A smart, strategic omnichannel approach is fueling growth.
In this month’s cover story, we took a deep dive into how direct selling companies have become true category kings—competing with and even surpassing retail brands that occupy the same space through product innovation, proprietary ingredients, nimbleness and incomparable customer service.
And we aren’t the only ones who’ve noticed. Retail giants are now looking to direct selling models to enhance their brand presence and scope.
DSN Founder and CEO Stuart Johnson explains the strategies behind the trend and shares his thoughts on the top companies inside and outside the channel whose omnichannel approaches are facilitating growth and brand dominance through supplemental brand enhancements, social selling initiatives and strategic mergers and acquisitions.
Building Bigger Brands
The direct selling model is becoming more deeply ingrained within larger retail brands, especially in the beauty and cosmetics segments. This trend goes beyond online direct-to-consumer sales done by a retail company. It involves either the development of a supplemental direct/social selling brand within the parent company or the acquisition of a direct/social selling brand into a larger conglomerate.
The benefits are clear and go both ways. Direct selling has robust social selling platforms that the parent company can leverage as well as presence in new markets. And the established retail brand lends credibility and exposure to the direct selling enterprise.
Although this trend isn’t new, it is growing and shaping the scope and focus of the industry. Traditional retail brands are acquiring or merging with direct selling standouts to create even bigger international beauty brands. And these brands dominate across all categories: direct to consumer, retail, e-commerce and social selling.
New Ways to Engage and Empower Entrepreneurs
There are several very well-known companies and celebrities launching social selling initiatives this year, each with the potential to change and shape the future of the channel. One recently announced example is Kendra Scott, a multichannel retail jewelry and accessories brand starting a direct/social selling division. This 20-year-old brand was founded in 2002 and boasts $360 million in annual sales. Its entry into the social selling space, Direct Retail by Kendra Scott, shows tremendous potential.
It borrows from traditional direct selling, but stretches the concept in new ways to help build the brand’s presence incrementally. Participants purchase a moderately priced starter kit that includes product samples; are given a user-specific URL; and receive a 20-35 percent commission on all sales.
The company has strategically launched Direct Retail in markets where Kendra Scott has low penetration and no current plans to open a brick-and-mortar location—including Tacoma, Washington; Toledo, Ohio; St Louis, Missouri; and Laredo, Texas.
The “win-win” potential is high. The brand gains traction within underserved markets, and the entrepreneurs not only have a highly respected brand to partner with, but the flexibility of setting their own schedule and pace.
Additionally, Total Life Changes recently introduced a Product Influencer Program that’s very reminiscent of affiliate marketing. It allows customers that enjoy and believe in the products but don’t want to become distributors in the traditional sense to use their influence to encourage others to buy the products via social media, earning $20 for every product purchase. Best of all, Product Influencers get paid the next day after a qualifying sale.
Another aspect unique to direct selling is its ability to capitalize on social media impulse purchases. Companies that have benefited from creating a perfect storm of low price point (under $50); dynamic, innovative products; and a simple, streamlined purchasing process via social media include Younique’s lash product; Nu Skin’s toothpaste; Colorstreet’s nail products; Paparazzi jewelry; and SeneGence LipSense.
I expect more consolidation in the channel this year as companies look for more stability and market share in an increasingly volatile environment.
These social media “selling systems” and others like them have successfully acquired tens of millions of customers in direct/social selling—this strategy has really developed over the last five years. Other direct sellers are introducing similar programs and encouraging existing distributors to use this exciting social selling system as well.
One of the top stories coming out of 2021 that I anticipate continuing into 2022 is the increase in strategic mergers and acquisitions. This is happening at companies of all sizes, and I expect more consolidation in the channel this year as companies look for more stability and market share in an increasingly volatile environment. Rumors of pending deals are plentiful, and one thing seems certain—this is a trend that will continue through 2022 and beyond.
These partnerships and acquisitions have several strategic benefits for the companies, allowing them to expand on their strengths; address deficiencies; provide a better, more holistic customer experience; or fill in gaps in their product assortment or social selling capabilities.
Carlyle purchased majority interest in Beautycounter in April 2021 at $1 billion+ valuation. The partnership will allow Beautycounter to accelerate its strategic initiatives, including increasing brand awareness as well as bolstering the company’s integrated, omnichannel business model.
Carlyle benefits as well. The investment builds on their long-term focus on partnering with founder-led brands focused on growth.
Beautycounter has leveraged a wildly successful omnichannel model. Their products can be purchased in a variety of ways: through one of 65,000 consultants; directly on their website via shoppable live-streams; traditional retail options through seasonal pop-ups in Sephora; and brick-and-mortar locations in markets like Los Angeles, Denver and New York.
Groupe Rocher, a French-based international cosmetic and beauty brand, greatly expanded its portfolio into direct selling when it acquired Arbonne in 2018. The family-owned company owns and operates retail locations throughout France but had little direct selling presence prior to acquiring Arbonne.
Retailers and direct sellers alike are adopting an even broader omnichannel approach.
The brands share similar values and botanically-based products. Groupe Rocher understands the value of the direct selling model, and the addition of Arbonne allowed them to become a $3 billion company.
L’OCCITANE en Provence is another huge beauty brand making an impression in the direct selling/social selling space. They acquired direct-selling standout LimeLife by Alcone in 2017. The brand has been providing professional makeup artists with their products since 1952 and found social selling to be a natural way to extend the brand to consumers with these influential professionals.
The emphasis on social selling continued in 2020 with L’OCCITANE’S U.K. launch of DUOLAB, a social selling-based skincare startup engineered to strengthen its e-commerce sales and grow its digital presence.
In June of 2021, L’OCCITANE en Provence announced plans for the company to expand its omnichannel beauty and lifestyle presence through the direct selling model once again. This was part of the company’s North American business transformation and is designed to help the company develop a more personal relationship with its customers. The result is MyL’OCCITANE, a brand-new social selling platform.
Mergers that Maximize
In December 2021, health and wellness standout Prüvit merged its exogenous ketones business with direct-to-consumer ready-to-eat healthy meal and snack delivery company Sunbasket to supplement and complement the brand’s healthy lifestyle offering.
This combination is an all-stock deal that values the new company at more than $1.3 billion. The combined company, called PSB Holdings, will focus on creating a single wellness platform combining food kits and supplements, along with an existing community of health and fitness users. The company also has plans to expand wellness offerings.
It’s the kind of brand extension that not only makes sense for the company but also adds tremendous value for the customers and distributors who can now easily order and enjoy the keto-friendly meals and snacks that enhance the Prüvit lifestyle.
Nu Skin acquired Mavely, an emerging social commerce platform that streamlines customer acquisition and social selling in November. The Mavely acquisition is expected to bring new social selling capabilities to Nu Skin distributors, empowering them to help consumers more effectively discover, share and purchase products.
Mavely’s proprietary technology will help Nu Skin accelerate its growth in the global social commerce market. In the coming year, Nu Skin plans to introduce new digital tools to help the company’s distributors expand their reach across social platforms.
Retailers and direct sellers alike are adopting an even broader omnichannel approach through brand and product extensions, social platforms and mergers and acquisitions that round out and supplement these brands’ presence and dominance in an increasingly complex and rapidly evolving environment. DSN
Two Lessons for Direct Selling from Direct-to-Consumer Brands
A recent article in the Harvard Business Review took a deep dive into how Direct-to-Consumer brands can continue to grow. Direct selling can take a page out of their playbook by keeping these guiding principles in mind.
1. Accompany the customer beyond the initial transaction.
DTC brands can travel with their customers all along the decision journey, following through on product use and experience after a sale. Because DTC companies don’t rely on middleman retailers, they have access to customer information, allowing them to conduct direct conversations with customers.
Founded in 2012, Peloton has transformed its business model to follow DTC sales of hardware, mainly its $2,500 exercise bikes, by offering annual subscriptions costing roughly $500 for access to exercise classes via livestream and on demand. The company’s model revolves around the notion of “consumption by a community.”
Direct sellers, like DTC brands, have the benefit of being in direct communication with their customers as they consider, evaluate, choose and experience products. As a result, these brands sit on troves of information about shopping and usage preferences—data that traditional retailers can’t touch. Brands should actively use the resulting insights to spur innovation; build community; strengthen the value proposition; and deliver satisfaction at every possible touchpoint.
2. Carefully consider product line extensions
Warby Parker introduced nationwide product sampling in 2010 with a program called Home Try On. Customers chose five pairs of eyeglass frames online that were then delivered for inspection, free of charge. Customers chose the frames they wanted to buy and uploaded a prescription.
Because Warby Parker maintained close relationships with its customers, it learned that people with complex prescriptions preferred to shop for glasses in person. The same was true for customers who preferred a wider selection of frames. That provided a good rationale for shifting to an omnichannel strategy, and after three years of selling exclusively online, Warby Parker opened its first brick-and-mortar locations.
The company extended its inventory to include more-expensive progressive lenses, blue-light-filtering lenses and light-responsive lenses. It also launched a line of contact lenses, supplementing its product line without weakening its core value proposition.
There is a real lesson here for direct sellers. Product line extensions can build loyalty, increase order sizes and keep customers coming back for more. But often, brands make them without first ensuring that the additions make sense for their brand.
Random product extensions risk coming across as inauthentic to customers and distributors. Make sure that any add-ons still reflect the products and branding that made you successful.
STUART JOHNSON has served the direct selling industry for 36 years and is the sole Founder and CEO of Direct Selling News. His passion for the channel encompasses a broader commitment to build and connect the direct selling community through exclusive industry events such as Direct Selling University and the DSN Global Celebration. Stuart is arguably the most connected person in direct selling, building and growing a network of executives, thought leaders, strategists and innovators. His advice and counsel are sought after by leaders throughout the channel.
From the May 2022 issue of Direct Selling News magazine.