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October 01, 2015

Publisher's Note

Core Companies Offer Look at the Future

by Lauren Lawley Head

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

By some estimates, there are a few thousand companies in the United States that distribute their products or services through direct selling. The very largest of these have built robust organizations with a track record of exceeding $1 billion in annual sales. On the other end of the spectrum rests the vast majority of companies, which are relatively small operations. But somewhere around the upper end of the middle market we’ve found a group of companies doing something extraordinary: shaping the future of the channel.

This group, which includes several companies that likely have recently crossed the $1 billion mark in annual sales, has taken the traditional elements of direct selling and combined them with the latest in technology, customer service and workforce culture. The result is a level of innovation that will reach direct selling companies of all sizes. They embrace e-commerce and social selling but remain committed to personal connection and high-touch customer service. They offer loyalty and reward programs to customers, but they also nurture their distributor force with free or low-cost business tools and streamlined payment systems that work for today’s busy, part-time entrepreneur. Many of them are growing quite fast, but they don’t take momentum for granted.

As part of our package on the future, we asked direct selling leadership expert John Addison to offer his advice for company executives. He honed in on the way companies approach momentum as key. (See story, page 24) “Momentum doesn’t perform like an arrow ascending on a chart,” said Addison, who most recently served as Co-CEO of Primerica Inc. before founding Addison Leadership Group. “Momentum comes in waves, and it can’t be maintained. In other words, you have to build your activity to match the momentum.”

Our research also found that the successful direct selling companies of tomorrow must be laser-focused on selling great products and services to customers and fiercely protective of the brand that results. At the same time, with consumer trends moving as quickly as they do, savvy executives know when it’s time to make a shift in brand strategy. To help navigate that line, we invited Princess House Inc. President and CEO Connie Tang to share her expertise. In her column starting on page 30, Tang doesn’t hold back on how difficult this can be. “Change can be hard for people,” she acknowledges, “and making significant changes to a company in the midst of its day-to-day operations can be like changing a tire on a moving car.”

No discussion of the future of direct selling in the United States would be complete without examining the Federal Trade Commission’s recent action against one of the country’s largest companies utilizing the channel: Arizona-based Vemma Nutrition Co. The Special Report beginning on page 61 will take you inside the FTC’s more-than-year-long investigation into Vemma and how, without warning, the government was able to shut down the global operations of a $200 million company with more than 100 employees. At press time, Vemma’s management team had regained partial control of the company and the case was proceeding through the legal process. While we won’t know the full ramifications of this case until a final ruling is in place, it is already clear that FTC v. Vemma is triggering more self-examination than the channel has seen in many years.

At its best, direct selling offers an outstanding channel through which a company can market consumer products and services as well as flexible paths to entrepreneurship with a low cost of entry for people from all walks of life. At no time does direct selling offer a guarantee of easy money—for the companies that use the model or for the people who pursue its business opportunities. Companies that use this channel must be sharply focused on selling to customers outside their compensation plan, and they must remain dedicated to serving as good stewards of their entrepreneurship opportunities. If self-examination elevates the level of performance, we will have wins on three fronts: a win for customers, a win for distributors and a win for companies.

The team at Direct Selling News is committed to providing executives with research and reporting that supports their quest for sustained success. If there are ways in which we can support you in your work, please let us know. Direct selling has a rich history, and by working together, the community can have an even more vibrant future.

All the best,
Lauren Lawley Head
Publisher and Editor in Chief