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Direct Selling: A Real Business
Neil Offen: Why Are We Hot?

Direct Selling: Why Are We Hot?
by Neil Offen, President and CEO of the Direct Selling Association

Within the past several years, direct selling as a channel of consumer product distribution has been "discovered" by both foreign and domestic investment firms, venture capitalists, manufacturers, retailers and direct marketers. The press has also shown increasing interest in our vocation-from the business pages to the lifestyle section. At the same time, the sales volume of our companies has risen to new heights: some $30 billion in the United States and more than $100 billion worldwide. Likewise, our sales forces have grown dramatically, to almost 14 million in the United States and more than 55 million globally . and I am not including our sales and salespeople in China.

What factors can we identify that are justifications for this growing interest and appreciation of our industry? Let me throw out a number of ideas based on my speculations.

First, the traditional attributes of being a direct salesperson remain in play. Being your own boss, setting your own goals, the ease of entry and exit, the total lack of discrimination in the field regardless of one's sex, race, age, educational background, physical condition or financial wherewithal-all resonate well with a population that is growing more and more entrepreneurial and more and more disaffected with jobs that offer no security, no opportunities for growth and certainly no fun.

Second, the breakdown of the nuclear family in our country, and the isolation that modern society brings about, make our industry-with its nurturing, caring, family orientation-even more attractive.

Third, our proactive program of image enhancement and reputation building has begun to pay dividends. Our FORTUNE magazine and USA Today inserts, our socioeconomic studies, our attitudinal research and other data collection efforts allow us to speak with clarity, backed up by hard facts. Third party validation is helpful to both our member firms and to their salespeople and distributors.

Fourth, as a method of distribution, our industry provides the opportunity to control the entire supply chain, or major portions of it, and to take the product from manufacture to sales to the ultimate consumer (our sales organization members as well as customers outside the sales force are ultimate consumers). This is especially relevant and attractive as the traditional retail landscape is being permanently altered by the behemoth Wal-Mart and other super chains like Target. Their demanding and huge purchasing power, the dependency vendors have on them, and their ability to cut supplier margins to the bone are causing these firms and their retailing competitors to look for ways to protect their futures by trying the one channel that seems to offer them the ability to control their own destinies. That channel is direct selling.

Since the beginning of this millennium, we have seen some of the biggest firms in consumer product marketing enter our industry, expand their positions, or join DSA (as subscriber members) to seriously investigate entry into our ranks. Warren Buffet's Berkshire Hathaway now owns three direct sales firms, Time Warner successfully launched one, and Unilever has opened direct sales operations in three countries and has one more on the way. Hallmark/Binney & Smith, Lillian Vernon, Jones Apparel, Jockey, Reader's Digest, Citigroup, Bertelsmann, Nestlé, The Body Shop, Penguin Books, Usbourne, Blyth, CPAC, and several more are now members of DSA . not only here but around the world.

More signs of our strength and attractiveness are the IPOs launched within the past few years. Herbalife in the United States, Natura in Brazil and Oriflame in Sweden are examples. All were extremely well received by the investment community. Some 30 of our companies are publicly traded, and several others are planning IPOs. Investors have entered our world via ownership of Shaklee, Home Interiors & Gifts, Arbonne and Lux. Even within the industry, direct sales firms are showing their own confidence in the industry by acquiring others or divesting their other non-direct sales divisions. Regal Ware was one such, committing itself to direct selling and acquiring West Bend to boot. Multibillion dollar, Germany-based, family-owned Vorwerk acquired Jafra Cosmetics and Lux Asia Pacific. Tupperware acquired Sara Lee's direct selling operations-including NutriMetics, Fuller de Mexico and Avroy Shlain Cosmetics-then combined them with BeautiControl to create Tupperware Brands.

Finally, another proof that we're hot is the increase in the number of firms joining DSA. In the last three years, more than 250 firms have applied for active or subscriber membership, bringing our total membership, including pendings, to more than 500 companies. Some 700 industry executives serve on DSA's committees, councils and task forces. Annual Meeting attendance last year exceeded 1,000 senior managers and leaders of our companies and vendors group. DSA members account for well over 90 percent of industry sales and salespeople. Over 80 percent of our members now use multilevel compensation systems. Investment bankers and venture capitalists contact me frequently for information on the industry. More than 45,000 unique individuals visit our Web site monthly, spending an average of 10 minutes online, and that number will continue to grow in the months and years ahead.

Direct selling is in the right place at the right time here in the USA . and in the other 170 countries in which our firms operate.