysia.
What is the difference between direct selling and direct marketing?
Direct selling is the practice of selling goods or services directly to customers outside of a physical store, whether it be through one-on-one transactions, party plans, other forms of direct interaction, or online transactions.
In contrast, direct marketing is an interactive marketing system that uses one or more media for advertising to produce a measurable response and/or transaction at any place, with this activity being logged in a database. This might involve direct mail, telemarketing, and direct response.
When the direct seller or retailer initiates contact with the possible consumer rather than waiting for them to come to a store or other permanent place of business, this is what makes direct selling unique.
What are the types of products and services marketed through direct selling?
Direct selling is a varied industry with a sizable product category in Malaysia. Direct selling is a standard method of marketing consumer goods and services accepted by the Ministry of Domestic Trade, Co-operatives, and Consumerism (KPDNKK). They could include, but are not restricted to, household goods, food items, and health care supplies.
How big is the direct selling industry in Malaysia?
In 2021, the direct selling sector’s sales turnover was RM27 billion, up from RM25.7 billion in 2020. The sector provides Malaysians with alternatives for both part-time and full-time business opportunities. The sector gives business owners a platform to use direct selling for marketing their distinctive goods and attentive service.
Is a direct selling licence required in Malaysia?
Yes, a direct selling licence is required in Malaysia. The Direct Sales and Anti-Pyramid Scheme Act 1993 requires any person or company engaged in direct selling to obtain a licence from the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP).
Who is eligible to apply for a direct selling licence in Malaysia?
Any person or company that meets the following requirements can apply for a direct selling licence in Malaysia:
- Registered with the Companies Commission of Malaysia (SSM) or the Registrar of Societies (ROS)
- Has a paid-up capital of at least RM100,000 for a private company or RM200,000 for a public company
- Has a registered office in Malaysia
- Has a local director who is a Malaysian citizen
How long does it take to obtain a direct selling licence in Malaysia?
The processing time for a direct selling licence application in Malaysia can take up to 90 working days.
What are the consequences of operating without a direct selling licence in Malaysia?
Operating without a direct selling licence in Malaysia is an offence under the Direct Sales and Anti-Pyramid Scheme Act 1993. Offenders can be fined up to RM250,000 or imprisoned for up to five years, or both. The court may also order the forfeiture of any proceeds obtained from the illegal activity.