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As we begin 2017, we can confidently assert that the state of direct selling remains strong.
Our channel has embraced the upsurge in technology that has dramatically altered the way we do business. We continue to weather ongoing scrutiny and constantly seize the opportunity to educate others about how direct selling offers benefits unlike any other in the entrepreneurial space—most notably a wealth of resources for personal and professional development. We’re broadening our message to communicate with changing demographics. We’re exploring ways to capitalize upon changing consumer preferences. And, while we chart new courses, we remain mindful of our distinct and cherished values. We step into the future while we honor the past. Direct selling is uniquely poised to capitalize on current and emerging trends both in consumer behavior and the workforce. So far, these advantages have outweighed any headwinds from the regulatory environment and from other emerging entrepreneurial opportunities. As we look into 2017 and beyond, here are seven specific trends to watch, a few forecasts for the future, and some insight into how our channel can be prepared.
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The Millennial Movement
One of the biggest trends shaping the business landscape today is the emerging power of the millennial generation. As the United States’ largest demographic segment, millennials, or those born between 1977 and 2000, represent 25 percent of the U.S. population with approximately 75 million members. And they hold enormous buying potential—if we can acknowledge the risk aversion of a population saddled with student debt, meager job opportunities and high rents. This emerging generation wants stability, having seen their parents struggle in the economy even with a college education. It’s not enough to pick a safe major and find full-time employment; they also want a backup plan. And that’s where direct selling can enter the picture.
In fact, the youngest respondents of the Amway 2016 Global Entrepreneurship Report express the strongest desire to be self-employed. But here’s the kicker: Only 10 percent of the respondents of that study were actually self-employed. What’s stopping them? In a word, fear—not only of personal financial failure, but also that the job market won’t be there to pick them up if they fall.
“This is a generation that seeks meaning,” says Lori Bush, former CEO of Rodan + Fields. “Meaning is the new money. This doesn’t necessarily imply that they don’t care about income and success, but they definitely buy into the idea of social entrepreneurship, which means they’re looking for a positive return to society; and this requires a different approach to rewards and metrics.”
Given these findings, direct selling has an incredible opportunity in its hands. The channel offers a low-risk route to entrepreneurship; most independent representatives begin their direct selling businesses with the support of an established company and a full suite of tools, training and other resources at their disposal. Startup costs and financial risk associated with a direct selling business are significantly lower than striking out on one’s own. Dr. Michael Solomon of Saint Joseph’s University, a marketing professor, consumer behavior expert, advisor and speaker on consumer issues, adds that the political landscape, too, has reinforced the case for direct sales, given the fact that, according to the U.S. Direct Selling Association’s 2016 Growth & Outlook Report, women represent more than 77 percent of independent salesforce members in the United States. “The empowerment of women is timely,” he says. Direct sellers also can help establish trust with millennials by communicating and integrating their philanthropic commitments into their respective brand identities.
How do direct selling companies continue to attract the best and the brightest? By offering the technology that appeals to them, along with culture and community they desire. The expectation for personalized interactions also extends into how companies attract prospective new representatives—and retain them. A typical new salesperson opens up that starter kit and, regardless of how simple it is, there’s no denying that many experience a moment of analysis paralysis.
That’s why the onboarding process has lots of potential, says Dr. Solomon. Current training methods aren’t always in sync with the way they learn. “The incoming generations of salespeople are used to learning in an online format,” adds Dr. Greg Marshall, the Harwood Professor of Marketing and Strategy at Rollins College, who served on the board of directors for the Direct Selling Education Foundation for nine years and is now on DSEF’s academic advisory council. Mobile training in a gamification format, with the opportunity to earn online and sharable badges, is a concept gaining traction among direct selling companies.
“They’re digital natives, and they need a high-touch, high-tech approach,” Dr. Solomon adds. Direct selling companies can strive to deliver targeted communications and training that speak directly to a rookie’s apprehension, and guide them through those early days. While technology has been bemoaned as a harbinger of a less personal society, direct selling companies can use it to engage directly with salespeople, regardless of their backgrounds, circumstances or unique concerns.
An Increasingly Diverse Landscape
In addition to becoming younger, the U.S. also is becoming ever more culturally diverse. So far, direct selling reflects those changes to some extent, but many opportunities remain. According to DSA’s 2016 Growth & Outlook Report, of the Americans involved in direct selling, 19.9 percent identify as Hispanic, while 80.1 percent identify as Non-Hispanic. The U.S. population, meanwhile (according to the U.S. Census Bureau), comprises 17.4 percent Hispanic and 82.6 percent Non-Hispanic. Digging deeper, however, reveals that both Black/African-American (10.8 percent) and Asian (4.9 percent) representation in direct selling are slightly lower than their respective representations within the U.S. population (Black/African-Americans at 13.2 percent and Asians at 5.4 percent). Direct selling offers a level playing field. Every independent representative begins at square one, and the opportunity for advancement is without limit. Direct selling companies need to keep striving to communicate directly and meaningfully with their diverse population, on their terms. A one-size-fits-all approach simply won’t work if companies hope to establish loyalty.
It’s also worth noting the other emerging demographic trends, all of which are covered in U.S. Consumer Trends Impacting the Direct Selling Industry, a July 2016 report prepared by GfK Consumer Life and commissioned by the U.S. Direct Selling Association. The analysis acknowledges an aging population—many of them seeking sources of income; a growing urban population, which tends to move faster and appreciate increased convenience and mobility; and the proliferation of one-person, multigenerational, diverse and inclusive households. Again, these trends all present opportunities for engagement as well as product research and development.
Additionally, that buying stimulus is different than it used to be because the demographics have changed. “It’s true for all industries, but you’ve got to keep people culturally close—get them where they live,” says Marshall. “We’ve got a lot of micromarkets, so marketing is harder now—the stimulus is different. Companies need to understand these cultural differences and create opportunities for diversity among their sales representatives in the field—that is, cultural diversity of the salesforce should match cultural diversity in the marketplace.”
Direct selling was built upon a philosophy of coaching, as companies guide new representatives throughout their entire journey, from the time they first sign their agreements to the first sale and first team member, and as they transition from mentee to mentor. The job is never-ending as companies seek to reach potential representatives where they are, and in ways that are relevant and meaningful to them, keeping in mind the great diversity of cultures in the United States and abroad.
Globalization
Savvy direct selling companies will be watching trends not just in domestic diversity but also in the increasing power of international markets. While the United States has long been the world’s largest market for direct selling, the channel’s strength extends beyond the U.S. borders, with U.S.-based companies doing increasing business abroad as well as a growing number of companies headquartered around the world. The World Federation of Direct Selling Associations reports that global direct sales increased 7.7 percent in 2015, reaching $183.7 billion—a new record. And 80 percent of countries around the world experienced growth in both sales and independent salesforce volume. The worldwide direct selling channel also demonstrated year-over-year growth between 2012 and 2015, with an average annual increase of 7.2 percent.
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The Asia-Pacific region is responsible for 46 percent of global direct sales, followed by the Americas (34 percent), Europe (19 percent) and Africa-Middle East (1 percent). Eighty percent of global sales come from the world’s top 10 direct selling markets: the United States, China, Korea, Germany, Japan, Brazil, Mexico, France, Malaysia and the United Kingdom. People living in emerging markets, or developing economies as they’re often called, are increasingly looking to direct selling to provide a means of income for themselves and their families.
“In today’s current business environment, people are eager to pursue job opportunities that offer greater independence and flexibility,” says Jim Ayres, Managing Director of Amway North America. “With 77 percent of respondents in Amway’s Global Entrepreneurship Report having positive attitudes toward entrepreneurship, we are seeing more people—particularly millennials—look for ways to generate additional income. As global trends such as the gig economy amplify this desire, prospective entrepreneurs are engaging in direct selling as a way to start businesses and capitalize on trends that have changed the way people consume products and services.”
The Changing Way We Buy
The millennial surge also has a massive influence on consumer preferences. As a university professor, Dr. Solomon is on the front lines of educating Gen Ys and Gen Zs (those under 18 years of age) about business. While Gen Ys use an average of three screens per day, Gen Zs use five: smartphone, TV, laptop, desktop and iPad, according to an article written in the International Business Times in 2015 (“Marketing to Generation Z: Millennials Move Aside as Brands Shift Focus to Under-18 Customers”). By 2020, Gen Zs are expected to comprise 40 percent of all consumers in the United States, and they have an average attention span of 8.25 seconds. Those numbers are among statistics compiled by Statistic Brain Research Institute—which, by the way, reports that the average attention span of a goldfish is 9 seconds.
Direct selling will continue to compete with noise as companies try to reach young consumers. “There are challenges in talking to them,” Dr. Solomon says. “Teens today are averaging 10 hours a day of screen time.” The key, he adds, is to continue serving up the technology in a personalized manner. With such evolutions as virtual and augmented reality, artificial intelligence and 3-D printing (all of which could dramatically modernize and enhance the selling situation), and RFID chips (which assist with supply chain operations), direct selling companies are only scratching the surface of the potential. Over time, the channel has been moving increasingly toward a model in which consumers are more active participants in the buying experience. Or, as Dr. Solomon describes it, “the customer becomes a co-creator in the creative process. They’re no longer consumers, but prosumers.”
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We hear about the stagnation or even imminent demise of brick-and-mortar retail locations, but that’s not necessarily accurate. Customers continue to shop retail stores, but they’re often online beforehand, or on their phones before or while they browse, to compare prices. Brick-and-mortar retail outlets have become omnichannel, upping their game to offer consumers more interactive shopping experiences and a mix of online, mobile and offline shopping. This omnichannel environment has created more competition from brick-and-mortar retail outlets and e-commerce websites. While that puts pressure on direct selling, U.S. DSA research findings suggest that e-commerce may complement and facilitate offline sales to distributors and customers, and drive new business.
The long-term forecast for direct selling might very well be the continued expansion of selling situations, not just online, but also at pop-up stores, with or without the aid of virtual reality. The customer could be presented with a world of options for engaging with a product. Pop-ups, which some direct sellers have employed throughout the world, could become a more frequent sighting. Their limited-time nature generates buying excitement. While e-commerce offers undeniable convenience, consumers don’t always want to be at home, and a mobile device doesn’t always provide them with the best experience. Again, direct selling blends the best of both worlds, offering any combination of online and in-person shopping, a try-before-you-buy policy and personalized product recommendations and service.
The Changing Way We Work
Ever heard the buzzwords “gig economy” or “shared economy”? They both describe the same phenomenon, in which technology connects buyers and sellers in a mode of commerce that eliminates the middleman, so to speak. Independent contractors may be selling products that either they or someone else produced, or sharing underused items, offering rental space, redistributing items for resale or something else. We’ve chosen to call it the YouEconomy, in large part because it reflects Americans’ growing desire to exercise more self-determination in the workplace.
The YouEconomy frees workers from the confines of a typical office environment and puts them in the driver’s seat of their success. Independent business owners set their own hours, say goodbye to the drudgery of a corporate commute, and work anywhere from their homes and cars to the coffee shop down the street, or anywhere their smartphones happen to be. Because mobile technology is typically their primary link to customers, their businesses can travel wherever they do. Uber, Etsy, Airbnb and Rover are just a few of the brands receiving a great deal of coverage from media covering the YouEconomy.
This coverage doesn’t tell the whole story, however. Direct selling has been an overlooked yet powerful player in this self-directed economy, with several additional advantages that can’t be found elsewhere. New direct sales representatives receive access to a full suite of tools and training, including a back office, videos and online courses; access to a personal website for a nominal fee; personalized business cards; and company-issued promotional emails, product catalogs, social media posts and videos all designed to help independent representatives build their businesses.
In partnership with the U.S. Direct Selling Association, Bloomberg Government conducted a survey of 864 independent contractors—including direct sellers—to gain a better understanding of the ways Americans work independently. The average independent contractor, the survey found, has been working as such for 7.2 years—sometimes in conjunction with another job, sometimes not. Respondents from the direct selling community generally had a longer tenure, with an average 8.5 years, and they were significantly more likely (37 percent) than other types of independent contractors (30 percent or less) to give independent contracting a “10” rating in terms of satisfaction.
Helping to fuel the growth of the YouEconomy is an admiration of entrepreneurship—a veneration that transcends all age groups, but which millennials seem to have, in particular. “Young people think entrepreneurship is pretty cool—they like the idea of having some autonomy and being their own boss,” says Dr. Solomon.
The Amway 2016 Global Entrepreneurship Report (AGER) studied global perceptions of entrepreneurship. The majority of the report’s nearly 50,000 respondents, situated in 45 countries, expressed agreement with statements like “Entrepreneurs like to learn new things,” “Entrepreneurs want to enjoy life,” “Entrepreneurs like to be in charge and tell others what to do,” and “Entrepreneurs look for adventures and like to take risks.” Entrepreneurship, then, holds cachet. That’s a status the direct selling community can capitalize upon, provided companies do a good job of explaining the comparatively lower barriers the channel offers when compared with other independent contractor opportunities.
The results of the 2016 AGER were just compiled, and the forecast for entrepreneurialism remains optimistic. “Positive attitudes towards entrepreneurship are on the rise in the U.S., a trend that will likely continue next year,” says Amway’s Ayres. “The 2016 AGER is indicative of this momentum and reflects the continued optimism among Americans with strong desires for self-employment.”
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Direct selling is no longer an island unto itself. The independent workspace “used to be dominated by direct selling, but now the industry is competing with many more choices. That’s an opportunity and a challenge,” says Eric Wagner, Vice President of Content Marketing and Cross Platform Businesses for Bloomberg. Where direct selling can distinguish itself, he adds, is in the strong sense of community the channel typically forges, between company and salesforce, among the salesforce, and between salesforce and customers.
Given this new reality—and because technology and peer reviews can either enhance or hinder continued efforts—it’s never been more vital that direct selling companies continue to highlight at every opportunity what distinguishes the channel from among the myriad avenues for independent work. The challenge is here, and it’s time to meet it head on.
Wellness Continues to Surge
While many of the trends that will impact the direct selling landscape in 2017 and beyond are universal, companies that operate in the hottest product categories will undoubtedly have an edge. Among all direct selling companies, the health and wellness sector has been capturing the highest volume of product sales, and our forecast is for that trend to continue. It’s the only product category to experience continued strong growth in the U.S. direct sales channel between 2011 and 2015, and indications are that this sector will remain strong both inside and outside direct selling.
The growth in the health and wellness market is driven largely by the obesity epidemic, which extends well beyond U.S. borders. Nearly one-third of the world’s population, or 671 million people, are obese or overweight, according to a study conducted by the Institute for Health Metrics and Evaluation (HME) at the University of Washington. In developed countries, an increasingly younger population is becoming overweight or obese. Interestingly, 50 percent of the world’s obese population resides in 10 countries, including several where direct selling is thriving: the United States, China, Germany, Brazil and Mexico. Across the board, a significant percentage of people express the sentiment, whether or not based on fact, that they’re overweight, and even more of them report that they’re actively trying to lose weight.
“Weight loss has been one of the larger contributors to growth in the health and wellness category,” says Jeff Kaufman, Industry Research Committee Chair for the U.S. Direct Selling Association and Director of Customer and Field Insights at Isagenix International. “Isagenix, as well as other companies in the category, recognize the opportunity to provide innovative sports nutrition products to support the consumer’s performance during their workouts or other physical activities. Sports nutrition is a logical opportunity for a consumer after they have experienced weight loss.”
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The Amazon Effect
Regardless of product category, direct selling used to enjoy several key points of difference that distinguished the channel from brick-and-mortar retail outlets, including personalized shopping experience through a trusted advisor, a try-before-you-buy policy, anytime ordering through representatives’ websites and convenient delivery.
Then, “Amazonification” began. Amazon put the pressure on traditional retailers to begin offering their products online and with easier shopping through such conveniences as one-click checkout, cutting-edge apps, mobile wallet and product recommendations. The direct selling community is trying to keep up, and while there is innovation within the channel, the differences between direct selling and major retail brands aren’t as sharply defined as they used to be.
The challenge is to continue pushing boundaries and develop the tools and training that help independent salespeople engage existing and potential customers through highly personalized methods.
In a book titled The Best Service Is No Service, authors Bill Price and David Jaffe make the bold claim that customer service is only needed when a company does something wrong. The best way to satisfy customers, they say, is eliminate the need for service altogether. That’s an interesting proposition for direct selling, Bush says. “Although direct sellers can provide more personalized service, sometimes the best service is no service. The challenge for direct sellers is that they often must serve as intermediary between the order and delivery, and the very process of enabling the transactions as well as the time to delivery and challenges with returns are just not up to what customers expect today. There’s been a significant amount of innovation and application of data science in transforming the direct-to-consumer delivery experience, but few examples of direct selling companies keeping pace, so it’s arguable that, as a marketing channel, service levels have fallen behind. There’s a huge opportunity for leadership here.”
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Dr. Michael Solomon, Marketing Professor, Saint Joseph’s University
Bush references the “zero moment of truth,” a term coined by Google, as the consumer engagement moment immediately following the recognition of the need for a product or service. “It used to be that major brands created that moment through mass media advertising,” Bush says. “Now that moment is often more peer- and social media-driven.” Direct selling, she adds, is a marketing channel that arguably is poised better than any other to both create that moment of truth, then be there either online or offline to engage the consumer.
What Does the Future Hold?
“I agree that retail establishments won’t go away, but there will be transformation and, it’s already happening,” Bush adds. “Think ‘phygital’—in other words, the merging of physical and digital experiences. Forward-thinking direct selling companies will similarly be arming their crowd-sourced sales organizations with ‘phygital tools’ to enhance the customer engagement experience.”
Direct selling hit a record for global sales last year—and, incredibly, the channel hasn’t even scratched the surface of its potential. If we can harness the opportunities before us while continuing to communicate the value that direct selling provides to millions of people throughout the globe, imagine how many more lives we can change. This is our time. The future is in our hands.
