In addition to navigating through the wake of recession in 2011, companies were faced with a new challenge: A seismic shift had occurred in the business landscape. Big, rapid change over the previous few years had completely altered the way people did business. New tools and technologies had redefined the way we communicated and formed relationships. The new self-empowered consumer had wrestled power from the supplier, reshaping the business model.
Many wondered if the direct selling industry was equipped to handle the changes. Others suggested that the industry was simply in the midst of a transformation, that it just needed time to acclimate itself to the new business environment.
In response to the ongoing discussion, DSN issued the S.W.O.T. Analysis on Direct Selling in June 2011. The report offered an examination of the industry using the S.W.O.T. methodology, replacing the traditional Weaknesses and Threats with What’s Important and The Future, respectively, in order to provide perspective on where direct selling was and where it was headed.
The conclusion of the DSN S.W.O.T. Analysis on Direct Selling in June 2011 was that, despite the challenges, thought leaders and business experts were optimistic about the industry’s future.
The motivation for the report was mounting concern over the industry’s future. U.S. direct selling retail sales had steadily declined over a four-year period, from $32.18 billion in 2006 to $28.33 billion in 2009. In 2010, sales grew only 1 percent, a positive sign that the industry was stable, but not exactly the rebound many had hoped.
However, the conclusion of the report was that, despite the challenges, thought leaders and business experts were optimistic about the industry’s future. Their optimism actually proved to be spot on when the 2011 statistics were released by the World Federation of Direct Selling Associations (WFDSA). That year, according to the report, U.S. direct selling retail sales jumped 4.5 percent, an increase of $1.3 billion, with many of the top direct selling companies experiencing increases in worldwide sales. Within the companies ranking in the top 10 of DSN’s Global 100 list, retail sales increased 11 percent between 2010 and 2011, moving from a cumulative $38.5 billion to $42.6 billion.
Now, 20 months after the report was issued, we’re wondering what might have changed. Have we met the challenges presented in 2011? Is the industry still in a period of transformation? What are the new opportunities ahead?
The following are our thoughts on where the direct selling industry stands as we enter 2013, and what we believe the future holds for those choosing to market their products and services through this enterprise system we call the direct selling channel of distribution.
Today’s consumers demand more integration, more networking and easier purchasing.
Clearly, acquiring new customers is the foundation of any successful business, regardless of the channel. Companies need to acquire new independent representatives as their primary customers, and then equip those individuals to acquire new end users.
While the direct selling model has historically facilitated the customer life-cycle process with relative ease—educating and demonstrating through the party plan platform or one-on-one meeting—the seismic shift in the business landscape from a few years ago now requires new and improved strategies to engage and retain customers, both in approach and in technological prowess.
In approach, businesses have often tried to be “customer-centric,” putting the consumer first, but still really maintaining the control in the relationship. That approach has changed with the advent of the “empowered consumer,” who shifted the balance of power. Where once companies bestowed favor on customers by serving them well, today it is the customer who bestows favor when choosing where to shop. This shift has largely occurred in tandem with tech advancement. User-generated reviews and content have come to mean far more to consumers than any commercial or billboard could ever mean.
So what are some of the new strategies? Since consumers demand instant access to product information and fast, efficient customer service, those who can provide this have a distinct edge. Today’s consumers demand more integration, more networking and easier purchasing. These things do not replace the distinguishing mark of direct selling—the individual attention of the independent representative—but they do have added value and can give a direct selling company an even greater competitive advantage.
The explosion of social networks over the last nine years, beginning with the extraordinary growth of Facebook, has been sending many a marketing and communications executive scrambling for a new business plan. The speed of communication has drastically changed the social landscape in how people interact and how often. Online communities have sprouted up everywhere, enabling users to share thoughts, ideas and interests as well as advertise activities and events—all in real time, 24/7.
The stats are staggering. Facebook has more than 1 billion active users. Twitter boasts 500 million users generating 340 million tweets daily. YouTube receives more than 4 billion views per day. LinkedIn reports more than 200 million registered users. How on earth does one play within this giant playground?
As the stats on users have continued to climb, many businesses are simply overwhelmed by the social media phenomenon.
Back in 2011, some in the industry were concerned by research that indicated 78 percent of consumers trusted peer testimonials compared to only 14 percent trusting company advertisements. Information on products, services and brands were at the mercy of posters and bloggers. Fear became a paralyzing factor for some.
But now that the initial shock that the global community had suddenly and irrevocably been made smaller and more fully connected is over, companies are beginning to see the true value of social networking. It is no longer a scary leviathan that can sink a company’s reputation through negative publicity; it is a new forum to be leveraged.
Social media is, in fact, a tool that plays to the strengths of direct selling. It is the digital expression of what the direct selling model has always been about: a personal relationship between the supplier and the customer, whether that is the independent rep or the end consumer. Entire teams can become more connected and training can be provided in interactive forums. Challenges can be issued and the entire group can compete, record their achievements and celebrate together. Best practices can be shared and encouraged. There is truly no end to the cooperative sharing and learning that can happen on social networks.
It is the combination of social media technology—which continues to evolve and expand—and the direct selling business opportunity that makes social networking a strength for the industry. This can be seen most clearly in the emergence of “social selling” as a specific designation among direct selling companies. Many companies, regardless of product, have now branded themselves as “social sellers,” tying in the basic strength of the personal contact of direct selling with the emerging social connectivity through technology.
Whether the product is jewelry, phone services, or weight-management products and coaching, more and more companies are focusing on helping the direct seller leverage their social networks through Facebook, Twitter, Pinterest, Instagram and other social platforms. A few companies have dedicated significant budgets to developing their own platforms that link their independent representatives directly into not only popular networks, but also virtual meeting places they have created for their own needs—a private Facebook, so to speak. In 2011, the S.W.O.T. Analysis recognized that companies needed to invest more in understanding the emerging social tools, and that is precisely what has happened.
It only makes sense in a world where, according to a recent study published in the Personal and Ubiquitous Computing journal, smartphone users check their devices an average of 34 times per day.
While tech advancements may have changed the delivery vehicle for some tools, providing them is not really negotiable.
Sadly, success has a habit of not only attracting admirers, but also detractors. There are those who would misrepresent the industry in the eyes of consumers, claiming fraudulent or illegal activity for what are the legitimate aspects of direct selling. Last year was a particularly challenging year for many companies, as the business model and their integrity were attacked by some.
What gives such attacks traction is that people unfamiliar with the industry do not fully understand how the direct selling channel of distribution works or how it contributes to the nation’s economy. Some have dredged up old stories and outdated stereotypes and paraded them out again to a public who doesn’t know that the Direct Selling Association works daily with government officials and regulators to ensure that legitimate companies are distinguished by law from those who engage in illegal behavior.
Transferring the knowledge of the direct selling industry’s commitment to ethical business practices more effectively is crucial in combating the negative perceptions that persist and the falsehoods that periodically arise. May we all continue to collectively defend the true value of direct selling and engage in a marked effort to educate the public, industry regulators, policy-makers and even those misguided and misinformed individuals who seek to tear down what this industry has built.
Tools and Training
Providing the salesforce with the tools and training they need to successfully run their businesses remains a critical function of any corporate home office. While tech advancements may have changed the delivery vehicle for some of the tools, providing them is not really negotiable. Additionally, the categories of information remain similar, regardless of company, product or tech innovation. These categories are recruiting, retention and training.
Perhaps more important to a company’s growth and longevity than a specific individual tool are the intangibles that are nurtured (or not) behind the scenes by the company executives. VideoPlus, a direct selling supplier, recently conducted an informal study of growing companies and found four common denominators:
- Focus: A single product or product category was used as their “lead” to attract people, rather than trying to offer the entire product spread all at the same time to everyone.
- Messaging: Each had a very basic set of prospecting tools that clearly explained the benefits of the product and business opportunity. The message was spread across a range of delivery media but remained consistent across them all. Additionally, they had a very clear system to help people understand how to deliver the message.
- Leadership: Company executives maintained a healthy ego that focused on making the field win, rather than focusing on their personal gains. Most provided some sort of ongoing messaging from the leadership to the field.
- Personal development: Each had specific personal development programs in place and an internal culture of personal development for executives and employees as well.
Direct selling remains the only opportunity that provides extensive tools and training to the independent representative at either low or no cost.
“We have this new space where we hang out, buy stuff, learn anything we want. It’s the first time humanity can share the same space.”
In 2011 we spoke to the change in the selling landscape due to the expansion of e-commerce. Traditional brick-and-mortar retailers were seeing a major shift in market share due to the success of online channels of distribution. We predicted that this new direct-to-consumer relationship would be competition for direct sellers. But many direct selling companies have remained on the leading edge of e-commerce technology, and found innovative ways to combine people and their networks, high-tech delivery systems, and the sale of goods and services.
Through the development of apps, companies are integrating individual social networks with the power of crowdsourcing and group interactions, leveraging an idea put forth by futurist David Houle that our concept of “place” has changed forever. At a speech he gave in December 2012 as a part of the TEDx inaugural conference in Sarasota, Fla., Houle says there is now no time or distance limiting connectivity for the first time in human existence. He says that although 200 years ago technology started shrinking the distances between us first with the telegraph, and then with radio, TV and the Internet, the proliferation of mobile devices has completely eliminated the concept of distance.
Houle notes that there are 7.1 billion of us on planet Earth, and 5.6 billion of us have cellphones. He says, “We have this new space where we hang out, buy stuff, learn anything we want. It’s the first time humanity can share the same space.”
A well-designed app can indeed eliminate all time and distance barriers between a direct selling company and its independent representatives and their customers. Some weight-management product companies have produced apps that bring personal trainers to the customer’s home, no matter where they live. That same customer can join a virtual group and be cheered on by people across the country. A skincare company can provide a virtual makeup artist to give customers guidance, then take an order. iPads can be loaded with all the tools the rep would need to take a prospect from a brief opportunity presentation to enrollment to ordering, all navigated easily and quickly.
Clearly, the direct selling model continues to offer the best blend of people, technology, personal communications and relationships.
As we seek to inform the public of the business practices of direct selling, we realize that transparency will always be an essential component to greater understanding and acceptance. Our culture, in light of the financial misdeeds of so many politicians and corporate giants over the last many years, has come to demand more and more transparency. Even in the selling sphere, transparency is being demanded by the same empowered consumer who is disgusted with corporate greed and insensitivity.
According to trendwatching.com, an independent firm that watches and aggregates consumer trends, people are so disillusioned with brands in general that most people would not raise an eyebrow if 70 percent of brands just ceased to exist. This staggering number surely speaks to the lack of relationship, and thus loyalty, that consumers have to any brand or company today. The site also states that just as people have a hard time connecting to other people who pretend to have no weaknesses or flaws, consumers “will become increasingly disenchanted when dealing with traditional, impersonal brands” who seem to exhibit the same impenetrability.
These consumers are becoming increasingly demanding about a brand having a personality and that “profit and personality can be compatible (think Zappos, Ben & Jerry’s, Tom’s shoes).” The direct selling business model’s reliance on the personal relationship that exists in the form of the independent representative between the company and the end consumer is a perfect illustration of what other traditional businesses are now striving for. As consumer demand for transparency increases, the environment can become one that encourages the growth of the independent representative.
Within direct selling and among the groups that support the business model, we understand that transparency is an important issue. The process of standardizing global statistical data collection, which the WFDSA made great strides toward in 2012, will help bring a higher level of credibility to the industry. Such data will enhance industry government affairs and media relations efforts as well.
Transparency is also why we at DSN will continue to speak out on these issues and support efforts to increase understanding. This is one of the primary reasons DSN conducts the research to publish the annual Global 100 list, to publicize the value and economic benefit these companies bring to the U.S. and the global economies, and the hundreds of thousands of opportunities that are created daily.
Last year, in an effort to support greater transparency, DSN adjusted its approach to the Global 100 list by instituting the Revenue Certification Form, or RCF, to ensure that the net sales figure submitted by a company was authenticated by the CEO as well as a certifier. It is DSN’s belief that any company receiving recognition as one of the Top 100 companies in the world would proudly share its numbers, for in doing so a company contributes to the distribution of information that clearly defines the magnitude of the economic impact direct selling makes upon the world.
As it has been for the past 150 years and will continue to be in the future, direct selling’s core value proposition is the business model itself.
The Business Model
In our 2011 report, we recognized the direct selling business model as the industry’s greatest strength. It remains that today, a distinct asset not found in any other tried and proven business model.
Collectively, the potential to earn money, the ease of entry, the opportunity to have a relationship with the business owner, and the offer of “privacy of consultation” regarding products and services combine to provide a perfect example of how a free-enterprise opportunity can be offered to the masses.
In addition, the opportunities to attach to charitable causes that are embraced and promoted by companies is yet another reason why direct selling appeals to so many people. Direct selling is truly an industry with a heart, providing financial support to local, national and global organizations that help fight childhood hunger and obesity, bring awareness to domestic violence, and look for cures for breast cancer and other diseases. It is an opportunity to affiliate with a good cause, one not typically found in traditional business models.
As it has been for the past 150 years and will continue to be in the future, direct selling’s core value proposition is the business model itself.
The Small-Business Owner
The traditional corporation has failed to provide the ultimate security it once seemed to promise—job security and a pension for a nicely funded retirement as a reward for working so hard. As a result, people are returning once again to small-business ownership. Today, the small-business owner is often held up as the savior to the current crisis.
What’s more, innovative online opportunities and home-based businesses are redefining Main Street, which is where most experts say true economic recovery will emerge. Main Street is now an open marketplace of people engaged in the business of providing products and services to meet consumer needs.
Over the course of its 150-year history, the direct selling industry has experienced both the best of times and the worst of times. It has triumphed in the face of new challenges, held steady while weathering economic storms, and fiercely defended its practices against misconceptions and outright attacks.
Through it all, the industry has never wavered in the belief that its business model has a positive social and economic impact on the world, offering people from all walks of life benefits that cannot be found in a collective anywhere else. The benefit of working at one’s own pace and being the boss. The benefit of a flexible schedule. The benefit of rewards and incentives for achievements. The benefit of personal development and skill training that comes along with being associated with a reasonable and affordable entry process.
People are now empowered. Their choices are more intelligent than any time in history because of access to information. Knowledge is indeed power. More people will choose direct selling opportunities because of the many and compelling benefits. More people will choose direct selling products because of the personalized service and human face behind the product. No one else can do it better.
In future years, these current times might be looked on as a defining moment—that the development of new technologies, the major business shifts and even the lingering economic crisis marked an important epoch in the history of the direct selling industry.