When Inc. magazine named Ambit Energy America’s fastest-growing private company in 2010, the then 4-year-old company’s annual revenue already had reached $325 million, making it one of the 40 largest direct selling companies in the world.
A year after the Inc. article appeared, the revenue number had doubled to $664 million. And 24 months later, Ambit did what very few direct selling companies have been able to do: break the billion-dollar barrier.
Hitting $1 billion in revenue is a milestone for any business, and to do so in seven years puts Ambit’s growth on a trajectory in line with some of the most recognizable brands of the past few decades: Apple (six years), Facebook (six years), Amazon (four years), eBay (seven years) and Google (five years).
Technology certainly helped. Co-Founders Jere Thompson Jr. and Chris Chambless have pointed to the company’s data processing technology as a key factor in Ambit’s rapid expansion. And Ambit, like all modern direct sales companies, leverages the connectivity afforded by the Internet as well as social media platforms in its sales strategies.
Yet despite the ubiquitous nature of technology, the billion-dollar milestone remains elusive for many direct sellers. In order to better understand what it takes to break through that barrier, we decided to study some of the members of direct selling’s Billion Dollar Club: six from the United States—Ambit, Amway, Avon, Herbalife, Mary Kay and Nu Skin, as well as Germany’s Vorwerk, Brazil’s Natura and Peru’s Belcorp.
What is it that makes them billion-dollar companies? What do they have that other companies are still trying to learn and to possess? In our review, we identified four key drivers behind the members of the Billion Dollar Club.
1. They were founded by outstanding leaders.
Which one would you invite to dinner: the visionary, the revolutionary, the dream-builder, the groundbreaker, the risk-taker, the mover, the shaker or the history-maker? In the Billion Dollar Club, you’ll find them all sitting at the table.
Take Amway’s Jay Van Andel and Rich DeVos, for example. Van Andel was a firm believer in and fierce advocate for free enterprise, and DeVos was among the first proponents of teaching distributors to start with believing in themselves.
“We were just two guys from Ada, Michigan, USA, who wanted to have a business of our own,” DeVos says on the company’s website. “We were two kids (it still feels like that sometimes) who were hungry for success and who wanted to give others the chance to be in business for themselves, too.”
The current generation at Amway is building upon that foundation. Co-CEOs Steve Van Andel and Doug DeVos have led the company to record sales growth marked by continued global expansion to more than 100 countries and territories.
Avon offers a similar lesson in the power of strong foundational leadership. As a salesman in the 19th century, David McConnell was far ahead of his time in recognizing that women could be successful sales professionals. Beginning in 1886 with Mrs. P.F.E. Albee, he tapped the power of a female salesforce to go door-to-door extolling the virtues of products from the California Perfume Company, the forerunner of Avon. By 1920, he had built a $1 million business, which adjusted for inflation would be nearly $12 million now.
Today, CEO Sheri McCoy, whom Fortune magazine ranks as among the 50 most powerful women in business, exemplifies McConnell’s vision of building the company for women. She joined the Avon team in April 2012, bringing with her 30 years of experience with Johnson & Johnson, and now leads a $10 billion business with more than 6 million independent sales representatives.
2. They offer distinctive, high-quality products or services.
Having bold, visionary leaders is critical to building a billion-dollar company. So, too, is creating products that bring true value to the marketplace. The club members reviewed here have done just that.
The United States has the largest cosmetics industry in the world, with estimated revenue of nearly $55 billion. Amway, Avon, Mary Kay and Nu Skin are all able to thrive because they continue to be at the forefront of scientific research, developing new products designed to enhance the lives of customers.
Nu Skin, for example, spent more than $46 million on research from 2011 to 2013 and has made several key acquisitions that brought new technology into the company. Its Pharmanex health supplements product line comes from the acquisition of Simi Valley, Calif.-based Generation Health Holdings Inc. in 1998. Since then, Nu Skin has gone on to purchase substantially all of the assets of Madison, Wis.-based LifeGen Technologies LLC in 2011 and Malvern, Pa.-based Nox Technologies Inc. in 2012, which added more anti-aging technology to the Nu Skin portfolio.
Avon significantly upped its research and development game in 2002, announcing plans for a state-of-the-art R&D center and a $100 million increase in research spending from 2002 to 2005. The company has continued that commitment, spending $67.2 million on research and development in 2013 and launching more than a dozen new products.
Unlike its personal consumer product peers, Ambit is using direct sales to introduce customers to a relatively new product category: energy. Deregulation in many utility markets is giving consumers a choice when it comes to purchasing their retail electric and gas services.
Since its launch in Texas in 2006, Ambit has used direct selling to spread the word. Co-Founder Jere Thompson Jr.’s mother and father were the company’s first customers, and received the first bill. Today, Ambit has more than 1 million active customers.
3. They target growing markets.
In order to hit the $1 billion mark, choosing where to sell can be just as critical as choosing what to sell. Of the nine companies in our report, six of them have a presence in more than 35 markets around the globe. Only Belcorp (16), Natura (seven) and Ambit (one) have managed to make the Billion Dollar Club with less.
According to a September 2013 DSN report, advanced markets—the United States, Japan, Korea, France, Germany, the U.K., Taiwan, Italy, Canada and Australia—accounted for $89 billion in retail sales in 2012. Emerging markets such as China, Brazil, Mexico, Malaysia, Russia, Colombia, Thailand, Venezuela, Argentina, Peru, Indonesia, India and the Philippines accounted for $65 billion. Those markets, however, are home to 85 percent of the world’s population; gaining a foothold there now establishes a foundation for future growth.
Take Brazil, for example. Natura has established itself as the biggest cosmetics company in its home country. The No. 2 cosmetics name in Brazil? That was U.S.-based Avon, which counts Brazil as one of its largest markets and where it keeps some research and development operations.
4. They invest in their people.
In the end, while leadership can create a desired path, quality products can help establish a business, and new markets can help bring a company’s story to a worldwide audience, it all comes down to the people who say yes to the opportunity to represent the brand.
The nine companies in this report have more than 20 million salespeople combined across the globe. Those salespeople are of every age and ethnicity, with diverse educational backgrounds and diverse reasons for wanting to be an entrepreneur. In fact, according to the U.S. Direct Selling Association, most people who join direct selling come for one of five things: supplemental income, recognition, rewards, social connections or product discounts.
Six of the nine companies currently have more than 1 million salespeople who, for the most part, are compensated on a multi-level structure. The most-frequently used sales method is person-to-person, which accounted for 80 percent of sales in 2012. Vorwerk, Mary Kay and Belcorp employ the party plan method as well.
The founders and leaders of the Billion Dollar Club companies recognize and value the diversity among their salesforces. Family men like Belcorp’s Eduardo Belmont and the brothers Carl and Adolf Vorwerk have shown that fostering a culture of love and respect brings in the greatest returns on investment. Motivators like Herbalife’s Mark Hughes and Natura’s Luis Seabra set out to help people change themselves so they could, in turn, change more lives for the better. And Nu Skin’s Blake Roney, Sandie Tillotson and Steve Lund are among the many philanthropists in direct selling who have reached out a helping hand to those in need.
A key to becoming a billion-dollar company is to have people talking about it. So whether the talk comes from the standpoint of a 150-year-old legacy or a new, spirited startup that has re-energized the industry, happy salespeople translates to happy customers; and happy customers is always a winning formula.
The Billion-Dollar Companies
The following is a more detailed look at the growth milestones in the nine billion-dollar companies we reviewed.
- Founder: David H. McConnell
- Executive: Sheri McCoy
- Key Brands: AVON COLOR (1988), ANEW (1992), Skin-So-Soft (1961), mark (2003), LIZ EARLE (2010)
|Sheri McCoy||“The company for women,” Avon was founded by bookseller David McConnell in 1886. McConnell was the first to recognize the sales skills of women, and his California Perfume Company (later to become Avon) was the first salesforce comprised entirely of women.|
- Founders: Jay Van Andel and Rich DeVos
- Executives: Steve Van Andel and Doug DeVos
- Key Brands: LOC (1959), NUTRILITE (1962), ARTISTRY (1968), eSpring (1984)
|Steve Van Andel||Doug DeVos||In 1959, Jay Van Andel and Rich DeVos decided to build a business of their own—and to do it the “American way.” Thus Amway was born. Now 55 years later, the Ada, Michigan-based company is the No. 1 direct seller in the world, and the legacy begun by Van Andel and DeVos is being carried forward by their sons, Steve and Doug, respectively.|
- Founders: Carl and Adolf Vorwerk
- Executives: Walter Muyres, Reiner Strecker and Frank van Oers
- Key Brands: Kobold (1929), Thermomix (1971), JAFRA (2004)
|Walter Muyres||Reiner Strecker||Frank van Oers||Focusing on the direct sales channel since 1930, Vorwerk is a 131-year-old, family-owned company founded by brothers Carl and Adolf Vorwerk. Its product offerings include appliances, home care and cosmetics, the latter mainly from its 2004 acquisition of JAFRA Cosmetics.|
- Founder: Mary Kay Ash
- Executive: David Holl
- Key Brand: Mary Kay
|David Holl||Iconic Founder Mary Kay Ash was on a mission back in 1963: to help women achieve personal growth and financial success. She built her company on the principles of the Golden Rule, and today, more than 3 million Beauty Consultants are part of the Mary Kay family.|
- Founder: Mark Hughes
- Executive: Michael Johnson
- Key Brands: Formula 1 Nutritional Shake Mix, Herbalifeline, Herbal Aloe Concentrate; Herbal Tea; Herbalife24, Sports Nutrition; Herbalife SKIN
|Michael Johnson||In 1986, Mark Hughes began Herbalife with the goal of the company changing people’s lives through nutrition. Today Herbalife’s weight-management, nutrition and personal-care products are sold in more than 90 countries through and to a network of independent distributors.|
- Founders: Blake Roney, Sandie Tillotson, and Steve Lund
- Executive: Truman Hunt
- Key Brands: ageLOC®, Pharmanex
|Truman Hunt||Provo, Utah-based Nu Skin is a recognized leader in anti-aging science and nutrition products. The company has collaborated with leading scientists around the globe to understand the genetic origins of how and why we age.|
- Founder: Luiz Seabra
- Executive: Alessandro Carlucci
- Key Brands: Fennel Liquid Soap (1984), Chronos (1990), Mamãe e Bebê (1993), Ekos (2000), Aesop (2012), Sou (2013)
|Alessandro Carlucci||Natura is a company known for its commitment to the environment as much as its cosmetics, personal hygiene products and perfumes. Led by current WFDSA Chairman Alessandro Carlucci, Natura is the No. 1 direct seller in Brazil.|
- Founder: Eduardo Belmont
- Executive: Eduardo Belmont
- Key Brands: L’Bel, Cyberzone, Esika
|Eduardo Belmont||Lima, Peru-based Belcorp is determined to help women realize their ideal of beauty and self-fulfillment. A family-owned and operated business, Belcorp offers beauty and lifestyle products and is committed to social responsibility through the Belcorp Foundation.|
- Founders: Jere Thompson Jr. and Chris Chambless
- Executives: Jere Thompson Jr. and Chris Chambless
- Key Brand: Ambit
|Jere Thompson Jr.||Chris Chambless||Founded by Jere Thompson Jr. and Chris Chambless, Ambit Energy provides electricity and natural gas services to residential and small business customers in deregulated markets across the United States using a proprietary system that delivers comprehensive account management and billing, usage, and service access.|
Billion Dollar Club: Who’s Next?
In the next few years, we anticipate seeing not one or two but several more companies join the Billion Dollar Club. As reporting becomes more transparent in emerging markets, particularly in the Asia-Pacific arena, a handful of Chinese and Japanese companies certainly will be welcomed. In South America, look for Fernando Belmont’s Yanbal, which is expected to achieve more than $800 million in 2013, to join brother Eduardo’s Belcorp as the Peruvian representatives in the Billion Dollar Club.
Here in the States, Thirty-One Gifts, USANA and ACN, all of whom achieved more than $700 million in 2013 and have strong leadership teams—led by Cindy Monroe at Thirty-One Gifts; Dave Wentz at USANA; and Robert Stevanovski, Greg Provenzano, Tony Cupisz and Mike Cupisz at ACN—will certainly be knocking on the door.
As evidenced by Ambit, the potential rate of speed in reaching the Billion Dollar Club has increased dramatically. New product categories and services, along with a surge in entrepreneurship that offers minimal risk and easy entry, will continue to help direct selling companies reach the $1 billion level more quickly. However, increased speed in attaining $1 billion in annual revenue is not the only measurement to watch. The direct selling industry overall is growing. It is growing because the business model is better understood even though it may appear, at times, that those who do not understand the industry are receiving more of the attention and certainly the publicity. Every industry goes through cycles of growth where speed over any specific period of time may be greater than another period in time. Understanding of the business model also evolves as those who do not understand the model often challenge it instead of supporting it. The franchising industry certainly went through its challenges before finally becoming a very credible business model globally. In fact, it would be hard to imagine a community almost anywhere in the United States without well-known national and global franchise brands. Direct selling should be no different.
Today, franchise businesses are often mentioned in the context of the overall economy. Franchise businesses will grow more rapidly and create more jobs than other businesses in the U.S. economy in 2014. Approximately 200,000 new jobs will be added, and that increase will continue to outpace total private-sector employment growth by an estimated 0.3 percent.
The actual number of franchise businesses opened is expected to rise by 12,915 in 2014, bringing total establishments to 770,368. The 2014 establishment growth rate is expected to rise to 1.7 percent from 1.4 percent in 2013. This will continue to align with the increase in overall business formation across the country.
Within the franchise sector, business services, commercial and residential services, and quick service restaurants are expected to drive job creation. Such descriptions of how small businesses impact the economy will become more inclusive of direct selling data as more companies reach the higher level of annual revenues and make an even greater impact through their charitable giving and support of humanitarian initiatives. Direct selling businesses are growing and having a greater and greater positive impact on economies.
Our research and writing of this story reminded us that the direct selling channel of distribution is still in a formative stage. Economic forces, market sophistication and demand have threatened traditional brick-and-mortar retail. Shopping malls are closing across the country and are being replaced by e-tailers supplying just about any product or service imaginable. Direct selling incorporates the best of new technologies as well, but maintains a focus on utilizing people as the local representation of the brand.
Somewhere out there, right now, there are many more future entrepreneurs with a watchful eye on this industry who have the ability to successfully and compassionately lead others and the skill to bring a new and beneficial product to market. We are bearing witness to such narratives far more frequently. Last year, Origami Owl, conceived by a teenager, became one of the fastest-growing direct selling companies in recent years. Such growth and opportunity for those who choose direct selling is predicted to increase the pool of companies exceeding a billion dollars in annual revenue. The franchise industry provides a benchmark for the challenges that can be overcome and the growth, credibility and understanding that can be achieved. Direct selling is a business model that should be viewed no differently. Our industry is growing, and so too will the Billion Dollar Club.