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Mannatech Q3 2018 Sales Up 2.4%

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Mannatech, Incorporated (NASDAQ: MTEX) announced financial results for its third quarter of 2018.

Net sales were $43.0 million, an increase of $1.0 million, or 2.4 percent, as compared to $42.0 million in the third quarter of 2017. For the three-month period ended September 30, 2018, net sales increased 2.9 percent on a constant dollar basis as compared to the same period in 2017, while unfavorable foreign exchange caused a $0.2 million decrease in GAAP net sales as compared to the same period in 2017.

Recruitment of new independent associates and preferred customers increased 1.6 percent during the three months ended September 30, 2018 as compared to the same period in 2017.

For the three months ended September 30, 2018, Mannatech’s operations outside of the Americas accounted for approximately 69.1 percent of the company’s consolidated net sales.

To read the full Mannatech Q3 2018 report, click here.

Thirty-One Gifts to Move Headquarters, Distribution Center

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Thirty-One Gifts recently announced that both its corporate headquarters and distribution center will be relocating.

The company will move its corporate headquarters from its current location near Easton in Columbus, Ohio, to New Albany, which is just northeast of Columbus, in early January 2019. About 300 people will move to the new headquarters.

Cindy Monroe, founder and CEO of Thirty-One Gifts, said the move into the new building, which was the old Bob Evans headquarters, supports the company’s growth plans. “This is a beautiful building on a beautiful 40-acre campus,” she said. “It will help us attract and retain the top talent we need to grow and remain a leader in the industry.”

The company also announced that, as part of its growth strategy, it will move its distribution center to Texas in the second quarter of 2019. It is leasing 651,000 square feet of distribution center space in Flower Mound, a suburb of Dallas, and plans to begin fulfillment operations there in April 2019. The move will enable the company to better serve the markets where it anticipates the most growth.

“We’ve had our home office and distribution center in Columbus for 10 years,” Monroe said. “Our Columbus location has served us well, and we’re proud and excited to maintain our headquarters—and 300 jobs—here. Moving the distribution center to Texas, however, puts our distribution operations closer to areas of significant growth potential for us in the southwestern U.S. and Mexico.”

The move will affect about 800 employees who work in the Columbus distribution center. Company officials have invited all of them to relocate to Dallas and continue working for Thirty-One Gifts there. Those who remain in Columbus will be eligible for a severance package and outplacement services, including onsite job fairs.

Plexus Worldwide Launches New Whey Shakes

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Plexus WorldwideTM recently announced the newest addition to its line of nutrition shakes, ™ Whey Meal Replacement.

Plexus Lean Whey, available in vanilla and chocolate flavors, features whey protein, dietary fiber and essential vitamins and minerals, and is free from soy and gluten allergens, non-GMO, and free of artificial flavors, artificial colors and sweeteners.

“We’re excited to add Plexus Lean Whey to our product line to help adults meet daily needs of essential nutrients for optimal wellness,” said Tarl Robinson, Plexus CEO and founder. “Our whey protein blend offers consumers a new option that is free of soy and gluten allergens, while containing important prebiotics.”

The new Lean Whey will be added to Plexus’ Nourish One™ Initiative, an on-going commitment to benefit Feeding America, the nation’s largest organization dedicated to fighting domestic hunger through a network of food banks. For every serving sold of Plexus Lean Whey and Plexus Lean Vegetarian, Plexus and Plexus Charities will provide a monetary donation equivalent to one meal for a child or family in need through Feeding America.

“The Plexus culture is built upon giving back to the community and helping those less fortunate,” said Alec Clark, president and founder of Plexus. “We are proud to partner with Feeding America to tackle hunger and end food insecurity, one of the biggest issues facing our nation that is often forgotten.”

Avon Reports 1% Increase for Q3 2018 Revenue

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Avon Products, Inc. (NYSE: AVP) announced its results for the quarter ended September 30, 2018.

Total reportable segment revenue in reported currency increased 1 percent to $1.4 billion. Adjusted total reportable segment revenue in constant dollars decreased 4 percent on a like-for-like basis. Active representatives and ending representatives, both from reportable segments, declined 5 percent and 6 percent, respectively.

“As we said at the recent investor day, it is going to take time for us to execute this turn-around,” said Avon CEO Jan Zijderveld. “While we are not yet satisfied with the overall quarterly results, I am encouraged by the speed at which initiatives are being adopted in our markets. We are beginning to see benefits from recruiting and training initiatives that have been put in place in countries around the world.”

Revenue by region:
  • Europe, Middle East & Africa revenue was down 8 percent, or 3 percent in constant dollars.
  • South Latin America revenue was up 9 percent, significantly impacted by an IPI tax reversal in Brazil.
  • North Latin America revenue was relatively unchanged, or up 5 percent in constant dollars.
  • Asia Pacific revenue was up 2 percent, or 6 percent in constant dollars.

To view the full Avon Q3 2018 financial report, click here.

LifeVantage: Q1 2019 Results, New Product Line, Expansion Plans

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LifeVantage Corporation (Nasdaq: LFVN) yesterday reported financial results for its first quarter ended September 30, 2018.

Highlights from the report included:

TrueScience Hair

  • Revenue increased 13.2 percent to $55.6 million year over year and 2.9 percent sequentially
  • Revenue in the Americas increased 13.6 percent year over year and 1.4 percent sequentially
  • Revenue in Asia/Pacific and Europe increased 12.1 percent year over year and 7.5 percent sequentially
  • Active independent distributors increased 4.8 percent and active customers increased 9.2 percent year over year

“We had a strong first quarter with broad-based growth in sales and active members (total active distributors and customers),” said LifeVantage President and Chief Executive Officer Darren Jensen. “Our recent launch in Taiwan was a significant success, already delivering the third highest sales by country across our global footprint during the month of September. Given the strong sales trends, we are increasing our fiscal 2019 revenue guidance. As we look forward, we will continue to focus on our key initiatives, including additional geographical expansion and product innovation later in fiscal 2019.”

LifeVantage also this week that is has launched a new product line, the TrueScience Hair Care System®. The system features Invigorating Shampoo, Nourishing Conditioner, and Scalp Serum.

In addition to the new product line, the company announced that it will aggressively expand its footprint in Europe in 2019 by opening five new markets: France, Greece, Belgium, Ireland and Spain.

To read the full LifeVantage Q1 2019 financial report, click here.

Mary Kay Inc. Opens New Manufacturing Facility

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Mary Kay Inc. recently opened the doors to its new U.S.-based global manufacturing and research and development facility located in Lewisville, Texas.

To support future growth for made-in-America products, the Richard R. Rogers (R3) Manufacturing Facility —named in honor of company co-founder, executive chairman and son of Mary Kay Ash—will support the global cosmetic company’s needs in producing skin care products, color cosmetics and fragrances for millions of Mary Kay Independent Beauty Consultants in nearly 40 countries.

Following an exhaustive search of potential locations throughout North Texas, Mary Kay Inc. broke ground on R3 on September 13, 2016, exactly 53 years to the day after Mary Kay Ash launched her dream company from a small Dallas storefront. With more than a $100 million investment, the 453,000-square-foot building features state-of-the-art R&D laboratories and cutting-edge manufacturing technology. It will function as a zero waste to landfill facility.

“The opening of the Richard R. Rogers Manufacturing Facility marks an exciting milestone in our company’s 55-year history,” said David Holl, president and chief executive officer for Mary Kay Inc. “Approximately 75 percent of our current business is overseas, and more than 50 percent of Mary Kay products produced at our U.S. manufacturing facility are exported to our international markets. As an innovation leader, this new facility will also allow us to continue producing best-in-industry products today, while practicing sustainability for the future.”

In partnership with the Arbor Day Foundation, the iconic beauty company planted its 1 millionth tree on the grounds of R3 as part of its Pink Doing GreenSM initiative. Mary Kay Inc. also presented a $50,000 check in partnership with Texas New Mexico Power to Denton County Friends of the Family, the sole provider in Denton County of shelter and outreach services for those affected by domestic violence and/or sexual assault.

To further showcase Mary Kay Inc.’s commitment to the Lewisville community, the company announced a 10-year partnership with Lewisville Independent School District to offer a more robust entrepreneurship curriculum for Lewisville High School. Using the nationally renowned Incubatoredu curriculum, students will learn business concepts while local business leaders provide coaching and mentoring.

“In 1963, my grandmother and father founded this company in Dallas and we are proud to maintain our strong connection with North Texas,” said Ryan Rogers, chief investment officer for Mary Kay Inc., son of Richard R. Rogers and grandson of Mary Kay Ash. “The Richard R. Rogers Manufacturing Facility is not only an investment in our company’s future but also in our continued mission to empower and enrich women’s lives around the world.”

Medifast/OPTAVIA Expands Executive Team to Support Asia-Pacific Expansion

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Medifast/OPTAVIA recently expanded its executive team to support its intended Asia-Pacific expansion, including Hong Kong and Singapore, in 2019.

Tony Tyree has been appointed chief marketing officer and Fran Lawler has been appointed chief human resources officer, adding to the company’s leadership team as it prepares for international expansion with its lifestyle brand and Coach community, OPTAVIA®. The appointments follow those of Nicholas Johnson, president of OPTAVIA, USA, and Clovis Lau, vice president of Business Development, Asia-Pacific.

“This is an exciting time in Medifast’s history as we continue to drive record-breaking revenue and profitability fueled by the growth of our dedicated OPTAVIA community,” said CEO Dan Chard. “Tony and Fran’s experience and expertise further strengthens our corporate leadership and will help us build on the momentum we reported in the second quarter as we expand internationally, and advance our mission of lifelong transformation, one healthy habit at a time.”

Tyree is charged with leading the company’s marketing, scientific and clinical affairs, nutrition support, product development, and strategic planning and program management teams. He most recently served as vice president of Global Snacks at The Hershey Company.

Lawler is tasked with developing Medifast’s talent management strategy both domestically and abroad, which encompasses recruitment, succession planning, and employee development. Prior to joining Medifast, Lawler served as vice president of Human Resources for Stanley Black & Decker.

Johnson was appointed President of OPTAVIA, USA in January 2018 and is responsible for leading the growth of OPTAVIA in the United States by partnering with the growing community of OPTAVIA Coaches.

Lau also joined the company in January 2018 and is responsible for leading the company’s business development efforts in the Asia-Pacific region with an initial focus of opening the gateway markets of Hong Kong and Singapore.

Lela Russo Named MONAT Vice President of Marketing

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MONAT® Global recently announced it has named direct selling industry veteran Lela Russo as vice president of Marketing.

“Lela will play a vital role in supporting our ambitious growth,” said President Stuart MacMillan. “Her experience in our industry will provide valuable insight to support our fast-growing line of products, which will ultimately aid in MONAT’s strategy for continued advancement and success. I’m pleased to welcome Lela to our team.”

In her new role, Russo will create, communicate and deliver value-offerings for MONAT Market Partners, VIP customers and retail customers. She is also be responsible for expanding global brand awareness.

“As I embark on my journey with MONAT, I look forward to witnessing—and being part of—the company’s continued innovation and growth,” said Russo. “I am pleased to join the MONAT family.”

Russo will office at MONAT’s corporate headquarters in Miami, Florida.

Leadership and Fear

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Struggling with insecurity on the inside, even while appearing confident on the outside, is a common battle for individuals who hold the high authority in their organizations.

When are they going to realize I’m a fraud? is a secret and lurking question that haunts even the most successful. For some people, the private doubting sounds more like, What if I’m not the right person for this job? or What if I don’t have what it takes and fail?

The doubts echo differently, but the effect is so common that psychologists have given it the name “impostor syndrome.” This phenomenon establishes a psychological pattern of doubting one’s accomplishments while elevating the abilities of others and results in an internalized fear that eventually everyone will see you for who you really are: a fraud.

This belief that luck—not accomplishments, talent or qualifications—is the reason for a person’s success was first diagnosed as a syndrome in 1978 by psychologists Pauline Rose Clance, Ph.D., and Suzanne Imes, Ph.D. Since then, researchers have discovered more about the phenomenon, learning that it strikes both men and women and doesn’t discriminate between job titles. It creeps into both the new intern’s cubicle and the corner offices of the C-suite alike.

It’s natural to assume that these persistent feelings of unworthiness might plague the worker just getting started, or to even chalk them up to nerves or inexperience. But why would executives who had worked their way up the ladder of success with experience and proven results—men and women who were chosen and hired for their ability to lead and inspire others—feel inadequate, unqualified or unworthy of their high-ranking job title?

The C-Suite Isn’t a Superpower

The answer begins with the mental image most of us subconsciously carry of what a chief executive should be: a tall and charismatic, visionary leader with Ivy League credentials who possesses laser-focused precision while making rapid-fire decisions. Add to all those exclusive characteristics the gender and racial bias elephants in the room, and the result is a typecast CEO in a role that very few people could play. This is the abrasive, well-dressed hero seen in improbable movie plotlines who saves the company at the last minute against all odds—a fantasy, but not reality.

Expectations like these are enough to make the average leader—even one with a portfolio full of awards, gleaming profit margins, and recommendation letters—question their abilities.

“Experience is cumulative. We all make bad decisions. Leaders get back up, dust themselves off, and quickly move on. Your organization depends on it.”
— Jere Thompson, Jr., Ambit Energy Co-Founder and CEO

The fears that resonate among those who sit at the head of the table aren’t much different from the fears that haunt the people who report to them. Underachieving, appearing foolish or too vulnerable, and being politically attacked by their coworkers ranked high in a 2014 Harvard Business Review study. The aftershocks of these fears, however, had a compounded impact because of their rank and were shown to create a ripple effect across the organization. As CEOs would become overcautious or take bad risks to compensate for their concerns, the way they acted out through their personal anxieties created an example of bad behavior that undermined the tiers of leadership below them as they followed suit.

But the ultimate fear of CEOs in this study is one that supplies an ideal catalyst for developing and nurturing an unhealthy struggle with the impostor syndrome: the fear of being incompetent.

Aren’t these Fears Natural?

Before standing at the helm of the multibillion-dollar Ambit Energy empire as Co-Founder and Chief Executive Officer, Jere Thompson, Jr. remembers being plagued with nagging doubts about his own abilities. “When I started my first company and was told that the initial critical financial commitment had been approved, I was absolutely terrified,” Thompson says. “I couldn’t sleep that first night, and I was wide awake in a cold sweat, afraid that I might fail. I had never run a company, much less started one from scratch.”

And he’s not alone. Struggling with insecurity on the inside, even while appearing confident on the outside, is a common battle for individuals who hold the highest authority in their organizations. “Absolutely, I have struggled with this, and a lot of my friends involved in the industry have shared that they have too at some point in their career,” says Team National President and CEO Angela Loehr Chrysler. “I think it’s a normal aspect of caring about those you lead. As leaders, our decisions can affect thousands of individuals that trust and believe in our company, our mission and our product.”

However, as the study discovered, it isn’t the fear itself that renders a leader ineffective. In fact, according to an article published in the International Journal of Behavioral Science, 70 percent of people experience impostor feelings at some point. Most executives even view fear as a natural part of leading or taking a business to the next level.

“The more I learn, listen, read, study and work on my own leadership, the more confident I become and the more wisdom I have to tap into as needed.”
— Angela Loehr Chrysler, Team National President and CEO

Fear may have haunted them at times, but as successful CEOs in the industry, Thompson and Loehr Chrysler have proven that the fears did not overcome them, nor have they negatively impacted their companies, as would be the case for someone with true impostor syndrome. So how did they come face-to-face with their fears and emerge victorious? What actions did they take to resiliently push back against their insecurities in order to build and lead profitable and thriving organizations? While it would be wise to consider the traits they possess and the habits they practice, the behaviors and characteristics they avoid are just as important to note.

Symptoms that Lead to Ineffective Leadership

Among those with heightened feelings of fraudulence, impostor syndrome expert Valerie Young found a pattern of predictable beliefs and behaviors that prevented them from effective leadership. Impostors expected perfection, setting almost unreasonable expectations and then drowning in failure, dwarfed by their own seeming incompetence. They were hesitant to make decisions, requiring every single data point before a decision could be made for fear they would be presumed stupid if the incorrect choice was made. They urgently needed to complete tasks on their own merits, without asking for help and frequently pushed themselves harder than their peers in an ironic effort to prove they were not impostors.

When asked what sets great executives like himself apart, CEO Jere Thompson responded with “Leaders must lead,” Thompson says. “They must make prompt decisions, set and execute priorities, attract and retain great people, delegate, and establish and live the values of the organization. You aren’t going to be right all of the time.”

The Successful CEO: It’s Not Who You Think

The glossy magazine cover CEO feeds the impostor syndrome mentality, but it is, of course, not necessarily reality. The Harvard Business Review addressed these misconceptions in their ten-year study of what specific attributes set apart the successful CEO (defined as one who exceeds the expectations of their board members and majority investors) in a project named the CEO Genome Project. What they found dismantled the common trope many executives struggling with impostor syndrome have internalized.

“A willingness to act on ideas and decisions are the greatest assets effective executives bring to the table.”

Although board members tended to initially gravitate toward the extroverted leader, the CEO Genome Project discovered that successful CEOs were often introverted. Charisma may get candidates shortlisted for a big promotion or new hire, the study showed, but it alone couldn’t determine longevity. And an elite education? The study found that only 7 percent of successful CEOs held an Ivy League pedigree and, in fact, 8 percent held no college degree at all. Virtually all CEOs in the study had made mistakes in the past, with almost half of them saying their mistake was so grave it cost them a previous job or created a financial hit for the company.

Successful leaders aren’t perfect it turns out. They don’t necessarily possess a magnetic personality or stand out as the most educated person in the room. And yet there’s something different about the CEOs in this study, and the CEOs we interviewed, that sets them apart from their peers. So what’s the key to unlocking their propensity for success?

High-Performance Actions & Habits

There is no one magic solution to transform someone into a high-performing CEO who is beloved by board members and shareholders alike. There are, however, crucial habits and actions that successful CEOs commonly exhibit that stave off the feelings of fraudulence and develop organizations that will confidently follow and collaborate alongside their leader.

In business as in relationships, trust is essential. That’s why three-quarters of the CEOs classified as successful in the CEO Genome Project’s study rated high on organization and planning. By creating a rhythm of meetings, accountability structures and methods for measuring performance, these CEOs were compulsively consistent in following through on their commitments. When it comes to leadership, delivering on time—every time—really does matter.

“I am boringly consistent,” Thompson says. “I have always been pretty good at making lists, prioritizing, focusing and then completing tasks. I have tried to be the same person in good times and in bad and no matter who I am with.”

Successful CEOs delegate and work well with others, but they also know how to keep momentum even when important voices are dissenting. Conflict management was a skill excelled in by two-thirds of the project’s successful CEOs. These CEOs listen to the echoes of voices from a variety of viewpoints without allowing them to slow down the process by waiting for consensus.

It’s no secret that the very best executives surround themselves with talented people in the areas in which they are not strong. When choices are on the table, the CEO Genome Project found that successful CEOs move quickly, even before all the data is presented. The problem with delving into the complexity of each decision, even when it results in making the right choice, is that it creates gridlock, frustrating hired talent or creating a slow-moving template that can cause the company to idle and eventually even stall. A wrong decision, the study found, was better than no decision at all.

“The moment arrogance sets in, or the I-can-do-no-wrong overconfidence clouds good judgment, then bad decisions and complacency will follow.”
— Jere Thompson, Jr.

A willingness to act on ideas and decisions are the assets effective executives bring to the table. And when a decision turns into a disappointment, or a market fluctuation sends plans spiraling, the high-performing CEO readily adapts. For these moments, there is no instruction manual, but the study found that the adaptable CEO was a successful CEO, and one who statistically spent more of their time—as much as half—focused on the future. They are not content to stay within their niche but instead research a wide swath of data and resources, even information unrelated to their industry, to check the pulse of the market and intuitively detect changes before they arrive.

November 2018 Cover

Pick up your print copy of the November 2018 issue in which this article appeared.

“I think great leaders are caring, compassionate, transparent, humble, servant-minded and always learning,” Loehr Chrysler says. “They take advantage of time management skills and learn to listen to their inner voice and gut instinct while staying true to who they are and who their company is as well. The more I learn, listen, read, study and work on my own leadership, the more confident I become and the more wisdom I have to tap into as needed.”

A Little Fear Can Be Good

It’s true that a lot is riding on even the smallest decision a senior-level executive makes because more is at stake. But if the frustration or stress of that responsibility turns into emotional outbursts and negative body language, it can be a detriment to the entire organization. A study by the National Institutes of Health found that the moods of leaders directly impacted how well individual team members could execute strategy and collaborate. Even an offhand comment or sarcastic scoff could send a department reeling if misinterpreted, which explains why more than three-quarters of the high-performing CEOs in the CEO Genome Project scored high in being able to regulate their emotions. When you have the most power, you also typically have the most influence. That means that not only will employees and contractors follow their leader’s stride and style; they’ll also be looking for clues as to what to expect next. And when the buck stops with you, there’s no safety net on the other side.

The expectations, both real and imagined, that come with the promotion to the highest rung on the ladder of success can be daunting. But a little fear, it turns out, can sometimes be an excellent motivator. “Every C-suite level leader should be a little paranoid,” Thompson says. “The moment arrogance sets in, or the I-can-do-no-wrong overconfidence clouds good judgment, then bad decisions and complacency will follow. Both traits are company killers.”

When the fears feel tangible, as they did at one time for Thompson and Loehr Chrysler, a consistent commitment to decisiveness, creating momentum without waiting for consensus, adapting to meet the future, and steadily providing results can provide a course correction. And when the doubts seek to settle in, or a setback feels like a failure, it’s important to remember that a nameplate on the door of the C-suite does not a superhero make.

“Experience is cumulative,” Thompson says. “We all make bad decisions. Leaders get back up, dust themselves off, and quickly move on. Your organization depends on it.”

4 Things Successful CEO’s Do

The Harvard Business Review’s CEO Genome Project discovered that the successful CEO was almost obsessively consistent in at least one or more of the following four behaviors.

Successful CEO’s: decide with speed and conviction.
When this decisive behavior was present—even when all of the facts weren’t available, or the executive was in unfamiliar territory—the CEO was 12 times more likely to be high-performing.

Successful CEO’s: engage for impact.
Bringing stakeholders along without allowing them to sway the end result is almost an art form. These executives know how to recognize the motivations and dissents of key team members and cast vision that allows others to get on board without losing face. Though these CEO’s allow everyone’s input to be heard, they don’t allow others’ fears to change the course they have set.

Successful CEO’s: adapt proactively.
CEO’s spend most of their time preparing and thinking about the abstract—future results, teams that have yet to be created, problems that are lurking just around the corner—in order to sense changes on the horizon. They also see setbacks not as failures, but as opportunities for improvement.

Successful CEO’s: deliver reliably.
Predictability is safer. That’s why board members were more likely to pick the steadier, even lower producing candidate over the star executive with massive results if history didn’t illustrate those results over time.

The Seal Has Been Broken — Tips To Staying Out Of Class Action Crosshairs

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For nearly as long as direct selling has been in existence, our business model has been the subject of skepticism, and often by virtue of the fact that it’s one with which many aren’t familiar.

That uniqueness—that flexibility to operate one’s own business with an unparalleled degree of support from an established brand—is what inspires thousands to begin a direct selling business each year. As a company’s sales force grows, it becomes increasingly challenging to ensure that every distributor is complying with the terms of his or her independent contractor agreement and representing the products and the opportunity appropriately. With the advent of social media, it’s easier than ever for a false claim to go viral before a company is even aware of it. On the other hand, social media can make it easier for companies to detect problems before they become even larger.

“In the early days of her company, Mary Kay Ash said that one of the most challenging aspects of her job was that there was just one Mary Kay and 20,000 Mary Kay spokespeople.”

We can’t discount the fact that many new distributors don’t read the fine print and therefore have no idea when they’ve overstepped the boundaries. Others may be taught by their upline to present the business opportunity or products in a manner not endorsed by the companies they represent. And we certainly can’t ignore that continually new sales force members are coming into direct selling for the first time. Direct selling companies may take great care to explain compliance, but if they don’t revisit the topic on a regular basis, there are those who will inevitably fall through the cracks.

Whether due to these areas of vulnerability or the deep pockets of direct selling companies—or both—the reality is that direct sellers have been the target of class-action lawsuits.

Class Action Seal Has Been Broken

The most common missteps occur generally in two areas: earnings claims and product claims. “In my experience, we’re seeing more and more direct selling companies targeted by class-action lawsuits. The seal has been broken,” says Crayton Webb, owner and CEO of Sunwest Communications, a Dallas-based public relations firm.

In the early days of her company, Mary Kay Ash said that one of the most challenging aspects of her job was that there was just one Mary Kay and 20,000 Mary Kay spokespeople. In other words, it’s very difficult to ensure that every member of your volunteer army is marching to the same drummer. Companies try to monitor and manage this—and most do quite well—but it’s nearly impossible to catch every infraction.

TINA.org’s Amplification Impact

It may come as no surprise, then, that the direct selling business model has become the target of criticism from organizations like Truth in Advertising (TINA), which has frequently panned direct selling companies and distributors for making what it considers to be erroneous or otherwise inappropriate claims on websites and social media platforms.

“Many times we’ll hear from distributors who simply don’t understand the law. It would be a prudent course for MLM companies to find an effective way to educate their distributors.”
— Bonnie Patten, Executive Director, Tina.Org

In 2017, TINA organization conducted an inventory of Direct Selling Association member companies, looking for what it considered to be questionable income claims by either the companies or their distributors. In total, TINA amassed a database of 3,000 examples. The organization then wrote letters to each of the companies. Many responded—some with a pledge to investigate the claims and address any wrongdoing, others questioning the organization’s tactics of publicizing the alleged offenses before giving companies the opportunity to respond, and still others pointing to their previous resolution of the issues (in some cases, the posts were from individuals who were no longer in the company’s independent sales force).

TINA’s legal team generally uses “FTC law and their guidance on that law to make the determination” that violations have occurred, says Executive Director Bonnie Patten. She adds that because there’s no way to vet all of the tips TINA receives about direct sellers due to the volume of complaints they’ve received, the organization started a blog called “TINA’s List,” which shares the names of organizations consumers have asked TINA to investigate.

Distributors Not Understanding the Law

Patten believes direct sellers can provide legitimate business opportunities; however, companies and distributors need to have a better understanding of the law when it comes to making income and health claims. “Many times we’ll hear from distributors who simply don’t understand the law,” she says. “I really do think that it would be a prudent course for MLM companies to find an effective way to educate their distributors. Obviously, there will always be people who choose not to follow the law, but that’s different from not knowing the law.”

“We can’t afford to be complacent because class-action suits affect not only the reputation and bottom line of the defendant; they affect our industry at large.”

Spencer Reese of Reese, Poyfair, Richards PLLC, has been an attorney since 1992, focused solely on the direct selling field. He says there’s been an uptick in class-action suits over the years fueled not necessarily by bias as much as the vulnerabilities associated with the sales channel. “Back in the ’90s,” he says, “we saw a lot of suits filed against bigger companies all alleging pyramid schemes. Now we’ve expanded beyond pyramids to improperly paid sales tax, deceptive income claims and conduct. The claims tend to follow suit with what the FTC is doing.”

Most allegations, Reese says, are brought by “disgruntled former reps but the real driving force is law firms are trolling for class-action business. One law firm has filed five different class-action lawsuits. They file a cookie cutter complaint hoping to get a quick settlement, and they move on.”

The Financial Toll

Are direct sellers particularly vulnerable to class-action suits? “Let’s not kid ourselves. Do we have some exposure? Of course we do,” Reese continues. “There are some bad apples among us, and one bad apple spoils the lot.”

Claims brought in civil cases tend to be disjointed but are often effective at leaning on pressure points. It’s expensive to defend one of these cases. Being accused of being a pyramid can be devastating so the pressure to settle is tremendous. A company that wants to fight it can do so for years, but it takes a financial toll like no other.

“We can’t just expect the legal department to clean up the mess. it’s not possible to ensure that members of the field are talking about products and the opportunity the right way.”
— Crayton Webb, owner and CEO, Sunwest Communications

So is there any way that a company can effectively police the online landscape and prevent these sorts of claims from gaining traction? A risk mitigation service can be an effective solution, says Reese. Other companies prefer to monitor social media manually – in other words, “hire a lot of people to sit and troll the web all day. I don’t recommend this; it’s an expensive way to do it.”

November 2018 Cover

Pick up your print copy of the November 2018 issue in which this article appeared.

Getting distributors to read and comprehend the terms of their independent contractor agreements is difficult. Reese says he’s been looking for a way to encourage more distributors to do just that for the last 25 years. One possible solution, he adds, is one taken by some of his own clients, who require that representatives take compliance training modules before they can advance in rank, “but there’s no panacea.”

Filling the Messaging Vacuum

One of the wisest strategies may be one of inoculation, says Webb, who recommends that direct selling companies be “proactive in providing materials that tell your story, as well as the rules of the road for what you can and can’t share with your team members and customers. You have to plan for the worst and anticipate what’s coming. The most important thing that a direct selling company can do is to fill the vacuum of messaging in what’s permissible and what’s not with the field. In the absence of good material from corporate, the sales force may create things on their own.”

Reese advises that companies have a strong class action waiver in their independent contractor agreements. That waiver requires representatives to agree that if they ever have a dispute with your company, they’ll resolve it individually instead of through class action. “ The company will need to give up something to get that kind of protection,” he adds. “You may expose yourself to small claims cases, but you’ll stay clear of class actions, which are really devastating cases.” He cautions that the law is constantly changing around class action waivers, so companies have to keep up.

The direct selling business model is by no means alone in its vulnerability to class-action suits, though its areas of exposure may differ.If you look at any consumer brand of note, all of them are bound to face legal challenges. “It’s the cost of doing business, which is unfortunate and scary,” Webb says. “The smart direct selling companies are looking at this as a multi-departmental strategy. The sales department has to keep the field motivated, the lawyers have to keep them compliant, and the communications team has to come up with the right messaging. We can’t just expect the legal department to clean up the mess. We can’t expect compliance to handle all of it. We’re talking about hundreds of thousands of sellers. Without a proactive communications strategy, it’s not possible to ensure that members of the field are talking about products and the opportunity the right way.”

As direct selling companies, we must understand that there are individuals and organizations, fueled by varied motivations, who are ready to amplify our missteps at any opportunity. The most effective strategy for preventing class-action suits is for all of us to take ownership of this issue and step up our educational outreach and monitoring efforts. We can’t afford to be complacent because class-action suits affect not only the reputation and bottom line of the defendant; they affect our industry at large.

Preparation Equals Prevention

Lawsuits are inevitable, but there are some actions you can take to strengthen your company’s position should you be hit with a class action lawsuit. Here’s a quick summary from our legal experts:

Proactive, integrated communications strategy—Sales, marketing, compliance have to work together to ensure the field are talking about products and opportunity the right way. It’s not just the legal team’s job to clean up the mess.
Hire a risk mitigation service—A risk mitigation firm can help you in evaluating your current risk as well as help you plan and develop options and actions to enhance opportunities in reducing potential threats that could lead to a class action.
Social media monitoring team—Hiring a lot of people to sit and troll the web all day can be expensive, but it may be worth it in the long run. Make sure they are trained on what to look for and how to report it to their team leader.
Compliance training modules—Before your distributors can advance in rank, provide them with a short and sweet training module that reminds them of rules of what you can and can’t do in regard to promoting products and the opportunity.
Provide materials to inoculate your distributors—Be proactive in providing materials that tell your story, as well as the rules of the road for what you can and can’t share with your team members and customers.
Have a strong class action waiver in your independent contractor agreements—That waiver requires representatives to agree that if they ever have a dispute with your company, they’ll resolve it individually instead of through class action.
Keep up on class action laws—It would be wise to have your legal team be on the lookout for any changes in class action law to be better assess your preparedness.

Brave Beginnings, Rare Ingredients — SEACRET Direct’s Extraordinary Journey

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In 2000, when brothers Izhak and Moty Ben Shabat launched a family-run holiday business selling toys in mall kiosks, their family and friends risked everything to help.

Izhak Ben Shabat

Izhak Ben Shabat

 SEACRET DIRECT
Founded: 2011
Headquarters: Phoenix, AZ
Top Executive: Izhak Ben Shabat
2017 Net Sales: $200 Million
2018 Global 100 Rank: 72
Products: Cosmetics, Personal Care

Their parents sold everything they owned, their extended family in Israel funded their flights to the U.S., and the Ben Shabat brothers prayed that their plan would work. Each week the family would work together to make this new venture a success. Every Friday Izhak and Moty’s mother would host a home cooked meal for the family, a tradition that continues to this day. Four months and $4 million in revenue later, the entire family was ready for the next phase of the business.

Following the success of their first kiosk venture, the Ben Shabat brothers chose to focus on Israeli skincare products made from minerals, salts and mud from the Dead Sea. That strategic shift, from toys to Dead Sea skincare products, would change all of their lives.

“What we created resulted in a lot of success and through that we decided to stay (in America) and build a foundation for the business, a business based on the force of Dead Sea minerals,” says SEACRET Direct Co-Founder Izhak Ben Shabat. “That’s our heritage, that’s where we come from.”

A Different Kind of Risk Pays Off

For the first five years in business, Izhak and Moty devoted their time to enhancing the kiosk shopping experience and developing skincare solutions with immediate results. “Our products work within minutes of the demonstration,” Izhak says. “Not in ten hours, not in 30 minutes, right now. That was the entire philosophy of developing the SEACRET products.”

“The company, with its new direct sales business model and new name—SEACRET Direct—made the transition away from kiosks to individual sales.”
— Izhak Ben Shabat, SEACRET Direct Co-Founder

By 2010, SEACRET had grown to a $100 million business with retailers in 30 countries. L’Oréal was now manufacturing the full line of SEACRET products, the first time the cosmetics giant was manufacturing a brand outside of its own. But as the recession began to unfold and affect every facet of retail, malls and shopping centers began to fail. The retail industry experienced a meltdown. Izhak and Moty’s dreams of transitioning from kiosks to larger SEACRET stores suddenly seemed like a potential misstep.

“We started seeing a huge collapse of the industry around us,” Izhak says. “L’Oréal was with us and had given us all these amazing tools. We had new technologies and access to the best manufacturer in the world. But (we thought) how can we grow when the retail industry is so challenging?”

With her experience in direct sales and network marketing, SEACRET Direct Co-Founder Betty Perez saw a solution: take SEACRET out of the mall. Put the products online and transition the entire business to the direct sales/network marketing model. “Before I introduced our groups to network marketing, SEACRET was already very successful,” Perez explains. “We had great products, manufactured by L’Oréal, with so much invested in the line.”

She could see the tremendous potential for the company in the direct sales arena, though it took some time to win over the Ben Shabat brothers to this line of thinking. “Initially we were very negative about network marketing and didn’t want to pursue it,” says Izhak. Then they stumbled upon the research that Warren Buffett had done about his acquisition of a network marketing company and his outlook of what the industry is going to look like. Buffett was talking about social economy and the fact that, if you want to survive this meltdown that is about to happen, you have to create a business model that will allow your customer to share and create excitement about the brand and participate in your business model. Network marketing practices an algorithm that’s been successful for over 100 years of how to compensate people for sharing products with each other.

The company, with its new direct sales business model and new name—SEACRET Direct—made the transition away from kiosks to individual sales consultants known as “SEACRET Agents” in early 2011. Since that initial transition, as of September 2018 and net sales have doubled in those seven years to more than $200 million. The transition was clearly a successful one.

The Rare Potency of Dead Sea Minerals

Paying homage to their heritage and home, the brothers initially offered various Israeli skincare brands from their kiosks, before creating their own formulations and product line as SEACRET in 2005. Today, the SEACRET line of products boasts the power of the Dead Sea and its therapeutic salt and mud, which contain 26 essential minerals—12 of those minerals existing in the Dead Sea exclusively. SEACRET’s products include facial cleansers, creams, serums and toners, as well as a line of hair care.

Betty Perez, SEACRET Direct Co-Founder

Betty Perez, SEACRET Direct Co-Founder

“The foundation for our product line is the Dead Sea,” Perez says. “We’ve worked with the government of Israel to get more research and obtain the highest concentration of Dead Sea minerals, so our customers get immediate results. Within the direct sales space, there are no other Dead Sea mineral products out there, so there’s really no competition.”

While there are no direct sales competitors that offer Dead Sea products, the world of skincare and cosmetics is a crowded one. In order to stand out and deliver best-in-class solutions to customers, SEACRET focuses on products with immediate results. “We offer what our customers call ‘wow products,’ products that make people say ‘wow’ within five seconds,” explains Perez. That’s something that they consider a cornerstone of their products at SEACRET, and as they continue to create products, they first focus on quality and then product integrity so that they’re providing amazing results every time. “I believe that’s what creates great retention—people can see today a glimpse of what they’re going to see even more in 90 days,” Perez says.

Aligning Two Approaches – Leading with Product vs Opportunity

As the business model transition became SEACRET’s new normal, the executive team noticed that their SEACRET Agents in the field were building strong businesses, but building them quite differently. Some Agents were focused on customers and products, while others were more focused on sharing the business opportunity. The company’s onboarding and training programs didn’t adequately address these two distinct business-building approaches.

“The customer loyalty we have is phenomenal…it’s because SEACRET has really gone out of the way to build relevant programs for customers.”
— Betty Perez, SEACRET Direct Co-Founder

“It became a challenge for us,” shares Perez. “We had people who really just considered themselves direct sellers of the products, never wanting to be business builders and vice versa. And we had a system that didn’t necessarily fit both.”

November 2018 Cover

Pick up your print copy of the November 2018 issue in which this article appeared.

To align these two approaches, SEACRET developed their “XO System” that’s included in the starter kits that new Agents receive when they join the company. The system consists of two workbooks; an “X Book” that focuses on the product presentation side of the business and an “O Book” that leads with presenting the opportunity. “We found a way to bridge both of these styles where it doesn’t matter which (book) you start with, says Perez. “Both are focused on the product, and the system has been very well received.”

New Agents receive a starter kit that contains an introductory workbook and links to online training videos. Following the initial kit, Agents receive the XO System books that they review initially with their upline and then dive into on their own. These hard copy training materials are referenced in the SEACRET App as well, which sends notifications to Agents to help them follow the training.

Once they’re up and running, Agents can take advantage of sharing SEACRET’s various customer programs, designed to reward frequent buyers and foster loyalty and customer retention. From VIP and Elite Customers to Hosts who hold SEACRET Experiences in their homes, the programs are specific and effective. “As a company, we’ve developed many programs to engage our customers,” Perez says. “The customer loyalty we have is phenomenal—I truly believe it’s because SEACRET has really gone out of the way to build relevant programs for customers.”

Forward-Thinking, Family-focused Culture

Today, SEACRET continues to expand both its product line and international presence but has retained its focus on family. Currently operating in the United States, Canada, Mexico, South Korea, Japan, Australia and New Zealand, SEACRET is looking ahead to launches in Colombia and Vietnam. The company’s first Asian market was South Korea, which proved an excellent opportunity for the leadership team to focus on culture.

“I will serve whether it’s the warehouse employees all the way to the executive leaders of the company. It’s an oath we took—we don’t see it as a responsibility, we see it as a joy.”
— Izhak Ben Shabat

“Korea is one the most challenging markets in the industry because it’s so highly regulated,” says Izhak. “We said ‘we don’t know the culture very well,’ so we invited every single person that signed up in the business into the office, and we conducted interviews.” They knew they needed to get people connected to their culture first, and then the product and the opportunity. They were looking at a culture that is very respectful with a very clear definition of how people treat each other. SEACRET is now in the top five skincare companies in South Korea, with over 20,000 people attending their most recent event. They are the number 6 direct selling company in Korea.

SEACRET’s product roster has recently expanded as well, with the addition of nutritional products that launched this past summer. Though only available for the past few months, the SevenPoint2 series of organic shakes, supplements and nutritional products already accounts for 20 percent of SEACRET’s revenue. But no matter how much SEACRET expands, the commitment to a family-focused culture remains.

“When these 20 people came over from Israel to help my family when we were in crisis, my family took an oath to serve our community for the rest of our lives,” Izhak says. Today, Izhak’s mother is still standing on her feet from Tuesday all the way to Thursday or Friday to cook food for everyone. She loves it because it’s her passion. And when food is being served, it’s being served by his family and by the leaders of the organization. “I am the CEO, and I will serve whether it’s the warehouse employees all the way to the executive leaders of the company,” Izhak says. “It’s an oath we took—we don’t see it as a responsibility, we see it as a joy. We’ve had a lot of success and we are very grateful for that.”

Full Stream Ahead

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Dallas-based Stream continues to expand its footprint and stay at the forefront as a leader in the direct selling industry.

Stream
Founded: 2005
Headquarters: Dallas, TX
Top Executive: Mark “Bouncer” Schiro, CEO
Annual Revenue: $958 Million
Products: Energy (electric and gas), wireless, protective and home services

Dallas-based Stream was founded in 2005 by Rob Snyder and Pierre Koshakji as a direct selling company that provided energy services in deregulated markets. The new business model shook things up and created a new niche that revolutionized both the direct selling industry and the energy industry.

Today, Stream continues to make waves in many ways, providing electricity and natural gas services in nine states—Texas, Georgia, Pennsylvania, Maryland, New Jersey, New York, Illinois, Delaware and Ohio—plus Washington, D.C., but is also expanding its footprint nationally by providing wireless services.

“We’re focusing mainly on energy and wireless,” says CEO Mark “Bouncer” Schiro. “Wireless gives us a national footprint. With energy, we are in nine states, plus Washington, D.C., where we are providing energy to our customers.” They added home and protective services that make Stream a one-stop-shop for their customers’ needs.

“Micro-entrepreneurship in my opinion is one of the purest things America has to offer. And we do that through network marketing.”
—Mark “Bouncer” Schiro, CEO of Stream

Going nationwide and providing a new territory for Associates was the strategy behind Stream’s decision to expand into other product categories. “When we saw we had the ability to add wireless to our portfolio, it was a no-brainer for us,” says Schiro. “We shook up the energy business by providing simple and secure plans for our Associates and providing them with value. And we did the same thing with our nationally launched wireless program.”

Flourishing Footprint

Although the new focus on connected services has generated excitement and enthusiasm among Stream’s Independent Associates, Schiro admits launching new services is a long process. “We have not hit the numbers we would like to hit,” Schiro says. “But we at corporate are continually improving at preparing the runway for our Associates to succeed, including offering more training and tools to support their business. Now that we are into our third year of wireless, we are hitting our stride. We finally are profitable, so it’s a profit center for us. Now we want to really grow the business. That’s where we’re headed.”

Schiro served as CEO of Stream from December 2011 through February 2016 before becoming chairman, and Larry Mondry assumed the CEO role. Then, in September 2018, Schiro resumed as CEO.

When Schiro was away from the CEO job for two and a half years, he continued to talk to his mentors in the industry, former Co-CEO of Primerica John Addison and ACN Chairman & Co-Founder Robert Stevanovski. With each visit with them, he realized he’s fallen more in love with the industry. Micro-entrepreneurship, in his opinion, is one of the purest things America has to offer. “I am just so proud I was able to get a chance to come back and really show our Associates how much I love this industry,” Schiro says.

Now that Schiro is back in the role of CEO, one thing he wants to do differently this time is to make sure that the Associates know they’re at the forefront. “I’m going to make sure that they are heard and encouraged, and we are going to celebrate their wins. Hence, recognition, recognition, recognition. They’re going to know my passion about this industry.”

To lead the charge for a new and enhanced recognition program at Stream, Schiro recently put Chelsey Berend, Director of Events, in charge of recognition and says they will be a success under her leadership.

Schiro says one of the things he believes the company does well is culture. “We have four mantras that we live by—and this is credited to our founder, Rob Snyder,” Schiro explains. “The best idea wins. Take out the panic. Work the problem. Be transparent.”

Tooling with Technology

Stream is also focusing on improving its technology to support its Independent Associates and customers. “Technology is moving at lightning speed now, and we need to keep up,” Schiro says. “My commitment to our team is that we will keep up with technology. We’re committed to a continued focus on that in the future.”

“We have less than 5 percent of the Texas market, and we want to grow that. That’s our number one initiative: to take over Texas by growing our share of the market.”
—Mark “Bouncer” Schiro

Specifically, Schiro is very excited about Stream’s new Interactive Voice Response or IVR system, which answers the phone and directs calls to where they need to go. Instead of having eight numbers to call into, whether it’s wireless, protective services, or different territories like Texas, Georgia, or the Northeast, customers and Associates will only have to call one number with an IVR that is state-of-the-art. The system only provides prompts relevant to the account associated with the number they dial from, touts a voice recognition feature, and offers call-back options for those who prefer not to wait on hold.

Technology wise, Stream also overhauled their Associate back office support system they call Power Center. The new Power Center launch represents a complete overhaul, offering features and enhancements that put their entire business at their fingertips. They also changed their billing system platform for wireless to make it a lot more user-friendly and capable of bundling product offerings.

Powerful Plans

Since its launch as a startup in 2005, Stream quickly grew to about $300 million in revenue over the first 20 months, Schiro says. “I’m proud to say we have averaged approximately $800 million in annual revenue over the last three to five years,” he adds. “We need to find a way to grow our revenue, and that’s what we’ve been looking at.”

How does Stream plan to do just that? Schiro reveals some of Stream’s future plans and growth strategy. “We have less than 5 percent of the Texas market, so we have a lot of work to do in our own backyard” Schiro says. “Our number one initiative–to grow our share of the Texas market, which is very competitive, and it’s something we need to be laser-focused on.” We have less than 5 percent of the Texas market, and we want to grow that. That’s our number one initiative: to take over Texas by growing our share of the market.

“Number one, we are about relationships— relationships with our Associates.”
—Mark “Bouncer” Schiro

Another growth initiative of Stream’s is to focus on growing its Hispanic market, which has been one of their fastest growing demographics over the last three years. This growth isn’t lost on Schiro. “We’re going to make sure they are recognized for their achievements. Most importantly, we’re going back to the basics and that begins with listening to our Associates. We’re going to find out what they need. Because they know what they need to succeed.”

In May 2017, Stream moved its headquarters from Downtown Dallas to Addison, Texas, which is just north of Dallas and part of the humming Dallas-Fort Worth metro area. Although its sparkling new office space is new, the company’s values remain the same.

“Number one, we are about relationships—relationships with our Associates,” Schiro says. “When they come into the office I want them to feel like they are family. And I want our staff to feel that way, too.” Number two, says Schiro, is that everyone in this office needs to know that their job counts, and that they are affecting people’s lives. “The reason I came back is very simple,” Schiro says. “I want to be a part of something bigger than me. And I want everyone in this office to know that they are a part of something bigger than them. Our cause is to change people’s lives.”

Stream Cares

Stream’s philanthropic arm is the Stream Cares Foundation whose primary mission is to help those affected by homelessness. Homelessness is a nationwide issue that Stream Cares is dedicated to ending, in all its forms.

“Stream created Stream Cares and the Stream Cares Foundation to help children that were impacted by the homeless locally and nationally,” says Mark “Bouncer” Schiro, Stream CEO. “That’s been our big push. We’ve been very children-focused in our philanthropy.”

Stream Cares has partnered with many organizations on local and national levels to further their mission. Stream Cares recently partnered with Captain Hope’s Kids to develop Splash for Hope events at Hawaiian Falls Water Park, creating fun and exciting summer outings for homeless children in the Dallas-Fort Worth area to enjoy being kids.

November 2018 Cover

Pick up your print copy of the November 2018 issue in which this article appeared.

Stream partners with Splash of Hope, which helps homeless children get to enjoy a carefree day playing at a local water park.

In May 2017, Stream Cares donated $15,000 to the American Red Cross Disaster Relief Fund for the tornadoes that hit East Texas, which left many homeless.

“After Hurricane Harvey, our Associates put a crowdfunding campaign together, and we agreed to match donations because we thought it was great they provided that. Together, we raised $30,000,” Schiro says. “They took it upon themselves and that’s what I’m proud of.”