November 01, 2014
Groundbreaking Study Reveals the Real Direct Selling
by Beth Douglass Silcox
Direct Selling News Study Conducted by Harris Poll Sorts Direct Selling Fact from Fiction
In the age of 24-hour news cycles and quasi-news blogs, the direct selling industry experiences more than its share of fallout from the recirculation of misleading statements and misnomers. Noisy voices shouting falsehoods often overpower industry fact, putting the industry, its companies and sellers on the defensive. Whether these fallacies are motivated by malice or just a lack of information, one thing is clear—the direct selling distribution channel is misunderstood, and too often misrepresented.
To sort direct selling fact from fiction, Direct Selling News commissioned Harris Poll to conduct a comprehensive online study among 3,549 U.S. adults 18+ between Aug. 19 and Sept. 2, 2014 to more deeply understand the direct selling industry.
This month, Direct Selling News presents some of what we learned—gleaned from the study Harris Poll conducted on our behalf. New data not only dispels several accusations made in the court of public and online opinion; but also advances the industry’s ability to apply a fact-driven, strategic, pro-active offense to better educate the public and potentially quiet industry opponents.
What we found flips five common direct selling misconceptions 180 degrees.
- When it comes to money, 93 percent of current direct sellers reported earning income in the last 12 months.
- While personal product discounts are extremely appealing to current direct sellers, 50 percent also served the needs of six or more customers in the last month.
- Most current customers (82 percent) thought their last purchase was a good value.
- Seven in 10 current customers (69 percent) are likely to speak positively about their direct selling experience.
- Despite leaving their businesses, 76 percent of past direct sellers rated their experience fair or better and 67 percent purchased from the industry in the past year.
Let’s explore the findings of this survey and break down the facts behind each of these five statements.
What we found: When it comes to money, 93 percent of current direct sellers reported earning income in the last 12 months.
People join direct selling companies for a variety of reasons and people quit for a variety of reasons too. Not all of them revolve around money, but when it is their motivation (40 percent of current sellers seek supplemental income; 23 percent want to pay down debt; 25 percent want to save for the future), direct selling most certainly offers a way to earn. The study found an overwhelming majority (93 percent) of current direct sellers reported earning some amount of money in the last 12 months and only 16 percent of past direct sellers reported not making enough money as the reason for leaving their businesses.
Of course, the amount earned is up to the direct seller, their efforts and the time they dedicate to the business. The median current direct seller income was about $6,200 in the last year, with most current direct sellers showing a part-time level commitment, as 70 percent dedicate 15 hours or less each week to their businesses.
The impact of time spent working a direct selling business is typically seen in earnings, so it is no surprise that some direct sellers earn more than others. While 27 percent of current direct sellers earned less than $1,000 in the last 12 months, 51 percent reported higher earnings ranging from $1,000 to $49,999, and 15 percent exceeded $50,000.
Apply the study’s 15 percent of current sellers earning $50,000 or more in the past 12 months to the roughly 16 million direct sellers in the United States, and some 2.4 million direct sellers earned upwards of $50,000 in the last year. This 15 percent of current direct sellers beat the national average salary for men ($45,188) and women ($37,076), as well as the national median annual salary for all Americans working a 40-hour workweek ($48,872), as reported by the Bureau of Labor Statistics in December 2013. (These salary figures were not provided by Harris.)
Those earning figures are impressive, but it’s also worth noting that salaries reported by the Bureau of Labor Statistics are for full-time employment. Direct selling, on the other hand, tends to draw people who want part-time employment. Four in 10 current direct sellers report their income from their direct selling business is in addition to wages earned in other jobs (41 percent), while 15 percent say they are in addition to retirement, pension or disability. Therefore, it is logical to assert that current direct seller earnings reported in the study (66 percent in excess of $1,000) could be the result of part-time efforts and most often provide a second source of income to the seller’s family.
What we found: While personal product discounts are extremely appealing to current direct sellers, 50 percent served the needs of six or more customers in the last month.
Naysayers of the direct selling industry depict self-consumption as a negative. With a broad brush, they denounce the existence of what they call “real” customers and minimize the efforts of millions of direct sellers who serve the needs of clients every day.
The practice of self-consumption—the ability of direct sellers to purchase products and services at a discount—is similar to membership clubs like Costco, where people pay a fee for access to discounted products.
In fact, the top financial benefit of a direct selling business, according to 84 percent of current direct sellers in the poll, is discounts on products or services. Three in 10 (29 percent) past sellers cite access to discounted products as the reason they initially launched their direct selling businesses.
The study found that current direct sellers tend to be more active shoppers than other audiences studied. They say shopping makes them feel good (71 percent) and other people seek their advice on purchases (63 percent). As savvy shoppers, current direct sellers—who are predominantly female—understand the impact discount pricing can have on the bottom line of a household. In much the same way Costco draws savvy shoppers, so too does the direct selling industry. Discounted products, whether they are purchased at a big-box retailer or as a result of a direct seller ordering from the company she represents, puts money back into the household budget.
Of current direct sellers, 50 percent served only small groups of one to five customers in the last month. While industry detractors imply these direct sellers are dissatisfied, the poll shows 85 percent of all current direct sellers depicted their experience as excellent or good. Direct sellers who choose to operate microbusinesses like these small enterprises—and whose objective is to obtain product discounts—seem to be at ease with their level of engagement with the companies they represent.
We found that the remaining 50 percent in the current seller group served six customers or more in the last month. Current customers reported making purchases on at least a monthly basis (26 percent), at least once every three months (45 percent), or at least once every six months (64 percent).
Harris Poll Methodology
Direct Selling News commissioned Harris Poll to conduct a comprehensive online study among 3,549 U.S. adults 18+ between Aug. 19 and Sept. 2, 2014 to more deeply understand the direct selling industry through the eyes of four key audiences:
The study explored attitudes and behaviors, as well as engagement and satisfaction levels. It also strived to provide a snapshot of the typical seller by uncovering goals, objectives and reasons for entering into direct selling, as well as explain why past sellers disengaged from their businesses. Results were weighted as needed for: age, gender, race/ethnicity, education, region, and household income, as well as the respondents’ propensity to be online. Harris Poll applied post-weights for gender to reflect a more accurate representation of the population of current direct sellers, according to data from the Direct Selling Association.
The study explored attitudes and behaviors, as well as engagement and satisfaction levels. It also strived to provide a snapshot of the typical seller by uncovering goals, objectives and reasons for entering into direct selling, as well as explain why past sellers disengaged from their businesses.
Results were weighted as needed for: age, gender, race/ethnicity, education, region, and household income, as well as the respondents’ propensity to be online. Harris Poll applied post-weights for gender to reflect a more accurate representation of the population of current direct sellers, according to data from the Direct Selling Association.
What we found: Most current customers (82 percent) thought their last purchase was a good value.
An assertion floats around cyberspace and the media that direct selling companies offer inferior products at inflated prices. Truth be told, current direct selling customers and sellers are smarter and savvier than industry critics realize. They place product quality (96 percent, current customers; 93 percent, current sellers) and price (92 percent, current customers; 88 percent, current sellers) as top considerations when making any purchase decision, and their direct sales purchases do not disappoint (majorities are satisfied with these aspects of their direct selling experience).
Current customers most recently purchased products to accentuate their beauty (14 percent), improve their skin (10 percent), simplify home life and entertaining (food and beverage, 12 percent), and present their most fashionable selves (jewelry, 11 percent; and clothing/accessories, 9 percent). They want a treat, and direct sellers provide them with an easy way to make a purchase (70 percent are extremely or very satisfied with this aspect of direct selling). Four in 10 (40 percent) have most recently purchased online, while most made their last recent purchase one-on-one, at a home party, craft show or farmer’s market or at some kind of demonstration, seminar or presentation of a product or service.
The results of the product purchase questions show that customer and seller expectations about quality and price align closely with after-purchase satisfaction. Four in five (82 percent) current customers say their last purchase was a good value and 64 percent are extremely or very satisfied with the quality of their direct selling purchases. Half report being extremely or very satisfied with pricing too.
What we found: Seven in 10 current customers (69 percent) are likely to speak positively about their direct selling experience.
Happy and loyal customers drive direct selling’s relationship-based business model, and current customers feel strongly about both the items they purchase and the sellers who make it happen. They find intrinsic value in supporting small business owners (89 percent), and if that small business is owned by a friend, all the better. Eighty percent like purchasing from people they know and that desire is evident for majorities of all four audiences in the study.
The poll bears out what the direct selling industry has known for decades. The relationships direct sellers cultivate with their customers keep them coming back and bringing new people to the party. Three in 10 (29 percent) current customers report knowing the direct seller extremely or very well, and four in 10 (41 percent) say they knew the direct seller as a friend or through a friend.
It is in that social business atmosphere that so many direct selling customers find the fun and pleasure in buying direct. Maybe it was a leisurely day at a craft fair or an evening at-home party with friends; perhaps it was a one-on-one coffee shop meet-up or a quick chat by cell or online; however they interacted, 87 percent enjoyed it! Not only that, but purchasing from a direct seller is perceived as easy (70 percent are extremely or very satisfied with this aspect of the experience), 61 percent are satisfied with the service, and direct sellers personally get high marks with 69 percent of current customers extremely or very satisfied with their most recent experience with a direct seller.
At the root of customer satisfaction is the human bond—the relationship between customer and direct seller. These connections are not to be taken lightly, as they have a tremendously positive impact on the consumer’s future purchases. Nearly nine in 10 (88 percent) current customers are at least somewhat likely to purchase again from the same direct seller as their most recent purchase. And it seems that once past direct sellers cross status to become a current customer only, they may remain supportive. Ninety-two percent of past sellers report they would be at least likely, if not extremely or very likely, to purchase from the direct seller who sold them their most recent purchase.
Outstanding customer satisfaction fuels word-of-mouth marketing, which is so vital and effective for the industry. Direct sellers, like other marketers, seem to understand that it works well for them. As a result, seven in 10 current customers (69 percent) are likely to speak positively to others about their direct sales experiences, and two in five (39 percent) have already recommended a product or service they purchased.
What we found: Despite leaving their businesses, 76 percent of past direct sellers rated their experience fair or better and 67 percent purchased from the industry in the past year.
Opponents of the industry often try to tie seller turnover rates to misleading or broken promises made by companies, implying that disillusioned direct sellers discover some sort of hidden truth and leave their businesses and the industry as a result. We have long believed this is a false picture of why direct sellers engage and then stop engaging in their businesses. The poll indicates that past direct sellers leave their businesses for many of the same reasons people in any career make a change.
What the data makes clear is that there is no overwhelming reason former direct sellers decide to close up shop. Lack of earnings and profitability do stand atop the list at 16 percent, but 15 percent of former direct sellers said they were just too busy and the business was too time-consuming for their schedules. Twelve percent simply lost interest.
Sometimes it was the “selling” that got in the way, with 6 percent feeling unqualified, 7 percent having trouble finding customers and booking parties, 4 percent deciding it was just too difficult, and 3 percent deeming it a hassle. Others took new full-time jobs (6 percent), moved away (5 percent), or left for health reasons (3 percent).
So what does the overall snapshot of a past direct seller look like? The majority (62 percent) worked their businesses part-time—15 hours or less per week. On average, they were direct selling for nearly three years, with a median duration of one year. Two-thirds (66 percent) of former direct sellers worked with only one company.
Despite leaving their businesses, 76 percent of past sellers rated their direct selling experiences fair or better, and 67 percent of them made a purchase from a direct seller in the last year. Obviously, the implication that former direct sellers became disillusioned and then disengaged from the industry with prejudice of some kind is untrue for at least two-thirds of past sellers.
The majority (66 percent) of past direct sellers who had access to at least one kind of training during their time in the industry found it to be extremely or very valuable. In fact, majorities found their training in sales, presentation, personal development and leadership to be extremely or very valuable. The poll showed these former direct selling professionals recognized the benefits of their direct selling experiences.
A Way Forward
The poll gives the direct selling industry an unprecedented look at itself and confirms that current direct sellers are a devoted bunch. They plan to expand their customer bases (76 percent say this describes them extremely or very well) and expect to increase the amount of time they spend working their businesses (45 percent) in the coming year. Current direct sellers are also enamored by flexibility and freedom (81 percent say their direct selling business provides this a lot or a little), as well as the ability to pursue something they love (83 percent) and the feeling of success and fulfillment (82 percent) that comes with a career in direct selling.
Direct sellers’ energy, enthusiasm and expertise, as well as product quality and value cultivate brand and customer loyalty. The study reveals that one in four current customers (26 percent) and nearly six in 10 current sellers (58 percent) say they are more likely to purchase the same products again from a direct seller, after having made a direct selling purchase in the past. Even those who have disengaged from their direct selling businesses remain loyal to the industry by purchasing products and services.
The attitudes, beliefs and actions explored by the study leave an overarching impression that both direct sellers and the customers they serve are happy. And, perhaps, as a result of this Direct Selling News fact-finding mission, the direct selling industry can finally find a statistical and eloquent way to tell its detractors, “We knew it all along.”