January 01, 2014
The Evolution of Direct Selling
by Teresa Day
The current of misconception and mistrust in the general public around the terms “network marketing,” “MLM” and “direct selling” may run too deep for the industry to reshape its image by using the same terminology going forward. Additionally, this current terminology may not sufficiently describe who and what we are and what our business model accomplishes.
Where might we begin in order to explore a naming change? This article presents one approach.
Though we might have called it different names throughout history, we’ve always sold things to each other, and we’ve always been social in our interactions, including those involving commerce. Indeed, it could be stated that the history of commerce is the history of humanity. The purpose of this article is to take a closer look at the history of selling and social interaction and apply that history to the consideration of a possible change in naming conventions within the direct selling industry.
Historical records of commerce in merchant colonies reach as far back as the 19th century B.C., but this only means that’s as far as recorded history goes. The true beginning of the exchange of goods and services began when the first group of people needed something that someone else could produce. Simply put, people have always “sold” things to one another—long before any legal or formal infrastructure existed, goods and services changed hands in barter and in one-on-one transactions.
Author David Schmidtz speculates in his 2010 book A Brief History of Liberty that the chief reason Neanderthals died out and Homo sapiens flourished is that Neanderthals never moved beyond the small groups in which they developed. There isn’t much evidence of cooperation or of their purposefully overcoming their isolated living conditions. Homo sapiens (that would be us), on the other hand, almost immediately developed what Schmidtz calls “the propensity to truck and barter.”¹
According to Schmidtz, Neanderthals disappeared because they “were not entrepreneurs.”² In contrast, Homo sapiens seem to have very early on embraced the ideas of division of labor, long-distance trade, and creating and managing a surplus of goods. In other words, commerce. Of course, there is no written record to support these ideas; however, archeological finds—tools made in one area found hundreds of miles away, segmented living and working quarters, and other evidence—give it validity.
What this means is that trade—the making available of goods and services and the purchasing of said goods and services—coincides with the emergence of modern man. To put it in a nutshell, the history of commerce is the history of humanity.
The archeological record also indicates basic crafts began developing about 10,000 years ago—such things as spinning thread from flax, wool and silk to make clothing and rugs; baking clay in kilns to make pottery for cooking and storing food; and weaving grasses together to form mats and baskets, among other things. Needles have been found in Europe from this time that are small and thin enough to indicate horsehair as the preferred thread, which means people could now sew articles with more complexity and even visual interest. Felted and woven rugs graced the floors, though “home” might have been a cave.
And, as truly as they do today, individuals would have emerged with special skill or flair in the making of these items, causing others who might have admired the work to ask, “How can I get one like that?” And so a transaction would take place, and a happy “customer” would go home with a new basket.
The next day, a neighbor might see the customer using her new basket and inquire about it. “Where did you get that basket? It’s beautiful.” “Oh, Geta made it, and I traded some bread for it.” “Do you think she would make one for me?” “Sure, what have you got to trade that she wants? By the way, she also makes beautiful woven rugs.” A relationship between buyer and seller is established, and by virtue of word-of-mouth exchanges the seller’s customer base grows. What was true 10,000 years ago is still true today.
There is another way in which selling has remained unchanged throughout the centuries. Some anthropologists have argued that this close exchange of goods and services without the use of “money” actually strengthened the bonds between people in the community. That is to say, the act of “buying” and “selling” goods without the use of money cannot really be separated from the value of the goods themselves, nor from the value of the relationship between the people making the exchange. Anthropologist Stanley Diamond calls this idea the “primitive exchange.”³
It is our opinion that the bond created in this transaction was not merely due to the absence of “money” to complete it, but rather the exchange itself that occurs between two (or more) people who live, play and work in close proximity. It is the nearness of the relationships—the “warm circle,” to use modern terms—that connects the buying and selling of the item with the value of the relationship between the people making the exchange. In other words, it is the relationship between the buyer and the seller that begins, completes and supports the transaction—what we today call “network marketing” or “direct selling.”
Frankly, the exchange of goods and services for something other than hard currency lasted well into the 20th century when, for example, doctors would take chickens for payment from patients who simply had no cash. Texas Tech University in Lubbock, Texas, has memorialized the original barn structure on its campus where students during the 1920s could bring their own dairy cows, which were milked there during the day to “pay” for the students’ tuition.
In truth, it is really only in the past 60 years with the rise of the monolithic corporation that our age-old selling and buying practices—closely aligned with our social relationships—have dramatically changed. In our current day, the commerce we experience and engage in on a daily basis is occurring on such a large scale that it is difficult to compare it to when cottage industries dominated the commercial landscape. And, in fact, as new generations are born and raised, fewer living individuals would have grown up in a time when they could even experience smaller-scale commerce.
We believe that it is actually today’s practices that represent the anomaly in commerce. Modern practices have removed all semblance of the “relationship” that used to exist between buyers and sellers. This is precisely why so many marketing firms today are selling services that revolve around “relationship marketing.” People are becoming aware that big business has lost something valuable along the way to corporate domination. Direct sellers, however, have always known this.
Just as people have always bought and sold goods and services, people have always been social. We build communities. We build cities. We find reasons to join clubs and to be with other people, and usually our affiliations center on those things we have in common. In social interchanges, we share those things that appeal to us, those things that have helped us, and even those things we want to share with others just because we like them.
Indeed, sharing things we love with our friends and family is such a natural part of our daily lives that we might not even notice how often we engage in this behavior. So pay attention next time to the co-workers who can’t stop talking about the movie or the restaurant they went to over the weekend and how you should go, too. Or the neighbor who recommends his brand of lawnmower or the friend you can ask about a doctor or dentist. We are constantly utilizing our networks to share the things we love and to help us make decisions about purchasing goods and services.
It is clear to us that the direct selling industry, as we know it today, is a marketing and distribution system that has codified the two natural human behaviors of buying and selling products and living and operating in tight-knit social networks.
In fact, these human tendencies are so strong that they have become codified as a marketing strategy called “word-of-mouth” marketing. Today, even with the amazing gains in technology, it’s still considered the best form of marketing. People do not trust corporations, but they do trust their friends and peers—their social network.
Certain human tendencies are so strong that they have become codified as a marketing strategy called “word-of-mouth” marketing.
While we have made a strong case that all aspects defining the channel of distribution known today as “network marketing” or “direct selling” have been in existence for centuries, the more formal understanding of the channel as opposed to other methods of retail selling began to emerge in the 1880s. This was when David McConnell first recruited Mrs. P.F.E. Albee to sell his perfume in her town and the Southwestern Company refined its door-to-door approach of selling books. Developing over the last 150 years into a more systematic type of approach—and having been refined by legal input, consumer responses and technological advances—many other remarkable companies have followed in their footsteps to continue the thriving channel we now call the direct selling industry.
Shifts in technology, ideas about business models, and other things that have impacted the industry and the times are all simply circumstances that surround the fundamental human activities of social sharing and economic transactions. We may feel that we’ve come a long way from living in a cave with a felted rug on the ground and a new basket in our hands. But honestly, how different is that from someone sitting in their two-story red-brick house in the suburbs, visiting with a friend who is showing them a new necklace she bought from a neighbor, prompting the other person to go online and order the same one from that consultant? Not different at all. Social sharing still leads to social commerce.
Schmidtz introduces the first chapter of his book with this quote: “The greatest threat to and the best hope for a better life, in the long run, comes from other human beings. Historically, trade has been a great liberator.” 4
This quote resonates in our time, but even more so in the direct selling model, for we continually see evidence of this truth. Our business model is not only thriving and creating real opportunity in emerging markets, but also here in the U.S. with the economy shrinking and little chance of the return of eliminated jobs. Our business model has liberating properties because it is based fundamentally on human nature: We are social. We seek out those goods and services we want and need. We trust our friends and their friends. This is direct selling, regardless of time or circumstance.
New economies are being created in the wake of large business and government failure to sustain growth. Smaller, more personal economies with greater chances of survival are replacing large, monolithic economies that simply no longer fit the pattern of the new world. Entrepreneurialism is the current buzzword appearing in countless magazine articles and flowing from the lips of politicians.
But traditional routes to entrepreneurial endeavors generally include high barriers: the need for capital, the need to pay people salaries, the need to develop marketing materials and spend advertising dollars, the need for computer infrastructures in both hardware and software, and so on.
Direct selling remains the best path to entrepreneurialism available to any one individual, without regard to a large bank account or access to one, without regard to educational background or training, and without regard to experience. Wisely choosing a product and a company to become associated with, the direct seller has access to everything necessary to build a successful and sustainable business. In fact, with the advancements of technology available to everyone, for the first time an individual has the capacity to compete at a much higher level with far more established enterprises.
Indeed, tech advancement has in no way hampered the experience of the direct seller; it has only and in every way improved it, thus ensuring the business model will survive and continue to grow in the future. This thought brings us to the underlying question raised by this article: Is the current lexicon used in our industry (“network marketing” and “direct selling”) serving us well, and will it continue to serve us well in the future? Is it time to consider redefining ourselves with new terminology?
Certainly, a few companies in the industry have already started to do so. A very successful jewelry company defines itself only as a “social seller,” not using any of the traditional language in their materials or training. Utilizing technology to leverage the consultants’ social networks, this company focuses on teaching its consultants to “sell” socially. They are not alone—other companies have focused on consultants creating online “boutiques” and using their social media contacts as their customer base, avoiding the terms “network marketing” and “direct selling” altogether.
The rationale behind such decisions is really twofold. First, companies that make the decision to avoid the terminology of direct selling and yet still engage in the business model are clearly distancing themselves from the negative press, bad actors and general public misunderstandings about the manner in which the model operates, not the model itself. Second, the companies are linking their sales and marketing language to the language of the present—the use of social media dominates every other manner of communication among humans.
The two constants are what we’ve delineated in this article: We share stuff with our friends and family, and in that interchange we also sell stuff. Social sharing leads to social commerce.
As an industry, it’s time to consider whether a new approach, one already utilized by many companies, may bring value. The end goal appears to be to further the validity of the model and to increase sales for the consultant. It seems that the companies already changing their terminology believe these things must be connected in today’s world. In other words, they believe sales will increase and more people will be interested in engaging in the opportunity if and when the opportunity does not seem to be connected to the old versions of “network marketing” or “direct selling.”
Considering the case we’ve made in this paper that commerce and social activity are inextricably linked and have forever been, and the fact that the general public calls the newest technology that allows us to stay connected “social media,” it makes sense that adopting these terms in sales and marketing uses could attract a wider audience. It also makes sense to use the general public’s current acceptance of social media as a way to engage in a wider conversation about our opportunities.
In the wake of so many misconceptions and basic misunderstandings of the direct selling business model that continue to surface, we believe it is definitely time for the industry itself to become more proactive in the public conversation. As Neil Offen asked in his recent article in DSN, “Do we let our critics define us or do we take steps to make sure we better control our own reputation?”5
Teresa Day is the Editorial Director of Direct Selling News.
- David Schmidtz and Jason Brennan, A Brief History of Liberty (West Sussex, UK: Wiley-Blackwell, John Wiley & Sons Ltd, 2010), 31.
- Schmidtz and Brennan, 33.
- Stanley Diamond, In Search of the Primitive, (New Brunswick, NJ: Transaction Publishers, 1974-2009), 134.
- Schmidtz and Brennan, 30.
- Neil Offen, “The Great Equalizer and Opportunity,” Direct Selling News, October 2013, 58.