The Way Forward: This is a Time for Leadership

We are at a unique moment in time, one that will undoubtedly change the way we live and the way we do business in the future.

Our way of life had hit a brick wall. In the span of a few days, hotels and retailers shuttered, airplanes were grounded, offices fell silent. Leaders scrambled to secure their supply chains, keep worried employees motivated to work, and looked to evaluate strategic plans that have been years in the making from falling apart.

Just know that all of us here at Direct Selling News are mindful of the challenges you face in your daily lives. Please know that our thoughts and prayers are with you, your employees, your distributors and your families.

Throughout the past year, the editors at Direct Selling News have had no shortage of topics to talk about. Never before have we seen such a year that has so dramatically impacted the future of direct selling, which was reflected in this year’s Global 100 List.

First, the Numbers (2019 Revenue)

Of the 50 companies in the ranking, only six grew by 100 million from 2018 to 2019. And only two of the Top 10 companies had increases in revenue (Coway and Ambit Energy).

However, of the companies ranking 11 through 25, seven had increases, and of the companies ranking 25 through 50, fifteen had increases in revenue. While there were challenges in 2019, 48 percent of the companies recognized tonight grew year over year.

Events Impacting 2020 G100 List

Here are some of the happenings that got our attention that certainly impacted growth in virtually every part of the world. I think the following were on everyone’s list:

  • China’s 100-Day Review – 2019 started with the Chinese government’s 100-day review of the health market. That review negatively impacted several of the world’s largest direct sellers. Whether or not the government came knocking, all direct selling companies were on edge, and financials took a hit. Earnings at USANA, Nu Skin and Herbalife Nutrition, three of the industry’s largest publicly traded companies, fell significantly—between 8 percent and 25 percent for the first quarter. Hopes were high that business would rebound once the review period ended in April. Still, sales continued to fall dramatically in quarter two, resulting in all three companies resetting expectations for the second half of 2019.
  • FTC, AdvoCare & Neora – Perhaps the most headline-grabbing examples that happened in 2019, unfortunately, were FTC related. In October, AdvoCare and its former chief executive officer agreed to pay $150 million and be banned from the multilevel marketing business to resolve Federal Trade Commission charges. The FTC charged that the company operated an illegal pyramid scheme that deceived consumers into believing they could earn significant income as “distributors” of its health and wellness products. Then one month later, Neora sued the FTC for changing the rules, hours later the FTC announced they were suing Neora as well.

  • Gig Economy’s Continued Growth – The explosive growth of the gig economy may have caught us by surprise. Supported by the innovative use of technology and a very effective approach to serving the consumer, the gig economy’s growth has captured the attention of marketplaces in virtually every mature market in the world.

    The growth of the gig economy has created more choices available to those interested in part-time work, and the estimates are that close to greater than 40 percent of the existing workforce in the U.S. is engaging in gig work, representing over 50 million people in the U.S. alone.

    Some estimates here in the U.S. indicate that up to 80 percent of the workforce may be interested in part-time work. All of this is happening during a time of low unemployment here in the United States.

Going Forward in 2020

At the end of the year, the world first heard of the coronavirus. Over the past few months, its spread has not only halted activity for many direct selling companies but also prompted countries to close their borders to travelers and shut down government agencies.

The future of direct selling will be determined by the evolution of the distribution channel and business opportunity.

Most direct selling companies are now embracing the need for a strong strategic focus on customer acquisition and retention. This focus will serve us well as we incorporate our unique attributes of relationship building and community in the digital and the social commerce strategies that will reposition the original form of gig work into, perhaps, the ultimate form of gig work.

The future of direct selling will be determined by the evolution of the distribution channel and business opportunity. History has taught us that the future rewards those who pursue a path to relevancy and leadership in the marketplace. The mantra for this new decade must be that we are a customer-centric industry. We build strong retail bases, and the opportunity seekers follow.

Here are a few insights to mull over as we finish out the rest of 2020:

1. The Channel is Showing Growth – As a nation, we are now 90 days into an unprecedented “work from home” doctrine and adjusting to all the changes and challenges it has brought to our personal and professional lives. The economy as a whole is reeling, but an informal survey conducted by SUCCESS Partners is showing some positive signs.

The survey includes talking with 50+ leading direct selling companies for a snapshot overview of how the industry is faring in the current climate. In these conversations with executives, there are ten top-performing companies on track to set all-time records in the month of May. The survey states these companies are necessarily using a different selling system or model, but they are flexible enough to pivot to growing their customer and distributor base remotely.

With over 22 million Americans having filed for unemployment in recent weeks, companies—along with their sales force—have been able to help those people earn alternative income sources. “Who better to rise to the occasion and provide that opportunity than the direct selling channel?” states the article.

2. Product Claims & COVID-19 – Seeing that the industry is growing is a great sign, but nothing will kill this growth faster than misleading product claims. As the COVID-19 pandemic continues to wreak havoc in the medical and business community, direct sales companies face the added pressure of ensuring that their independent sales representatives are not seeking to boost sales by making unauthorized health claims related to the coronavirus. “Statements that imply or expressly claim that a product can treat or alleviate COVID-19 symptoms will almost certainly invite immediate regulatory scrutiny. With the FTC’s heightened scrutiny of the direct selling channel, direct sellers can ill afford the reputational damage (and certain adverse regulatory enforcement action) that would result if a company (or its independent salespeople) seeks to capitalize on the current pandemic by making unsubstantiated health claims,” says Brent Kugler, a Partner for Scheef & Stone.

The DSA and DSSRC issued a joint press release stating the same thing, cautioning direct selling companies and their independent sales forces from making claims. “During these dynamic times, it is of paramount importance that we maintain the integrity of the direct selling space and be especially cognizant of any and all product claims and business opportunity representations,” said Eric D. Reicin, President and CEO, BBB National Programs. “Since product claims made by sales force members are attributable to direct selling companies themselves, our direct selling self-regulatory division, DSSRC, reminds all direct selling companies to educate their sales force members about best practices with respect to health-related product claims.”

Statements that imply or expressly claim that a product can treat or alleviate COVID-19 symptoms will almost certainly invite immediate regulatory scrutiny. — Brent Kugler, Partner, Scheef & Stone

In less than a week of these warnings, the FTC issued warning letters to several direct selling companies to remove and address claims that they or their participants are making about their products’ ability to treat or prevent coronavirus disease or about the earnings people who have recently lost income can make, or both.

“MLMs and other companies that distribute their products through networks of distributors are responsible for the product and earnings claims those distributors are making,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “During this health and economic crisis, we are on the lookout for false income claims for work-at-home opportunities, in addition to spurious health claims that products can treat or prevent COVID-19.”

The FTC has previously sent a number of warning letters about health claims related to the coronavirus pandemic. Still, this group of letters is the first to also include warnings related to claims about potential earnings related to the economic fallout from the pandemic.

What happens in the next six months will be crucial in the decisions we make with our companies as well as our channel.

The letters refer the companies to the agency’s guidance for MLMs, reminding them that they are responsible for the claims made by their members and representatives, and advising the recipients that they and their members must immediately cease making all claims that would be false or misleading.

This is a critical time for our channel to continue to educate our sales force on the dangers of product and income claims. We don’t want 2020 to mirror the events of last year.

3. The Immediate Future Will Take Leadership – What happens in the next six months will be crucial in the decisions we make with our companies as well as our channel. It will need leadership to keep our channel moving forward, relevant and in step with the ever-changing customer behaviors.

In a recent article penned by industry veteran Brett Blake, he says the COVID-19 pandemic has presented us with what might be the most unique business experience of our careers, one we are all trying to wrap our minds around from a public health perspective. He says, “…my experience leading several companies through very difficult crises has left me thinking, What would I do if I were leading a company right now? This is a moment in time when ‘work from home’ companies should be thriving or, at the very least, preparing to thrive. Whether your company is in ‘crazy growth’ like the company of one executive I recently spoke with, or in ‘survival’ mode, this is a time for leadership.”

In their video acceptance speech for the 2020 DSN Bravo Leadership Award, Orville & Heidi Thompson stated that the titles we hold in our various direct selling companies mean something: They should be more than being the people who make the big bucks or the people who get the credit for growth. Leaders don’t exist without others. You don’t lead yourself. Leaders lead people. They lead them to a happier, healthier place. They help people embrace the growth mindset. They help people adopt a sense of childlike wonder, embrace contagious optimism, develop relationships of love connection and kindness, find hope in a troubled world, and see the light of a better life in a better world. DSN

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