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February 01, 2015

New Perspectives

Are We Winning?

by John Fleming

Click here to order the February 2015 issue in which this article appeared or click here to download it to your mobile device.


It’s hard to keep a scorecard on the direct selling industry! Those who tend to look for a way to criticize can always find something. Those of us who see within the industry and have the opportunity to interact with industry decision makers gain much insight and perspective. And this is a time of year to reflect. The corporate scorecard will be the year-end financial statements that will recap the business of the previous year. Businesses will win or lose depending upon the bottom-line numbers of profit or loss and the top-line number of revenue generated in comparison to the prior measurement period. But the question for those of us affiliated with the direct selling industry might be: What is the industry scorecard? Are we winning or are we losing?

Some scorekeepers like Bill Ackman, the hedge fund manager who has specifically targeted Herbalife with venomous attacks on the company’s method of conducting business (direct sales), completes his scorecard based on a set of very personal criteria that leads to an accusation and attack on, in this case, Herbalife in particular. However, this type of scorecard has implications for the entire industry. Direct selling, as a channel of distribution, is executed in many different ways, from what we often refer to as party plan to network marketing, social entrepreneurship, social selling, and social commerce, or even simply person to person. Today, the actual definition of direct selling is so very broad that direct sellers utilize online methods for delivering messages and transacting business as effectively as any channel of distribution.

In response to a scorekeeper like Bill Ackman and his staff, we remind such scorekeepers of the fact that the industry has a formal code of ethics as well as an informal code of ethics. The industry code and the more stringent company codes of ethics serve to govern the manner in which those who utilize the direct selling channel engage both employees of the company and the independent brand partners representing the company’s products, services and business opportunity. Independent contractors are also consumers as it simply makes sense to be your own best customer. 


Today, the actual definition of direct selling is so very broad that direct sellers utilize online methods for delivering messages and transacting business as effectively as any channel of distribution.


The formal Code of Ethics is provided by the U.S. Direct Selling Association, and this code is public information. Members of the U.S. DSA pledge to abide by the U.S. DSA Code of Ethics. Many non-members of the U.S. DSA (direct selling companies) have created their own company codes and often use the DSA Code of Ethics as their benchmark. In either case, the direct selling industry overall has done a good job of policing itself and has grown as a channel of distribution to over $30 billion in U.S. revenue and $150 billion in worldwide revenue, generated by approximately 16 million U.S. independent contractors and 90 million worldwide independent contractors.

Every organization and every business has some type of scorecard for reflection on previous-year results and the planning of the new year. It is part of our nature to desire a scorecard to determine if we are winning or losing. Each winter, the NFL hosts the ultimate scorecard in professional football, the Super Bowl, where thousands will witness the final score that determines the best football team of the year. The same process holds true for all professional sports teams and leagues wherever they are located in the world. Hundreds of millions watch these events on television.

Direct Selling News created a scorecard for the direct selling industry when we first published the Direct Selling News Global 100 listing in 2009. Each year, this enormous research project serves to identify the top 100 direct selling companies in the world who certify their revenue performance by submitting the DSN Revenue Certification Form and complete a profile of their company. This process results in the publishing of perhaps the most important scorecard on the industry issued by anyone.

However, there is more to score on a company-by-company basis, and we offer on this page a potential scorecard profile that we believe tells even more of the story about an industry that shows such diversity in its representation of people from all walks of life. Direct selling as a method of distribution provides people with hope and with training to learn the basic knowledge and skills to be able to build a business. This could be a small part-time effort or a more serious effort that not only develops customers but also provides the opportunity to recruit and train others to do this, resulting in a much larger business opportunity. Because a scorecard is so important, we encourage each direct selling company to submit your Global 100 information and profile, as in so doing you participate in a valid process for scoring an incredible industry.

In going through the scoring process, we remain optimistic that we will have experienced another year of overall growth with respect to the first two categories on the scorecard pictured. Within the growth, there will always be those companies that did not grow, and the reasons for that are many, some of which are mentioned below and are also being researched by Direct Selling News.

1. Restructuring and Refocus
2. A Shift in Momentum
3. Competition
4. Failed Strategies
5. Disruption to Normal Business
6. A Change in the Season of the Business
7. Fast Growth


Scorecard


Yes, We Are Winning!

Based on the results of 2013 and the anticipated reports on direct selling companies for 2014 performance, we find that people everywhere in every region of the world are seeking to engage in some form of entrepreneurship that is accessible and realistic for the average person, and provides the opportunity without the traditional risks. Direct selling is thriving around the globe. DSN’s Billion Dollar Markets story published last October reflected growth in 16 of 22 markets identified from the data of the World Federation of Direct Selling Associations, which provides proof that people everywhere are finding direct selling companies that fit their needs and desires. From beauty, wellness, gifts and accessories, home, and education, to beverages, telecommunications, financial, and energy, direct selling companies are providing an opportunity to engage in free enterprise. The barriers to entry and risks associated with starting one’s own direct selling business are virtually zero. Such opportunities are increasing in demand and interest, not shrinking—so yes, we are winning!


Direct selling companies and the opportunities they offer provide something that traditional jobs and opportunities do not provide as effectively: mission, purpose and a sense of community.


Direct selling companies and the opportunities they offer provide something that traditional jobs and opportunities do not provide as effectively: mission, purpose and a sense of community. Direct sellers appear to find a shared sense of purpose in the work they do, selling and serving customers while recruiting others who desire to learn to do the same. Worthwhile values like helping others better understand the products and services they are purchasing, promoting physical and financial health, being environmentally conscious, and doing personal shopping for almost anything sold through more traditional channels turn individuals into a community of people who share values for the work they do. It is this sense of community that is hard to duplicate in ordinary part-time jobs, which attracts many people to the direct selling industry. Mission, purpose and values play a huge role in this. “Much like teams in sports, communities have a goal in mind, and they will not rest until it’s met,” says John Parker, Chief Sales Officer at Amway.

The recent Harris Poll commissioned by Direct Selling News further found that social, emotional and intellectual fulfillment ranked very high amongst those who had experienced a direct selling opportunity. In fact, about eight in 10 current sellers say their direct selling business offers many opportunities, including valuable social interaction, the ability to connect with other people with similar interests, entrepreneurship, flexibility and freedom, and recognition of skills and achievements (See graphic below).

The Harris Poll also revealed that, when considering their most recent purchase, roughly six in seven current customers bought an item for themselves (85 percent strongly or somewhat agree) and really wanted the item they purchased (85 percent strongly or somewhat agree), and the majority were highly satisfied with the item (73 percent were extremely or very satisfied). Additionally, seven in 10 current customers reported high satisfaction of their experience with the seller (69 percent were extremely or very satisfied) and 87 percent enjoyed the sales experience a lot or a little (See graphic below).

These results reinforce the positive impact that direct selling companies and their independent contractors have on the social fabric of communities, as well as the significant economic impact the individual family has on the broader economy.

We are also winning because direct selling companies are good at what they do. The amount of time and investment most companies make in the development of their product or service would amaze anyone not familiar with the operational side of the business model. Amway is known to be the largest direct selling company in the world, but few realize that their NUTRILITE nutritional supplement brand is also the largest nutritional brand in the world, outside of the direct selling arena. Tupperware is known for its plastic bowls, but the brand has expanded into so much more. Mary Kay is a direct selling company but also one of the most-respected beauty brands in the world. Primerica sells financial services through independent contractors utilizing the direct selling model, but they also sell more term life insurance than any other insurance company in the world. Ambit Energy surpassed $1 billion in sales in less than eight years. Origami Owl with its line of personal jewelry and Nerium International with one anti-aging product surpassed $200 million in sales in less than three years.

Direct selling companies are winning because they offer quality products and services at competitive prices. Direct selling companies are also winning because they place a lot of focus on the compensation plans that reward their independent contractors for the time and effort invested. Direct selling companies are also nimble, quick to react and quick to implement some of the newest and most impactful uses of technology. The giant steps being made in extending new technology to the independent contractor levels the playing field. An application on a smartphone is now capable of providing the most remote direct seller with the information and even the presentation needed to impress the most sophisticated of prospective clientele.

With millions of customers being engaged by millions of independent contractors, supported by a variety of products, services and state-of-the-art technology, even the newest direct seller can now compete with the most established traditional retailer and in a far more personal manner.

Make sure your company submits its profile. The DSN Global 100 will recognize the top 100 direct selling companies in the world as ranked by Revenue Certification. We also look forward to publishing the profiles of all direct selling companies whose profile is received by and recognized by Direct Selling News as an authentic submission.

With all of the current talk about “social” and the importance of being social in all business relationships, we can point to the first social selling model—the direct selling model—and convincingly say, in accordance to our scorecard, YES, WE ARE WINNING!