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November 01, 2010

DSA News

Beyond the Niche

by Joseph Mariano

Last month in this space, Neil Offen, DSA’s President, gave his analysis of the direct selling industry. He promised that I, as his successor in that office, would share my thoughts this month. I’ve worked with Neil for 25 years and generally have found his insights and observations to be spot on. But this time (in an obvious effort to be at least a little bit controversial and interesting for our readers), I am going to disagree with Neil.

Don’t get me wrong. Neil is correct in just about every fact he describes. When he says that direct selling is a “niche” industry—less than 1 percent of total retailing in the United States—he’s got the numbers just right. Taken out of context, the numbers might even seem discouraging. The entire direct selling industry in the United States, is, according to DSA’s own statistical studies, only about one-fifth the size of Wal-Mart’s annual sales. Target doubles our industry number, and even Sears, a retailer who has seen its struggles over recent years, outranks us in revenue.

Of course, it is also true that some of the largest direct selling companies are giants within their own product segments. And our brands are ubiquitous. (I can’t help but see a direct seller’s bumper sticker or window decal on my drive into the DSA offices every day.) Additionally, our presence in the popular culture is pervasive. (An admittedly unscientific Google search of just the term “direct selling” generates almost 88 million responses.) And anyone who has seen DSA’s 100th Anniversary Museum will understand just how much direct selling is a part of the American marketplace.

So where do Neil and I “disagree”? We certainly agree that direct selling isn’t “countercyclical” or recession-proof. And we agree that multilevel “marketing” is, in fact, a compensation method within direct selling that will be critical to the industry’s continued growth. And we both recognize that while there is (and probably should be) some measure of financial risk in the business, we do more than any other industry to minimize the chance of significant loss while providing an ethical and honest income opportunity.

Direct selling must get “beyond the niche.”

Perhaps the only difference Neil and I have is in the ongoing characterization of our business as a “niche.” It’s hard to argue with the current numbers, of course, but I believe that direct selling must get “beyond the niche.” We cannot be content with our current status. If we consider ourselves to be a niche market, then that is exactly where we will stay. While it is true that we have, over the years, confounded the “experts” who have predicted the demise of direct selling, the next few years could be critical to the ongoing success of our business. The transformational theory of “grow or die” could very well apply to direct selling, and I suggest that we should take on “traditional” retail channels and grow to 2 percent or more of total retailing.

Direct selling has four distinct advantages in the marketplace—personal service, product information, caring salespeople and economic opportunity and empowerment. We have used these advantages to spur remarkable growth in markets outside the United States, and I believe we can use these same attributes to reach a goal of 30 million salespeople in the United States by 2015. The Kaufmann Foundation of Entrepreneurship reports that in 2009, more people, across every demographic type, started their own businesses than at any time in the last 14 years. There is a hunger for opportunity and economic empowerment in the United States that no amount of government regulation, negative press or pessimism can dampen, and direct selling is poised to satisfy that hunger.

Why not, after all? Virtually every type of product is now sold by direct sellers, and we have created the market for many product categories, from scrapbooks to nutritional juices. We should not now be willing to cede ground to fixed-location retailers. We have the advantage! Let’s press it!
Neil is right of course. There are challenges to our growth, and we would be naïve to ignore them. We must work together, through DSA, to combat negative stereotypes in the press and in public perception. We must continue to enact safeguards and promote ethical business practices to distinguish ourselves from bad actors in the marketplace. We must battle unwarranted government regulation and taxation that would harm our salespeople or our companies. And we must contiunually improve our business model by sharing techniques and practices to ensure our competitiveness for decades to come. And all of that is happening in the Direct Selling Association right now.

I am confident that because we are doing these things and because of the inherent strength of our channel, direct selling has a stupendous future “beyond the niche.”

Joseph MarianoJoseph Mariano is Executive Vice President, Secretary and Legal Counsel of the Direct Selling Association.