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Reliv International Announces Executive Promotions

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Chesterfield, Mo-based Reliv International, Inc., a maker of nutritional supplements that promotes optimal health, recently announced a series of internal executive promotions.

Tom Pinnock to President of Sales and Marketing

For over three decades, Pinnock has built and led an organization of tens of thousands of Reliv Distributors. From 1992–1994 he held the position of senior vice president of Sales, returning to the field from 1994–2017. For the past 18 months, he has served as executive vice president of Sales and Marketing at the corporate office.

“Tom’s role going forward will be to continue to motivate and lead the field, as well as define and teach sales strategies that are relevant in today’s direct selling and wellness industries,” said Reliv CEO Ryan Montgomery. “Tom brings a unique skillset to his position in that he knows the mindset of Distributors and is also experienced to lead from the corporate office.”

R. Scott Montgomery to President of Operations and International, Reliv Kalogris Foundation Chairman

Previously president of Reliv Asia–Pacific and chairman of the Reliv Kalogris Foundation, Montgomery has 30 years of experience with Reliv, from operations and marketing to international development.

“Scott is very connected and involved with the direct selling industry and its trends,” said Montgomery. “Going forward, he is the perfect leader to oversee Reliv’s operations and manage the international markets, as well as offer tremendous experience and input for the sales and marketing effort.”

Debra Hellweg to Senior Vice President and Chief Operating Officer

Hellweg joined Reliv in 2004 to establish and manage the Internal Audit Department. She was appointed vice president of Operations in 2008 and was responsible for additional departments including IT, Human Resources, the Distributor Services Center and Travel. Additional leadership roles include various purchasing functions and Distributor compliance.

“Debra understands the Distributor environment and has been integral with leading projects to modernize Reliv and its information technology and tools,” said Montgomery.

Kurt Wulff to Senior Vice President of Marketing

Wulff joined Reliv in 1999 and was promoted to vice president in 2005. He is responsible for the management and strategic direction of the marketing staff at corporate headquarters and oversight for international marketing efforts.

“In today’s technology age, Kurt has been instrumental with devising, coordinating and leading projects that are necessary to not only compete in today’s online world, but are innovative and stay ahead of marketing trends,” said Montgomery.

Jim Lahm to Vice President of Information Technology

“For the past decade, Jim has run the IT department and continues to push Reliv’s systems forward,” said Montgomery. “He continues to upgrade every component of our commission system, as well as provide information and metrics for management. Jim understands the technology needs of Distributors and is always thinking of ways to improve the ways we deliver information and tools, and he was key to the development of Reliv’s new mobile application.”

Steve Albright to continue as Senior Vice President and Chief Financial Officer

“For 26 years, Steve has done tremendous work to manage Reliv’s finance and public company accounting in the U.S. and 15 international markets,” said Montgomery. “He continues to be a huge asset for Reliv and its financial strategies and corporate structure going forward.”

SimplyFun Releases New Life & Thinking Skills Game

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Bellevue, Washington based SimplyFun, LLC., the publisher of award-winning educational board games, recently released Rolling Tides, a new life and thinking skills game developed by board game designer Andrew Harman that focuses on decision making and spatial reasoning.

Rolling Tides is for two to four players ages 8 and up. Players build decision making skills by choosing which die on the gameboard to move or re-roll while trying to create or block groups of matching dice.

Players also build spatial reasoning skills as they evaluate the gameboard and consider the various dice placement options. Through this game, players can also learn about tide pools and the tide pool creatures that comprise the theme of Rolling Tides.

Life and Thinking Skills, one of four skill sets that are the focus of game development at SimplyFun, include evaluating options, learning from mistakes and making informed choices. SimplyFun games that hone in on these skills help to prepare children to analyze situations to make proper decisions. Other skill sets at SimplyFun are Reading & Language Arts, Math & STEM and Social Sciences & Studies.

Founded in 2004, SimplyFun champions a vibrant, play-based education that enriches families and contributes to the potential of children, the success of schools and personal fulfillment. The company provides its Playologists (Independent Consultants) the opportunity to make a difference for kids and families with its skills-focused board games while earning income through direct sales opportunities in person and online.

Avon Selling Last U.S. Factory

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According to a recent Wall Street Journal report, Avon is selling its last U.S factory to a French cosmetics manufacturer. Citing people familiar with the plan, the WSJ reported Fareva Group will take over production at Avon’s factory in Morton Grove, Illinois.

Fareva, one of the world’s leading subcontractors in the industrial & household, cosmetics and pharmaceutical fields, will make private-label products for drugstore chain Walgreens Boots Alliance Inc. at the underutilized, 500,000-square-foot plant, the report said.

According to the northern Chicago suburb’s records, Avon employed 362 in Morton Grove in 2016. While financial terms were not disclosed, current Avon employees are expected to keep their jobs as part of the ownership change, the report said.

The deal comes less than three years after New Avon LLC, formerly the North American arm of Avon Products Inc., split from the larger company as part of a deal with private-equity firm Cerberus Capital Management LP. Cerberus bought a 16.6 percent stake in the parent company and acquired 80.1 percent of New Avon, which separated the unprofitable division from Avon’s international business.

Update:  Elizabeth Bergman, Director of Public Relations from Avon provided us with the following quote.

“We can confirm that we intend to establish a long term partnership with Fareva, a world class manufacturing and cosmetics development company, to begin in late 2018. We chose to partner with Fareva because they are one of the top beauty development houses in the world, and deliver innovations with great speed and efficiency.  We will have special access to their latest breakthroughs, and we will work with Fareva to build a robust innovation pipeline for our Avon Representatives and their customers. As part of this partnership, Fareva will assume operations at the manufacturing facility located in Morton Grove, IL, which manufacturers some of the cosmetics products in our Avon portfolio.”

Isagenix Expands European Presence with Spain and Belgium Launches

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Gilbert, Ariz.-based Isagenix International recently continued its European expansion with market launches in Spain and Belgium. The privately owned global health and wellness company entered Spain on June 25 and Belgium on April 23. The company manages both markets from its European headquarters in London, England.

“It has been a goal of ours to build on our successful launches in the U.K., Ireland and the Netherlands by expanding further into Europe, so we are excited to bring our offerings to Belgium and Spain,” said Jonas Hedberg, Isagenix regional general manager, Europe. “We look forward to seeing the people in these great countries embrace our high-quality nutritional products and solutions as well as the opportunity to build a world-class business by sharing Isagenix with others.”

The two new markets focus on weight management and energy and performance and offer some of the company’s most well-known products, including the 30-Day Weight Loss System, IsaLean™ Shake, e-Shot™ and Nourish for Life™.

Isagenix, which was founded in 2002, entered Europe in 2017 by offering its products and solutions in the U.K. The company launched in Ireland and the Netherlands soon after. With the addition of Belgium and Spain, Isagenix is now established in 17 markets, including the U.S., Canada, Puerto Rico, Hong Kong, Australia, New Zealand, Taiwan, Mexico, Singapore, Malaysia, Colombia, Indonesia, the United Kingdom, Ireland, the Netherlands, Belgium, and Spain.

DSA of Canada Celebrates Top Achievers at 2018 Awards Gala 

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Photo: Ivan P. Phelan Award recipient Rhancha Trick, Director Business Development, Nature’s Sunshine (centre) with DSA Chair Tracie Graham (left) and DSA President Peter Maddox (right)

The Direct Sellers Association (DSA) of Canada recently announced the recipients of the 2018 DSA Awards held on June 26, 2018, during its annual conference in St. John’s, Newfoundland and Labrador.

The DSA Awards honor and recognize organizations and individuals for their outstanding contributions to the direct selling industry in Canada. “The recipients of these awards are true leaders of Canada’s direct selling industry,” said Peter Maddox, president of the DSA of Canada. “Each of them have enriched the lives of many Canadians through their dedication and passion. We are inspired as an industry by their accomplishments.” 

DSA Award recipients for 2018 included:

Ivan P. Phelan Award

As the industry’s highest personal recognition, the Ivan P. Phelan Award is presented to an individual who has made a significant contribution to the advancement of the direct selling industry in Canada.

Recipient: Rhancha Trick, director of Business Development, Nature’s Sunshine Canada.

Trick has been a passionate voice for the direct selling industry and the DSA for nearly 30 years. She has spearheaded many initiatives and her contributions are a huge asset to the industry. She led the Direct Selling Education Foundation of Canada Board as chair from 2013 to 2015 with vision and sound leadership. She joined the DSA Board in 2017 and is now the DSA board chair for 2018.

Distinguished Service Award

This award recognizes individuals for their significant contributions to the advancement of the DSA through participation and leadership on DSA committees, the DSA Board, in their community or in public service.

Recipients: Darren Sketchley, president of FORMCOR Inc. and Linda Herron, Barrister & Solicitor

Industry Innovation Award

This award recognizes the implementation of a program or service unique to the Canadian direct selling industry by a DSA member company.

Recipient: Mary Kay Cosmetics Inc. – Timewise Vitamin C Activating Squares

This beauty industry first uses breakthrough technology that delivers pure vitamin C to the skin in a tiny, dissolvable square.

Partnership in Progress Award

This award recognizes supplier member companies that provide a product or service to an active member company, which has made a measurable impact and contribution on the active member company’s business.

Recipient: Strategic Incentive Solutions Inc.

Making a Difference Award

This award honors companies whose charitable and/or community service efforts have made a profound difference in the lives of Canadians.

Recipient: MONAT Global

MONAT Gratitude is the philanthropic initiative that is embraced by MONAT Global Corporation. MONAT Gratitude has been an integral piece of the MONAT Global company culture since its inception in 2014.

Community Spirit Award

This award recognizes an independent sales contractor who makes a profound difference in the community by helping others and positively impacting the community.

Recipient: Elaine Tarrant, AVON Canada

Tarrant began fundraising for the Grace Sparkes House, a women’s shelter in her hometown. Her involvement grew exponentially over the years, with over $12,000 raised by her team between 2011 and 2016, at which point the decision was made to launch the Grace Sparkes House Educational Scholarship.

DSEF Circle of Distinction Award

This award recognizes individuals who have devoted significant years of service and made considerable contributions to the Direct Selling Education Foundation of Canada and the direct selling industry.

Recipient: Jackie McClement, vice president & general manager, MONAT Global

As the national trade association for the leading firms that manufacture and distribute goods directly to consumers, the Direct Sellers Association of Canada promotes, serves and protects the interests of Canadian member companies and independent direct sellers marketing their products, and ensures the highest level of business ethics and service to consumers.

DSEF Circle of Distinction Award recipient, Jackie McClement, Vice President & General Manager, MONAT Global (centre)

The Rise of the Virtual Social Selling Enterprise

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Direct selling is in the throes of a hot new business trend, and the companies who are jumping onboard say the benefits outweigh the risks.

Did You Notice The Shift?

Barriers have disappeared and customers are engaging like never before. In fact, the current digital and technological change is so great that it will completely change the way we work, play and interact. More and more, the companies we work for and buy from are choosing to live in the cloud, thinking twice about the infrastructure and traditional systems that can bog down growth and tie up profit margins.

More and more companies are turning to third-party suppliers to help them fulfill orders or complete operative functions. They are discovering that by embracing this new trend and releasing their grip on every single facet of operations—like outsourcing IT, third-party logistics and distribution—they reduce overhead, more quickly adapt to market fluctuations. They also become easily and readily compliant with state and federal regulations and stay ahead of their competition.

As technology advances and strategic partnerships with skilled suppliers flourish, the gate keepers of the industry are dwindling in number. Now almost anyone can play.
But it wasn’t always like this.

As technology advances and strategic partnerships with skilled suppliers flourish, the gate keepers of the industry are dwindling in number. Now almost anyone can play.
But it wasn’t always like this.

The Toyota And Honda Effect

When the Big Three automotive giants (Ford, General Motors and Chrysler) were getting taken to the woodshed in the late 80s and 90s by Toyota and Honda in their own backyard, analysts took notice. How could these Japanese car companies, who were working with the same manufacturing suppliers as the Big Three, be winning awards for reliability, perceived quality, all the while decreasing manufacturing costs? Each automotive powerhouse was drawing from the same resources and yet Toyota and Honda were deemed far superior—better industry ratings, better customer satisfaction and better prices—but how? The answer could be found in the way Toyota and Honda regarded their suppliers.

The Big Three viewed suppliers as competitors, a necessary evil. One CEO of a supplier to the Big Three even went as far as saying that, in his opinion, Ford seemed to send their employees to “hate school” before they interacted with suppliers, according to the Harvard Business Review. Big Three employees were instructed to award jobs to the lowest bidders and operate with an extremely confrontational mindset. Suppliers, they presumed, were an obstacle to cost-reduction and should be cast aside at a moment’s notice if another supplier with a better price came along.

Toyota and Honda took a drastically different approach and received drastically different results. They were interested in investing in the long‑term benefits of lasting relationships over short-term cost savings. Both companies built supplier keiretsu, close-knit networks of suppliers that continuously learn, improve, and prosper along with their parent companies, a practice which spawned many books on the Japanese automakers’ business philosophy and analyzed Toyota’s and Honda’s commitment to co‑prosperity. It wasn’t that Toyota and Honda weren’t fierce to negotiate with or demanding in both quality and delivery, but the long-term relationship between the two parties superseded their minor squabbles.

When Toyota and Honda chose to invest in their supply chains, they developed an incredibly loyal system of manufacturers that valued the partnership. Having empathy while simultaneously holding each other to high standards, knowing that both sides were doing their best to provide high quality at the lowest price possible, means that the atmosphere between the two wasn’t hostile, but rather cooperative—an important working culture for companies that need each other to thrive.

For Toyota and Honda, saving a small percentage by switching to a competing supplier every time a lower bid popped up on the horizon wasn’t worth negating the trust developed between the two channels over time, and suppliers rewarded them for it. Such an incredible business advantage couldn’t be contained inside the automotive industry for long.

Fast forward two decades and direct selling businesses are increasingly relying on the same valued supplier relationships to help them reduce costs, improve quality and develop new processes and products to better serve their customers and distributor salesforce.

The Virtual Movement Comes To Direct Selling

Startups in the direct selling industry, which were previously limited to the independently wealthy or highly connected, now face fewer hurdles than ever with this new trend. Employees can office from home, outsourced manufacturers can make the enormous upfront investments in machinery, and specialized, experienced forms can handle customer service.

Ten years ago Terry Lacore, CEO of b:hip Global was the first in the direct selling space to see the many cost saving advantages that a virtual company would have over a traditionally run business. First to go was the need for a physical corporate headquarters. Next, it was finding trusted suppliers to handle many operational duties that traditional companies like to keep in house. He even started a company solely based on helping other companies do the same.

“Trusted suppliers get to know you and your company’s needs as they form a relationship with you.”
—Heidi Whitehair, CEO, Innov8tive Nutrition

Today, outsourcing a major chunk of business processing to trusted suppliers has become the hot new business trend for many organizations. In some cases, like Lacore, these companies have done away with the traditional expensive and expansive corporate headquarters altogether, choosing instead to rely on a virtual, cloud-based model, without the hierarchical organizations, infrastructure and operations that come with a conventional business. And like the Japanese car companies who led the way, some of these companies are enjoying incredible results, growing to as much as $50 million a month in revenue.

In a recent Direct Selling News cover story, Le-Vel (established 2012), who is virtual to its core with 2017 revenues topping $500 million, 55 employees and no corporate office, talked about the importance their cloud infrastructure plays in being lean and mean. “You just can’t operate efficiently and effectively when you’re that lean without having the right technology, like our custom cloud infrastructure,” says Drew Hoffman, chief operating officer and chief legal officer.

Outsourcing these business functions has allowed increasing numbers of companies in the direct selling space to manage their time and money better, freeing them to spend more time on what they do best.

For Prüvit (established 2015), a virtual company whose revenue reached $213 million in 2017, that means some of their departments are located in different parts of the country in order to stay in line with their efficiency-based philosophy. “We feel you don’t need a 300,000-foot campus and have every department under one roof,” says Prüvit CEO Brian Underwood. “We would rather redirect those profits back into research and development as well as feeding the community and creating positive experiences, which is what we do best.”

But more importantly, these virtual companies feel comfortable handing over entire departments’ worth of business processes and functions because they have forged partnerships with trusted, valued suppliers, who have become literal extensions of their businesses.

That trust, says Heidi Whitehair, CEO of Innov8tive Nutrition, is essential in order to meet the demands of her growing business, whose reported revenue is almost $500,000 per month. “Trusted suppliers get to know you and your company’s needs as they form a relationship with you,” Whitehair says. “It keeps things running smoothly as they begin to depend on your business as much as we depend on them to meet our expectations. Once that relationship is developed, they’re more willing to work with you when things come up, like unexpected deadlines or situations. We’ve called a vendor at 9 p.m. on a holiday weekend with an issue and he got his team on the situation immediately, and it was resolved within an hour. At the end of the day, reciprocal trust is most important.”

What part of your business would benefit by bringing in a supplier to help your team be more efficient? The current need for most companies is to analyze your business operations and identify which areas form the core of your business (the things you do well and want to keep in house), and others areas you need help with:

• Manufacturing
• Warehouse and fulfillment
• Marketing support materials
• Customer service
• Accounting, HR and finance
• IT and back office
• Branded merchandise
• R&D and product development

The Co-Prosperity Movement

Delegating time-intensive business functions to highly skilled suppliers provides the breathing room to focus on unique skill gaps, like training team members on best practices, getting up to speed with new technology or customer service response that many organizations overlook. Distracted by the tyranny of their towering to-do lists, many businesses can’t find the time to analyze which areas of their operation would be better served by handing it over to a trusted supplier. As a result, customer and distributor service often suffers, and potential business is lost.

But delegating outside of company walls—whether physical or virtual—can spark anxiety among executive teams. Legacy thinking would normally dictate that trusting suppliers with knowledge of certain parts of your business represents a risk from the CEO’s perspective, including loss of control, loss of strategic capabilities and increased dependencies. But for the CEOs who are living in the world of suppliers and proprietary knowledge, they say the risks are minimal and limited.

Much like the leaders of Toyota and Honda, PrimeMyBody (established 2015) CEO Paul Rogers believes holding suppliers to a high level of communication and never taking the relationship for granted is essential for success. “Suppliers have already sunk cost into something I need so it just makes financial sense,” Rogers says. “The next and more important step is to build a relationship above and beyond the contract. I trust but verify. A supplier having knowledge of my business is not a risk because my business is so much more than just the supplier. Suppliers are a piece of the pie but I know how to make the entire pie.”

For third-party companies like the ones Rogers works with, PrimeMyBody isn’t the only one in the partnership with skin in the game. The suppliers’ livelihoods depend on the success and health of their client’s business. If one succeeds, the other does as well. If the client stumbles and takes a financial hit, so too goes the supplier. PrimeMyBody’s monthly revenue of $4 million and growing is a real-world example of the value found in trustworthy outsourcing.

Andy McWilliams, CEO of revital U (established 2017) was looking to at a cloud-based infrastructure to help control initial capital expenses. “Not only did it allow us to allocate money where we needed it most, it made us better managers because we have instantaneous data at our fingertips to help us make better decisions,” he says.

KNOW THYSELF:
Q&A with Revital U CEO Andy McWilliams

In the beginning, it was hard for him to let go of those duties that a traditional business would keep in house, but the angst he felt was lessened by the fact that he had more time to do the things he and his small team are really good at. “Finding good partners to help us grow will always be part of our business plan going forward.” he says.

For Cara Brook, founder of Maskcara Beauty, the direct selling world can be so unpredictable from one month to another as far as getting orders out the door. And having trusted suppliers makes all the difference as far as giving her company the flexibility it needs. “Our supplier partners have taken so much of the load off of us,” she says. “It has freed our corporate team to focus on the magic of Maskcara, and not be bogged down with the details that take so much time and energy away from the creative aspects that we need to stay focused on.”

Maximizing Revenue Per Employee (RPE)

The virtual movement is also about maximizing revenue per employee, an important financial ratio used to gauge the success of a young, growing business. Since the largest expense for all companies are their employees, the more revenues that can be generated for each employee the greater efficiency for the company. It shows what companies are getting in exchange for human expenses.

RPE is not only a key indicator that reflects a company’s ability to sustain growth, it also measures productivity and how efficiently a company operates with their given resources. And greater efficiency means you are doing more with less, which translates to expanding margins and improved profitability. RPE has been an important metric for the growing tech industry for years and is becoming an increasingly important measure of being on the right track.

Being virtual and lean is less about whether or not you have a corporate office, and much more about allowing you to focus on what you do best and letting your supplier partners handle the rest.

Experienced executives may question how companies can make an appropriate net profit while outsourcing so many of their key functions and processes. However many of these virtual companies have a ratio of $5 million to $10 million or more in annual revenue per employee.

Partnerships Will Become More Critical In The Future

Being a good leader means knowing where you shine and leveraging those abilities. It also means being aware of your own skill gaps and hiring for your weaknesses. If your staff is stretched too thin or you just don’t have the in-house knowledge and adequate resources necessary to grow and improve, having partners who you can trust to deliver on time and on point can make all the difference to your bottom line. And research supports it as well. In fact, according to a Whitelane Study, 89 percent of clients who have outsourced their IT for example claimed to be satisfied by the services provided by their third-party agents. After interviewing a cross section of network marketing executives who are doing the same, it is our opinion that the findings of this study span all industries, including direct selling.

Skinny Body Care (established 2011) founder Ben Glinsky sees relying on suppliers as an opportunity for sheltered scalability. “Many companies come in with huge projections, create a ton of unnecessary overhead, and never get into profit,” Glinsky says. “Other companies try to start small, then outgrow their facilities and structure, and have to scramble to find solutions instead of focusing on building the company. We can grow (or shrink) as fast as the market dictates and never miss a beat.”

Refusing to be locked-in to full-time employees at a brick and mortar headquarters location has given Glinsky’s company the unique ability to strategically shave off the excess when it comes to working hours, while getting the most bang for the company’s buck. “As far as employees, everyone works from home,” Glinsky says. “We track everything they do to know they are being productive, if we need them, if they are overworked. So instead of having a bunch of employees sitting around an office looking busy, we maximize what we get out of our employees, and they love working from home.

I believe they do much better work.”

Lean & Mean

Being virtual and lean is less about whether or not you have a corporate office, and much more about how you want to scale your success. For some having a building makes sense, for others it doesn’t. It all boils down to helping companies create more value for their customers and independent salesforce with fewer resources. Simply put, they are able to focus on what they do best and let their supplier partners handle the rest.

What we are witnessing today is just the beginning of a revolution in how business operates in the new age of technology and the internet. Thriving direct selling leaders who have jumped headfirst into this business trend tell us that success in this new digital age will require organizations to find partners who can both understand their current needs and anticipate what they may need in the future to meet business objectives. At the same time, companies will also experience the demand to lean into a trusting reliance on third-party suppliers and invest in a loyal relationship in order to maximize their benefits. This requires a new kind of cooperation where each company acts transparently and with empathy for the other in an effort to meet their mutual business goals—a direct selling version of supplier keiretsu.

Know Thyself: Q&A with Revital U CEO Andy McWilliams

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This Q&A is part of the July 2018 Cover Story

Q: How does being cloud-based give you an advantage over companies with large headquarter locations and lots of employees?
In the startup phase it’s a great way to control expenses since you are not putting money into infrastructure and things you don’t need like office space in the beginning. For us it was great way for us to get into the game and put our money where it belongs, which for us was marketing and communications.

Q: Why are having trusted suppliers essential to your success?
They are incredibly important to us. We don’t like the word “supplier” or “vendor” and prefer to call them “partners” because that’s what they are since we are outsourcing a big majority of our business to them. I’m a big believer in the “know thyself” principle. I know what parts of the business we excel at and where we don’t. And we went and found partners who are experts in those areas where we needed help.

Q: What is the number one factor in choosing partners for your business?
Trust is the number one factor. You are in business with them, they just don’t work for you.
And we know as much about their business as they do about ours. We have earned each other’s trust because they are in it with us. And that’s the difference between a partner and a vendor.

Q: Is there a risk of allowing partners to get too close?
When we were first starting the company, I had a little of that old legacy thinking. It was hard to let go and allow our partners access information to what we wanted to do. But what we found out is when you have a good business model, they can see your integrity and what you are trying to do and they know it will be a good thing for them as well.

Q: What are the weak spots that outsourcing alleviates?
I didn’t want to build a traditional company inside a network marketing company. I wanted to do what we do best. You can call that a weakness, but we think we are building a much stronger company for the long run by finding great partners we can plug into those areas we need and let them go to work.

Fragile or Agile?

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Disruption is coming. How nimble is your company to weather the inevitable storm?

Ten years ago, when we needed a ride, we called a cab by default. Then came Uber and Lyft, to the dismay of taxi drivers. Twenty years ago, when we wanted to buy new clothes, we drove to the mall. Then came Amazon, forever changing the fates of brick-and-mortar stores and shipping carriers. Oh, what a difference disruption makes.
Technological disruption isn’t new, but it’s accelerating. Consider that it took about 80 years for Americans to adapt to the dishwasher. Yet the consumer internet became commonplace in less than a decade.

Another example of how disruption is changing the landscape of the marketplace is China. Currently, China is home to nine of the world’s 20 biggest internet companies by market cap while the U.S. has eleven. Five years ago, China had two and the U.S. had nine.

These are some of the key insights revealed by venture capitalist Mary Meeker, who released her highly anticipated Internet Trends report in May 2018. The slide deck is crammed with timely tech stats and upcoming trends. The message is: Disruption isn’t done.

Agility vs. Stability

In today’s market, agility is what’s now. Agility is the ability of a company to react to changing market forces. What about stability? Isn’t that a critical component of business success?

The experts of our time say you need both agility and stability today. Truly agile organizations are both stable and dynamic at the same time.

Take the smartphone. It has a fixed hardware platform that basically doesn’t change. But it also contains space for new and ever-changing apps. Just like the agile company that possesses a stable backbone with the dynamic capability to change in the face of disruption.

Even if you’re now an established industry leader—even if fortune has clearly favored you—remember that fewer than 10 percent of the non-financial S&P 500 companies in 1983 remained in the S&P 500 in 2013.

A 2018 article from McKinsey & Company, The Five Trademarks of Agile Companies, says we are moving from an “organization as machine” model to a new business paradigm of “organization as organism.” The agile company is dawning as the new dominant organizational paradigm. Rather than organization as machine, the agile organization is a living organism.

A machine is inflexible, unmoving, bureaucratic. A living organism is nimble and quick on its feet. It adapts to the environment quickly. If companies want to stay successful, they must act with agility.

History is Our Best Teacher

How agile is your organization? What if the equivalent of Uber came your way? Would your company be quick enough to respond to the market headwinds?

Lean Business Model Benefits
Whether your company is a small startup, mid-size or legacy direct selling leader, your business will benefit from a lean philosophy in the short- and long-term. Here are just a few of the benefits of operating from this business paradigm.

Engaged Employees
By placing responsibility for your company’s success on your employees directly—makes them feel like their contributions are critical to your company’s success, from the receptionist to the CEO.

Business Growth
Focus on the essentials—discarding what doesn’t work for your company or doesn’t matter to your customers. As a result of this streamlining, you’ll save your time, money and energy for things that truly matter to your business growth.

Customer Focus
An integral piece of the lean philosophy is putting customer service front and center. This means sincerely listening to complaints and problems and then acting on that input rather than only paying attention to positive comments. As a result, your products and services are bound to improve.

Businesses large and small would do well to heed the history lessons of their predecessors, suggests Baba Prasad, CEO of the Vivékin Group and author of Nimble: Make Yourself and Your Company Resilient in the Age of Constant Change.

Companies like Digital Equipment and Ericsson were once considered leaders in the marketplace—sure bets. But they failed because they could not think and act differently from what they had always done.

“DEC, or Digital Equipment Corp., is an example of how companies can just die even if they’re huge,” Prasad says in a podcast. “It was a $14 billion company in the early 1990s, with offices in 95 countries. But in a matter of six to seven years it folded, because it didn’t anticipate the emergence of the microcomputer. Compaq ultimately bought it.”

DEC is a classic example of a company that was not nimble, he says. “If you don’t have an agile approach, you die,” Prasad adds. “Many companies have folded when they didn’t have agility.”

Ryan Napierski, President of Nu Skin, touched on this during his speech at the DSA Annual Meeting last month. “The way we build our organizations… if we are not flexible, if we are used to working in waterfall type orientations, we can’t move as quickly as we need to move and compete in today’s world,” he says. “The ideal organization regardless of size has to be nimble and have the ability to pivot as the market changes.”

What You Can Do Now

Is there anything you can do right now to prepare for disruptive times ahead? How can you make your company more lean and mean and agile, readier to adapt to change?
Being agile and lean doesn’t mean a reduction in staff—it’s about how your organization operates as a whole. Are your people empowered to make decisions without you? Can third-party supplier partners help take some of the load off of you in some respects?

It’s about engaging your employees in the effort to stay agile, lean and profitable. Are you empowering them in making decisions to be a part of the solution? One of our industry’s own is doing just that.

In May 2018, Young Living announced it would be incentivizing its employees with a new employee profit-sharing program as part of its plan to become a $2 billion company this year. The company hopes the new plan will also help them reach other goals that tie in with agility—such as cultivating their culture and attracting top talent.
The point is to think of ways to get employees to “think like a CEO,” so they will be motivated to go the extra mile and take responsibility for helping you stay agile and profitable. It takes everyone working together.

In today’s times, all businesses—from legacy companies to startups—should perform a self-assessment to determine where they are on the agility scale. If you haven’t thought about this in a while, now is a good time to reflect on the question all companies must answer.

Is your organization agile enough to weather the coming disruption storm? It’s a question you should reflect on and ultimately answer.

Strategic Pivot: ASEA’s infrastructure build out readies them for growth

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When they launched nearly ten years ago, ASEA married the highly personal and culturally infused aspects of direct selling to a traditional, Fortune 50 corporate strategic planning structure. The mission: Take a revolutionary cellular health product to the masses worldwide.

Charles Funke

Charles Funke

 

ASEA
Founded: 2009
Headquarters: Pleasant Grove, UT
Top Executive: Tyler Norton, Founder/Chairman of the Board; Charles Funke, CEO; Jarom Webb, President; Scott Aldred, COO
Products: Cellular Health, Skincare, Nutrition

The sheer nature of revolutionary products poses challenges and ASEA recognized the double-edge of a scientifically complex product. Three years ago the company rebranded, planted a flag in the cellular health direct selling space and set about reinforcing the infrastructure necessary to transform and sustain their business on a global scale.

Fortune 50 to Cellular Health Leader

When Verdis Norton retired to Park City, Utah in his mid-50s, he wasn’t thinking about direct selling, and it’s unlikely anyone had heard the term Redox. In fact, “antioxidant” was a new buzzword, and Verdis was fresh from the Fortune 50 corporate world where he was vice president of strategy for Kraft Foods, reporting to the CEO in Chicago.

Strategy consulting work for a biotech company positioned Verdis perfectly to learn about a unique biochemistry area called Redox and a patented core technology—years in development—that promoted communication and ultracellular signaling in the human body. Impressed, he and a group of investors purchased the intellectual property, research, and patents in 2008. A year later, ASEA Redox, a cell signaling liquid supplement, launched commercially.

“We’ve run this company like a legacy company from Day One.”
—Tyler Norton, co-founder and chairman of the board

“Fact is, it was a product and a cause vision to get it out to the world as quickly as we could, once we learned and understood its universal benefits,” says Tyler Norton, Verdis’ son and ASEA co-founder and chairman of the board.

ASEA RENU Advanced

ASEA RENU Advanced

Despite the moral imperative for speed felt by the founders, which also included CEO Charles Funke, ASEA approached the direct selling business model with a Fortune 50 mindset and adopted strategic planning principles and processes that are now sacred, annual practices.

“We were profitable inside of our first 12 months and have been every year since, and that’s largely due to those disciplines. We’ve run this company like a legacy company from Day One,” says Norton.

Strategic Link

Strategic Link is a pioneering element of ASEA’s strategic plan for its business. The end game is to address key internal and external business concerns with no more than five and no less than three core strategies, which drive ASEA to financial outcomes and address qualitative challenges and issues. Strat Link is updated annually and includes a three-year outlook.

A series of cascading initiatives link all resource allocation and operating planning back to five areas of focus: product development and validation, new and existing market expansion, associate experience, culture and talent development (corporate and field), and operational excellence and financial management. Ninety-five percent of ASEA’s dollars trace back to these areas.

ASEA Diamond Summit Event

ASEA Diamond Summit Event

“Strategically, we are putting those five areas of emphasis out there and aligning resources, time and attention of our team to driving those things forward,” says Norton.

These are things they do every single year to make sure they are making the right decisions for the business. It’s not one guy calling the shots. “It’s a collaborative effort with all the best research and study in place, so that we are doing things strategically for the long term,” says Justin Wilson, senior vice president of sales.

“We’re often told we’re not flashy and we’re actually okay with that. We will take sustainability over a meteoric rise and corresponding cliff any day,” Funke says.

Redox – It’s Complicated

How do you get someone to understand something for which he or she has no context? That was and is ASEA’s Redox challenge.

“The upside: it’s very cutting edge and scientifically validated. We have patents on our technology and how we produce the product. We have all these people in the field that love the product. The downside: the field is filled with laymen and not Ph.D. scientists. It’s hard to explain the underlying functionality in the body,” says Becky Cox, vice president of marketing.

“We’re often told we’re not flashy and we’re actually okay with that. We will take sustainability over a meteoric rise and corresponding cliff any day.”
—Charles Funke, Chief executive officer

But does the sales field need to be an expert to sell Redox? ASEA has worked hard on good, solid science to help people understand what actually happens in the body and why cell signaling is so important. Their duplication model relies heavily on award-winning video and collateral materials to avoid Associate paralysis and inaccuracies when the science gets too complicated.

“We continually remind our field we don’t need to explain the mechanism of action. We only need to tell them it works, how it’s going to help, point to all the studies and the video if they have more detailed questions,” says Cox.

ASEA has come a long way, but Wilson believes they’ve only scratched the surface. One way ASEA hopes to make redox science more accessible is with new products that can make a difference in the world of cellular health.

ASEA first diversified its product line in 2014 when research and development stabilized a molecule that made its first topical skin product possible. A high-end, ultra-concentrated Redox eye serum and complementing skin care essentials (sans Redox) followed.

Intense, launch-product loyalty proved tricky with a hesitant field, but ASEA slowly transitioned Associates away from its ties to a solitary product by pre-releasing information and pre-launching products like its new nutritional line.

International Growth

At the time 69-year-old Verdis Norton, now retired, founded ASEA, his deep, abiding conviction to make a difference in people’s lives took the lead. His son says he wasn’t processing that through regulatory and compliance chalk lines, so ASEA has had to learn to operate within those boundaries.

“Our product is one that does not fit neatly into a classification in most countries, so we have had to establish very good relationships with regulators to educate governments about our product and the benefits of it,” Funke says.

It takes time, patience and a very active compliance department to navigate regulatory requirements in the 31 countries where ASEA operates and in 21 European markets where products are marketed differently. This group also monitors Associate activity for compliance.

Initial international expansion trailed from the U.S. on to Europe and to some degree Australia, New Zealand and Mexico, but left Asia at a cold stop. Funke says one of the biggest impediments to ASEA’s international growth, particularly in Asia, was its IT platform.

So an IT overhaul began. The far-reaching decision impacted every aspect of ASEA’s business and took two years to complete. In July 2017, ASEA transitioned to a customized system that opened aggressive growth potential in Asia.

H.Q. – Pleasant Grove, Utah

Recognized as one of the state’s best places to work by Utah Business magazine for two years, ASEA’s CEO feared they wouldn’t make the list in 2017. “We put an enormous amount of stress on the organization,” Funke says. “Within a time frame of a little under three months, we flipped the switch on the IT conversion, completed construction of a brand new building, moved in, held our international convention and opened two Asian markets.” But ASEA made the 2017 list.

The move into ASEA’s new headquarters, 47 miles south of Salt Lake City, is yet another important infrastructure milestone. It’s a place where Associates can come in, shake hands, and spend a minute in an open space where light passes from one side to the other. They can learn a little ASEA history, see their faces on the walls and understand how important they are to the business.

Less than a mile away is ASEA’s production facility, where the company controls 100% of their Redox-based product manufacturing. Everyone on the line is an ASEA employee. Visitors can tour the facility, peering through windows into production and bottling. From here, products ship by rail or truck to boats bound for 18 distribution centers around the world that stock ASEA products.

“It all goes back to infrastructure. These were all things that we needed in order to set us up to be able to have significant growth in the coming years,” Funke says.

Moving Forward

“We’ve grown every year, year over year. We had a record year last year. We’re on pace for significant double digit growth. We just built and finished out a brand new corporate office that’s a world-class facility. We’re a mile away from a 40,000 square foot production facility, which will be integral in scaling our business for future growth,” says Norton.

“We’ve grown every year, year over year. We had a record year last year. We’re on pace for significant double digit growth.”
—Tyler Norton

This inflection point comes as ASEA pivots from a two- to three-year operational and scalable infrastructure strategy to one of operational excellence and execution. Their expanded product catalog now allows a shift in product messaging toward universal appeal and should help diversify their customer base and Associate field that skews older.

They also have a social media strategy in place to get more traction, to get online influencers and to not only enhance their online reputation in search standings, but also be visible to a younger group of people who are more solely online versus the previous generations.

ASEA corporate headquarters located in Pleasant Grove, Utah

ASEA corporate headquarters located in Pleasant Grove, Utah

SEO efforts to drag down negative chatter are underway and two full-time, corporate social media hires work to increase online reputation and manage ASEA websites. Three key vendors help on the third party side.

“We have a few leaders who are millennials who have come up through the ranks and are very active online. When you see a powerful online direct seller go after it, they do amazing things,” says Cox. What takes a decade to build on paper, can happen in 12 months online.

“Our first wave of associates trended older and approached the business with a traditional networking mindset, but we have a growing wave of younger leaders that are looking for their audience in new and innovative ways. The first wave sees their success, and many of them are exploring these new techniques to reach a wider audience.” says Shane Martindale.

“We know if you don’t cultivate culture, the natural tendency as you grow is that it will go away. One day you wake up and you’re not the same company that attracted a lot of people to begin with.”
—Charles Funke

Many Associates acknowledge this is a great strategy, but aren’t capable of doing it themselves. “We recognize the untapped growth potential through generational diversity and are developing ways to educate and train our associates on how to leverage new technology in their business building.” says Martindale. Will ASEA someday lend a hand with that social media process for its field?

That’s tied up in the functionality of the company’s back office provider, Cox says. Some back end systems are a “hot mess” with interfaces that linking different systems together or bolt options on to standard systems. But ASEA’s new, from-scratch IT platform is customizable, Cox says, inferring that with proper lead time corporate social media management may be an option.

All that said, ASEA is acutely aware that theirs is a belly-to-belly business. Its culture is ethos based and a corporate ETHOS Academy at national conventions teaches corporate principles ranging from human interaction to the EP Ratio—managing ego and economic drives beneath principle, people and purpose. Maybe it’s too traditional and not high velocity or sexy, but it has substance, Wilson says, and people are drawn to it.

“We know if you don’t cultivate culture, the natural tendency as you grow is that it will go away. One day you wake up and you’re not the same company that attracted a lot of people to begin with,” Funke says.

“The goal here was to get ourselves, clearly foundationally set before we throw a lot of wood on the fire. We have significant double-digit growth happening now and it doesn’t feel like we’re stretching the business out. We have strong senior leadership positions and strong field leadership that knows our culture and raises that flag well. We’re ready to grow,” says Norton.

7 Points for a Successful Partnership

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A strong partnership divides the effort and multiplies the effect.

I wrote a book called Intentional Living, and out of the 100-plus books I’ve authored, this one is the most important I’ve ever written. One of the things I teach in this book is the value of what I call Front End Thinking. This kind of thinking is 10 to 1 more valuable than back end thinking. If you are intentional you think on the front end. You say to yourself where am I going? What am I trying to accomplish? What do I need to see and say? If you think well on the front end, your odds of having success are going to be much higher than if you think on the back end (“Oh my, what did I do? How can I change this?”)

There is a statement that says all’s well that ends well. That may be true, but let me tell you what’s better: All’s well that begins well. You can’t end well if you don’t begin well. Intentional living starts you down the right track of ending well.

I say that because in order to have a successful partnership you need to start well on the front end. Your success in your business is based on your ability to get along and partner well with other people and companies.

There are seven points to consider to for a successful partnership:

Place Their Agenda At The Top Of Your Agenda

When you partner with someone, they need to know where they stand in the relationship. And when they know they are at the top of your agenda it makes a major statement in their mind. When I was around 21 years of age I heard the late Zig Ziglar say, “If you will first help others get what they want, they will help you get what you want.” As he spoke and moved across the stage, I felt as if he were talking to just me.

Add Value On A Daily Basis

That was a major shift for me when I heard Zig say this because I was doing the exact opposite. I realized that up until that point I had been putting my needs and wants ahead of others, asking people to help me accomplish my goals and dreams.

But what I needed to do was focus on the needs of others. This changed my life and the way I taught leadership. I needed to add value to them first. I committed to becoming a ladder builder instead of a ladder climber. I needed to add value to others first. When you add value to yourself you add. But when you add value to others you multiply.

Resource You With Influence, Ideas, And Tools

So what does it mean to resource with influence? It means I am going to introduce you to people that I influence, which in turn will help increase your influence. The most important question you can ask someone who you are trying to gain influence from is who do you know that I should know? That question has opened up so many doors in my life.

“Your success in your business is based on your ability to get along, and partner well with other people and companies.”

If Influence asks who do you know that I should know? Ideas asks what do you know? Every time you meet with your partners, keep your eyes and ears open for fresh ideas you can implement in your own business.

Tools asks the question what do you use that I should use? What are the tools, systems and practices that have proven to be successful for your partners? A system is like a freeway, it gets you to where you are needing to go the quickest. Practices are the things you do that bring the desired success.

Tailor Your Services To Meet Their Needs

The key to tailoring is based on your questions. You have to be someone that asks good questions. Here is the challenge. The more you know someone, the less questions you ask. The more we know someone the more we come with answers, not questions. And when you are coming to the table with all the answers instead of questions, you are starting to live a life of assumption, which can bring a quick death to the relationship. And when you run out of answers, you run out of relationships.

Never Violate The Trust You Have In Us

If you are going to partner with me, I am never going to violate the trust you put in me. Because everything works on the basis of trust. Remove trust and you’ve lost the relationship. The highest compliment a person can say about you is that they can count on you.

Exceed Expectations In Everything You Do

Seventy percent of people don’t meet expectations. 25 percent meet expectations. And only 5 percent exceed expectations. And it’s those 5 percent that are going to walk away with the business. The least you can do is meet expectations, anything below that is total failure. I want meeting expectations to be your ground floor and exceeding expectations to be your ceiling.

Respect The Relationship, And I Will Grow In It

I believe respect must be earned daily. I feel we sometimes confuse honor and respect. You honor a person for what they have done in the past. You respect a person for what they do. I could live off of honor the rest of my life, but I want to live off of respect. Always contribute and gain respect for what you are doing now. Gain honor down the road for what you accomplished, but gain respect for what you doing now.

Place your agenda at the top of our agenda.
Add Value on a daily basis.
Resource you with influence, ideas, and tools.
Tailor your services to meet their needs.
Never violate the trust you have in us.
Exceed expectations in everything you do.
Respect the relationship, and I will grow in it.

Partner with Life-Valued People

When seeking partners, don’t choose people based on what they say they can do or based on what they did once. Choose based on their regular behaviors. That’s how you know what they really value.

Too often our choices are made by what we think we could or should do rather than what we usually do. We are all human, so we should give everyone the benefit of the doubt. But we also need to be realistic. We need to have a picture of what we’re shooting for.

Picking the right partners is crucial to taking our lives to the next level. It is a key practice in intentional living. But we can pick the right partners only if we know what matters to us. In just a second I’ll offer a quick guide to help you assess your personal values, which will in turn help you pick the right partners.

What Are Your Values?

To find like-valued people, you need to know what you’re looking for. Think about the values most important to you for making a difference in the lives of others. As a starting point, I look for people who embody these 12 qualities:

  • Thinks about others first
  • Thinks bigger than self
  • Has a passion that’s contagious
  • Offers complementary skills
  • Is great at support
  • Possesses a can-do spirit
  • Has an expanded influence
  • Holds an activist mindset
  • Is a proven ladder builder
  • Stands out from the crowd
  • Creates teamwork
  • Makes a difference

Which of those is important to you? Put a check mark by them. What additional qualities or characteristics not listed are important to you? Write them down. This becomes your starting list for finding like-valued people.

“REMEMBER: Great partnerships make you better than you are. They multiply your values, enable you to do what you do best, allow you to help others do their best, give you more time, help you fulfill the desires of your heart, and compound your vision and effort.”

Outsourcing Fulfillment? 5 Things to Know

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“Should I outsource my fulfillment?” As a direct seller, you might be reading this and asking this very question.

Perhaps it’s a decision that kept you up at night several years ago as you spent countless hours crunching numbers and sifting through RFPs. Or, maybe you’re currently undergoing an RFP process and are having a tough time choosing the company you feel is the right match for your business.

Whatever the case may be, outsourcing the fulfillment function is a necessary means in helping you focus on running the elements of your business that you know best; whether it be product development, sourcing, creative, media and financials. And depending on where you are in the business development stage, the nuances of these elements can vary.

Let’s take a look at each of these stages:

A startup company has a lot of balls to juggle. Managing costs is one of the greatest concerns. You might be tempted to reduce costs with a Do-It-Yourself approach to fulfillment. However, keep in mind that a DIY approach will divert your attention from more critical areas of the business, adds little value to influence your success or failure and in short, is a huge drain on your time and resources. Additionally, as a startup, you have the most to gain from a third party’s scale and buying power in areas such as supplies and shipping costs.

An established direct-seller knows firsthand the life of a startup. They’ve been there, done that. Many have learned not to carry the burden of fixed infrastructure required for a fulfillment operation. It doesn’t matter if the space is leased or owned, the fixed-cost is punitive. For direct sellers who already have fixed-costs (i.e. a building with a warehouse in the back), the objective should be to eliminate that cost via sale or sub-lease.

Even the “Big Guys” can improve profitability and reduce risk through outsourcing fulfillment. While there may be significant volume and buying power, and on the surface it appears that they handle fulfillment profitably, the achilles heel relates to the cyclicality of sales. This is a result of both product seasonality and campaign scheduling. Unit costs may be low when a campaign is active, but during periods of reduced or no activity, fixed costs keep adding up (we’ll dive into this a bit more below). By outsourcing, the fulfillment function is a nearly 100% variable cost.

The fact is, at any size or stage in the game, businesses can always benefit by outsourcing. Take note of these five factors when considering partnering with a fulfillment provider:

  1. Quantifiable Cost– Outsourced fulfillment provides a mostly variable cost component to your campaign. If you sell, you ship. If you ship, you incur known and predictable costs. As you’re building campaign financials, outsourcing allows for a tighter budget. If you predict activity, the fulfillment cost can be projected accurately. Compare this to doing fulfillment on your own. Try to think of all the cost factors you will be budgeting for: warehouse space, taxes, utilities and labor. It is very likely you won’t anticipate every single factor that needs to be included. Even if you can, you don’t know how to predict the variability of each over time; which makes your entire financial plan risky. With outsourcing, you will largely pre-negotiate costs on a transactional basis.
  2. Expertise – When hiring a third-party logistics provider these days, experience matters. Fulfillment is a lot more complicated than most people think. To do it accurately and effectively, you need specialized systems, labor, management and expertise. Even established direct sellers with their own distribution centers fulfilling B2B orders should think twice before trying to utilize these resources for consumer-direct fulfillment. They’re very different and the landscape is very dynamic. Carriers and freight programs are ever-changing, technology is evolving and consumer expectations are becoming more demanding. An experienced fulfillment provider is on top of these changes and can shift you into more advantageous programs quickly. Outsourced fulfillment centers often have years of experience across many product lines, campaigns and industries. All this accumulated knowledge is applied for the benefit of each client. Finally, every successful fulfillment provider has mastered labor management. Would you like to be an expert in this area? Or would you rather create, market and sell your products?
  3. Lower Costs – Beyond the discussion of fixed vs. variable costs, outsourcing your fulfillment will enable you to leverage the scale of your provider. Fulfillment providers ship a whole lot more than you do. Therefore, their shipping rates are lower and give you a competitive advantage. In many cases, the savings in this category will pay for the services. The same can be said for supplies and other consumables. Ride the coattails of your provider.
  4. Location – The location of your fulfillment center plays a major role in reducing transit time (and saving on your shipping costs in the process!). If you handle your own fulfillment, you are stuck with your own geographical location. Most direct sellers are reaching an audience nationwide, or even global. Choosing a provider with strategic facilities will help greatly. For example, by incorporating just two facilities in optimal locations you can achieve a 2-day ground transit to over 90% of U.S. households. Those without enough distribution centers (or with sub-optimally positioned DC’s) will be burdened with the costs of express and priority shipping if they are to meet the demands of today’s consumer.
  5. Depth-of-Service Options – Think about what services are important to you, both today and in the future. Many fulfillment providers offer the basics: warehousing and shipping. But others go way beyond and offer far more value. These complementary services can save you from having to manage these processes in-house or through several additional vendors, and include customer care, kitting and assembly, reverse logistics, product refurbishment, order management technology, data analytics, subscription management, marketplace integration, payment processing and more. You may have needs for several of these functions, and with the right provider you can create a package that is provided by one supplier, simplifying your management efforts.

In summary, think carefully about how you handle fulfillment today and give outsourcing serious consideration. And as you do your research, be sure to take the time to explore each provider’s value proposition. Your selection may yield an invaluable strategic partner that will pay dividends long into the future.

Ayal Latz is a lifelong entrepreneur and is the Founder and President of a2b Fulfillment, a progressive 3PL specializing in Order Fulfillment, Customer Care and Value-Added Business Services.

Public Direct Sellers: Q1 Momentum Continues

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The six publicly traded direct selling companies we follow, whose stocks are listed in the U.S., Herbalife (HLF), Medifast (MED), Nu Skin (NUS), Tupperware (TUP), USANA (USNA) and London-based Avon Products (AVP), began 2018 in much the same fashion as how they exited 2017. On balance, trends continue favorable.

In aggregate, on an equal weighted basis, the group average organic sales growth for the six companies in Q1 of 2018 was 11 percent, the second straight quarter of double digit growth. But below the surface there are divergent trends. Nutrition and skin care-based companies like Medifast (OPTAVIA), Nu Skin, USANA and Herbalife Nutrition have shown more favorable trends lately, while Avon and Tupperware have shown slowing trends in recent quarters.

Organic growth rates at MED are for OPTAVIA, the company’s Direct Selling division.

Companies outside the U.S., Oriflame and Natura, have also been performing well with organic sales growth in the mid- to high-single digits recently. Both companies, which are more Cosmetics, Fragrances and Toiletries (CFT) focused but with some exposure to skin care and wellness, are undertaking substantial initiatives to move to digital platforms. More orders are coming in from mobile devices via company-developed apps, and distributor productivity is increasing as more of them are moving to digital platforms.

Organic Sales Growth Past 5 Quarters (YOY Percent Change)

Company reports, Lane Research estimates. Group Average is equal weighted. Organic growth rates at MED are for OPTAVIA, the company’s Direct Selling division.

Source: Company reports, Lane Research estimates. Group Average is equal weighted. Organic growth rates at MED are for OPTAVIA, the company’s Direct Selling division.

OPTAVIA

With a new name and what we sense is a new sense of purpose, Medifast’s OPTAVIA led the way with what we estimate was sales growth in excess of 50 percent in Q1 year over year. OPTAVIA is now over 90 percent of Medifast’s total revenue and it’s continuing to increase. OPTAVIA-branded product sales were 58 percent of the total company’s consumable units in Q1, up from 17 percent a year ago. Active Health Coaches increased by nearly 30 percent to 16,700 in Q1, marking the third consecutive quarter of double-digit growth for that metric, which had been mired in the 12-13,000 range for many years. In our view, we feel the acceleration coincided directly with the name change of the company from Take Shape For Life in July 2017. That will prove to be a seminal event in the company’s history, in our view, signaling 100 percent management focus and support of the brand, providing it with the resources it needs to grow.

Nu Skin

Also posting double-digit organic growth was Nu Skin on the heels of its highly successful launch of the ageLOC LumiSpa skin care system in most markets except China, where it was launched in Q2. Concurrent with the LumiSpa launch is the introduction of several products at lower price points more suited to social sharing, such as Powerlips ultra-long-lasting lip fluid at $25 and the AP 24 Whitening Toothpaste at $20. These offerings will be lower priced, higher velocity items ideally suited for influencer marketing over social media. Interestingly, LumiSpa itself, while retailing at a much higher $199, is still much lower than other recently introduced skin care systems, such as the ageLOC Me system, where the starter kit retails at $480. So while social media influencers can build their network with the lower ticket, higher velocity products Nu Skin offers like the $199 LumiSpa potentially brings it into the mix as a social selling option.

USANA

USANA sustained its steadily re-accelerating growth trends in Q1 with organic sales up 8 percent after bottoming 4 quarters ago at 2 percent. The recent improving growth trends can be attributed to the success of the launch of Celavive, USANA’s new skin care brand introduced at last year’s convention, as well as the return to firmer footing in China, the company’s largest market where recent promotions have gained good traction. With momentum already building in China, the launch of Celavive there in Q4 of this year coupled with the rollout of the company’s new We-Chat social selling platform bodes well for continued sustained top line momentum for USANA coming out of 2018.

Herbalife Nutrition

While organic sales growth at Herbalife Nutrition was only modest in Q1, up 1 percent, all of its top line metrics beat expectations on a somewhat difficult comparison when the company raised prices in China at the end of Q1 2017, which borrowed from Q2. So while volume points at Herbalife, the company’s closest approximation for global product demand excluding currency fluctuations and pricing changes, were relative flat in Q1, expectations were for a mid-single digit decline. While China was soft as expected, every other major region exceeded expectations, indicating a broad firming in the business after 2017 that saw volume points decline 4 percent. Perhaps most notable was that North America returned to modest positive volume growth in Q1 after 4 quarters of volume point declines as the U.S. business focused on the May 2017 deadline for compliance with the July 2016 FTC ruling. This is a quarter sooner than we forecast. It seems that Herbalife is back on the offense after several years of having to play defense.

Conversely, Tupperware and Avon continued recent soft trends, each with organic sales growth declining 4 percent in Q1.

Tupperware

For Tupperware, the outlook for each major region either deteriorated or stayed the same as of the Q1 release. In the regions that deteriorated, management attributed the softness to company-specific near-term issues in Europe and in South America. It sounds like issues in both regions should resolve themselves in relatively short order. While growth in Indonesia and India continues to be soft, the outlook for Asia didn’t change. We note that those markets are smaller than they used to be and the comparisons get much easier beginning in Q2. Meanwhile, most of the other emerging markets are performing well for Tupperware, particularly China, CIS, Mexico, South Africa and Malaysia/Singapore. Therefore, we are fairly confident the 1 percent organic sales growth in Q1 for Tupperware’s emerging markets, which accounted for 70 percent of total company sales, will begin to move back to what we would view as a more normal upper single digits trend line sooner rather than later.

Avon Products

Avon’s 4 percent organic growth decline was a deceleration from the 2 percent decline in Q4 of 2017. Each major region showed greater sequential decline from Q4 trends, except Asia, which was the same. Momentum has stalled and it is broad-based. It appears the honeymoon for new CEO Jan Zijderveld is coming to a close. Investors will be closely watching for Avon’s latest turnaround plan under this new management team, which is expected in the fall after a thorough review of the business. Until then expectations should remain low.
The underlying fundamental strength for publicly traded direct selling companies as a whole did not go unnoticed by the stock market in Q1, with our Lane Research Direct Selling Index up 14 percent in an overall market that was down modestly. Even this was understated since Medifast (OPTAVIA) was not in our index in Q1 because it had started the year at under $1 billion in market capitalization. That will change. After appreciating 34 percent in Q1 and another 55 percent since, Medifast’s market capitalization is now $1.7 billion. We will add the stock to our index retroactive to April 1, 2018.