PREPARE FOR A TRANSFORMATION

How top industry executives predict the channel will transform in the new year and why the industry will never be the same.

Seeing 2020 in the rearview mirror will be a relief for many. The year of the pandemic has been a lot of things. From stay-at-home orders to record-setting hurricanes and wildfires, the year unfolded one newsworthy event after another with rhythmic predictability, each one delivering a crushing blow to the economy and the nation’s overall sense of security.

When social distancing measures became common practice, the relationship-based, face-to-face model that direct sales is known for became almost impossible. It was no longer safe for distributors to invite large gatherings of potential customers into their home for parties, and the casual conversations with strangers that happen in the grocery line or while browsing boutiques occurred less and less as people opted to shop online or pick up curbside. For companies who had spent 2019 and the years prior building momentum, this stop to their forward motion felt like a defeat.

But in a surprising twist, the direct selling industry is emerging from the setbacks of 2020 with a renewed strength that most industry insiders, top executives included, could not have predicted. And while not every company is reporting a revenue explosion, some are experiencing a bump in their customer numbers and a heightened interest in the business opportunity side of their brands.

MONAT President Stuart MacMillan watched as the activity rate (a key metric to define how the company’s field is engaging, selling and enrolling new customers) began to climb during the first few tenuous months of the pandemic.

“One of the things COVID brought was that the people who were dabbling in the business before are now doing more, and the people who were on the fence before got involved,” MacMillan says. “A pretty good company has a 25 percent activity rate. We have always traveled in the 30 percent range. Two to three months into COVID, we were up around 40 percent. We believe we have set a new threshold.”

What constitutes average for the industry has shifted upward. Looking forward to 2021, the big question will be: How will the industry sustain this renewed interest and growth in the channel?

The New Hybrid Mentality

When the country began to cumulatively understand the severity and seriousness of the pandemic in March, the direct selling industry was already full speed ahead with plans for large national conventions. Companies scrambled to relocate their stadium-sized events to a digital platform on a dime, and in a matter of weeks, reimagined what these concert-style celebrations could become when broadcast online. The results revealed an untapped truth that executive teams are now salivating over: online events bring in more participants and more sales than a massive in-person event can.

When MONAT pivoted to virtual, they turned their online experience into an innovative production, with daily surprises delivered to registrants that helped them participate with the event, like 3D glasses and confetti poppers. A post-convention rewards gala encouraged viewers to dress up in their homes and watch as James Corden hosted. Their interactive approach led to skyrocketed engagement. “Instead of 14-15,000 people, we reached 50,000 people,” MacMillan says.

This out-of-the-box thinking and its unparalleled results have influenced their event strategy for 2021. In-person gatherings are important and something the MONAT field is craving, MacMillan says, but their strategic approach to future events will require innovation and transformation. “We’re not giving up on in-person events,” MacMillan says. “But it was so successful that now we’re realizing maybe the new world is a hybrid of virtual and in-person because you reach more people.”

MONAT is not the only one. Herbalife Nutrition reported record performance for the first half of 2020 and points to their previous investments in online systems and tech that made connection and growth possible, even when face-to-face meetings weren’t.

“The challenges of 2020 have led our distributors to further embrace technology to service and connect with customers,” says Herbalife Nutrition Chairman and Chief Executive Officer John Agwunobi. “This has been done in numerous ways, one of which has been the virtualization of our events and trainings. While we are still optimizing virtual events in terms of length, tools, training and best types of content, we see an efficient hybrid event model enduring in the coming years.”

High-Touch Meets High-Tech

This hybrid mindset is one that the companies at the top of the leaderboard will be harnessing as they enter the new year. First and foremost, direct selling companies are a high-touch model, but 2020 demanded that it also become equally high-tech. Almost every direct selling company has a digital home base, but that’s not enough anymore. Websites can’t simply be a stockroom for digital brochures and product glamour shots. To be competitive, they have to replicate the feeling customers get when they shop at Amazon, Nordstrom or Sephora.

For MONAT, that means upping the customer experience by reducing the number of clicks it takes to complete a transaction and paying attention to how customers are viewing their site. In the coming year, the company will focus on their mobile website experience, since 70-80 percent of the company’s traffic views the site on a mobile device, and implement streamlined transactions through PayPal. Their new shopping cart, which took two years and millions of dollars to perfect, is a pillar of their customer-first strategy for 2021.

“Being customer-centric is going to be key for the industry,” MONAT Chief Executive Officer and Co-Founder Ray Urdaneta says. “We are literally doubling our technology budget for the next year so that the things that are front-facing and back-facing—the things people don’t even know about—will make us more efficient.”

Learning from Distributors

Many of the plans companies have for the new year will be a continuation and fulfillment of dreams deferred. Global expansion and in-person meetups that were off the table are now tantalizingly in reach, and companies that have been held for so long at the starting gate will undoubtedly race to regain normalcy. But in a world where business as usual has been turned upside down and normal is not as easily definable, a commitment to flexibility and innovation will be the industry’s salvation.

“I don’t see it getting back to how it was before,” says MONAT Chief of Staff Javier Urdaneta. “A big focus in the industry is going to be on distanced experiences, online experiences and online business.”

This fluidity has allowed the industry to serve as a solution in the midst of a negative trend for society when unemployment has left many people searching for viable options for flexible, part-time work. To properly serve this influx, many companies will be investing more time and resources into digital communities, like Amway, who is leaning into the online expressions of its brand after witnessing how distributors and customers naturally embraced it.

“The way distributors have moved their community events and engagement to customer outreach online has been a source of great inspiration for us,” says Amway Vice President of Strategic Planning Andrew Schmidt. “We are learning from our distributors and seeing how they respond to the realities of the marketplace. It’s something we expect will continue in some way even as typical gatherings are acceptable and allowed.”

The Gig Economy, Expanded

Direct selling has long been an opportunity for families looking for additional income during unstable economic times, and 2021 will be no different. The economic impact of COVID is going to critically shape and inform action plans for brands as they head into 2021. Still, it is a strategy and trend that industry leaders have been steadily preparing for.

“Not just in 2020, but in the past ten years, there has been an increasing interest in the types of flexible, part-time opportunities that Amway or direct selling offers,” Schmidt says. “The expansion of the gig economy and, I would say, the generational views toward work have created a greater openness toward side hustles.”

Serving this expanding group of distributors and customers means leaders will be focusing on how they can tailor their products and tools to suit the new microentrepreneur. In an ever-changing marketplace, companies will need to continue evolving to match their efforts with customer demands and support distributors who will ultimately have to alter their approach and where they spend their time. Regardless of these challenges, leaders are anticipating that the intensified attention will reflect a year of growth.

“This is a gig economy,” Ray Urdaneta says. “It’s been happening for years, but this accelerated everything. Now more than ever, people are giving us a second look. This opportunity is going to be huge.”

Prepare for a Transformation

Ready or not, the pandemic has given direct selling the makeover it didn’t know it needed, and maybe wasn’t even sure it wanted. But the industry is not the only thing that has been transformed. Customers and casual patrons have experienced change as well, as the need for online shopping and the permanency of work-from-home lifestyles gradually shifted their buying patterns.

What will the future hold? Certainly, relationships that live mostly online, and product trends that reflect consumers’ new immunity obsession, the likes of which only a viral outbreak could inspire. But regardless of the methodology or product verticals, enhanced team-building and customer attraction efforts will be at the core.

“We’ve noticed that the companies that seem to be really moving ahead are the ones who are super focused on customers,” MacMillan says. “I think you’ll see more compensation plans and incentive programs really shifting to be more about new customer acquisition, customer retention, volume and about how you are growing your business, not just how you are growing your team.”

Those leading the pack are clinging to the roots of the channel—it’s entrepreneurial and relationship marketing heritage—while boldly injecting relevance and innovation into its future. In 2021, the industry’s leaders are illustrating with their own strategic planning that “hybrid” will be the buzzword of the year, as events, training and customer connections shift to lend a more high-tech approach to the high-touch business, and flexibility in the face of unforeseen obstacles will continue to play a leading role.

“We are fundamentally committed to going to market in partnership with our distributors,” Schmidt says. “That resolve and commitment are unchanged. Having said that—the marketplace changes constantly, and our distributors change in terms of how they build their businesses—the tools they use, the approach they take—and so we are consistently inspired by observing the actions they take.”

A transformation is taking place in how direct selling presents itself to the world. As the industry prepares to build upon a strange 2020—a year filled with supply chain challenges and unusual regulatory scrutiny—leaders are committed to remaining beholden to the most signature characteristics of the channel, while strategically preparing to keep their forward motion no matter what challenges the new year may bring. It’s a response to a lesson that 2020 taught all of us so well: nothing is certain.

“We are 100 percent committed to this channel,” MacMillan says. “But we need to be in a position that if the channel were removed, we would still have a viable, sustainable business.”

 

SIDEBAR: The three PILLARS of 2021

While all of the high-volume direct selling company leaders we spoke with have goals and initiatives unique to their brand, three overarching strategies rose to the surface as common goals.

  • Stability: The recent growth associated within the direct selling space has been an exhilarating infusion for the industry. The upcoming year will be about scaling infrastructure (call centers, technology, warehouse facilities) and offerings (new price points and products) to match customer and distributor demand.
“Through the first half of 2020, Herbalife Nutrition performed at an exceptional level, experiencing record top-line performance. We believe our quality line of nutrition products and passionate, driven and engaged distributors will lead to continued growth.”—Herbalife Nutrition Chairman and Chief Executive Officer John Agwunobi
  • Expansion: With a substantial increase in demand for health and wellness products, companies have their sights set on new launches to meet the trend. This includes innovative product categories as well as a continued effort to advance and expand existing nutritional lines.
“The statistics are pretty clear. There is a lot of survey data that says the U.S. consumer is intending to spend more money on dietary supplements and vitamins in particular.”—Amway Vice President of Strategic Planning Andrew Schmidt
  • Improving Customer Experience: Digital footprints are being reimagined and customized to better suit the needs of distributors and customers alike. From new online communities that draw in loyal customers to back office overhauls that make working from home more efficient, companies are focusing not only on the organization as a whole but focusing on enhancing customer acquisition and helping the distributor reach them—on a more one on one, individualized basis.
“Customer experience continues to be a huge pillar for us. We survey our customers on a regular basis and have some cool ideas on how we plan to enhance their experience and simplify it. That’s a huge key for us: make the customer experience sticky and simple.”—MONAT President Stuart MacMillan