There was understandable enthusiasm among the US direct selling community at the start of 2021. The channel had shown up on the national stage in a big way the previous year, proving the agility of its business model to quickly pivot on changing consumer preferences, restrictions in the physical marketplace, and new norms in the supply chain. In addition, it was a record-setting year for the channel.
On the economic stage, direct selling once again demonstrated its impact. The Direct Selling Association (DSA) reported that the channel generated a record-breaking $40.1 billion in retail sales in 2020, a 13.9 percent increase over 2019.
On the labor front, companies helped millions of Americans who experienced job loss or minimized income through business closures find new opportunities to supplement their income. In 2020, the number of direct sellers increased 13.2 percent over 2019 to 7.7 million.
As for products, many of the offerings from direct selling companies became must-haves for mainstream consumers. Sales of health products, supplements, and weight and fitness programs increased substantially. During lockdowns, companies offering lifestyle choices—such as cooking at home or reading with their children—achieved their best results in years. In all, direct selling customers increased 12.7 percent over 2019, to 41.6 million—about five million new customers in 2020 alone.
As direct selling heads into 2022, leaders looking to build upon the growth mindset that unleashed such transformational outcomes in 2020 and the first half of 2021 will need to focus on the following areas if they hope to keep their momentum going.
A focus on customer-centricity will continue to be key in 2022 as changes in the marketplace and consumer preferences continue to evolve. Companies that remain primarily focused on customer acquisition rather than customer loyalty and retention will see the bottom line affected.
- Are you offering preferred customer or loyalty programs?
Are you implementing salesforce segmentation to identify and better serve customers?
- What retention programs do you have to support the lifetime value of customers?
- Are you looking to leading retailers inside and outside direct selling for preferred/loyalty customer program ideas?
- Are you strengthening your e-commerce capabilities so that you’re not left behind with increasing consumer expectations?
- What value-adds are you providing to strengthen the distributor relationship?
What is the future of retail and what are the implications for direct selling? New data and insights into consumer trends and changing consumer behavior will help companies navigate rapidly evolving retail environments.
- How are your product categories faring in relation to traditional sales channels?
- Are you experiencing a reversal of pandemic shopping trends as the economy continues to reopen and people are going out more?
- What are the biggest opportunities/retail sectors for growth post-pandemic?
- How do we compete when brick-and-mortar continues to reopen, the unemployment/underemployment rate continues to decline, and overall retail and labor competition intensifies?
Supply Chain Trends
Supply chain is the backbone that supports most direct sales businesses today. With continued changes in consumer demands and global disruptions, supply chains worldwide have been put to the test. Those that can adapt to change faster will create a sustainable competitive advantage for their direct selling organizations.
- How significant are your company’s supply chain issues?
- How are they affecting your business?
- How is US transportation being affected? Overseas transportation?
- When do you think your supply chain issues will be resolved?
- What are you doing to overcome supply chain challenges, especially during the upcoming holiday season?
New reports show millions of Americans prefer to quit the workforce rather than give up working from home. This can be partially explained by labor supply constraints related to the pandemic, including workers’ health concerns and increased unemployment benefits.
- What do Americans want out of entrepreneurship and how can direct selling best compete within a tightening labor market and against growing gig economy alternatives?
- How do we continue to make direct selling the best opportunity to be an entrepreneur?
- How does direct selling compare to the gig economy, and how does it continue to compete?
- How do you ensure your messaging stays on trend to better compete with the gig economy?
- How do companies keep relevant with Gen Z?
- What are you doing to recruit and retain salesforce members?
In today’s digital marketplace, brand equity is impossible to defend without a retail strategy. A fixed retail price is among the most important factors of direct selling opportunities. If the salesforce doesn’t control the best wholesale price, their potential is compromised.
- What is your company doing to protect the field’s wholesale opportunity?
- How does your company reinforce a highwater retail mark?
- Does your company allow or prohibit undersellers on Amazon, eBay, and elsewhere?
- How do company and industry brands evolve for mainstream consumption?
- How does direct selling simplify the business model for representatives and consumers?
New technologies propelled the channel forward substantially over the last two years.
- How can companies use data to serve and protect the end-customers in a new regulatory environment?
- How does your company achieve the balance of the benefits of a broader reach through virtual with the personal touch of in-person?
- What will be the ideal balance between in-person and digital?
- What new payment methods are you exploring to meet the needs of a younger salesforce?
Social Media Trends
The way we communicate will continue to evolve and social media will be at the forefront of it all. It is the most critical channel for direct selling companies and their consultants.
How can companies best utilize the various platforms to market, recruit, sell, and build community? How do they stay current with the many changes put in place by the social media companies, such as Facebook’s change in how its platform and family of apps are used for business. How will that impact how direct sellers do business?
- What new social media efforts do you plan for 2022?
- How can the field best tell the story of your brand?
- What will be the company’s role in consultant personal branding?
- What will the company do to rethink the way it sells and grows the brand?
- What formats will the company allow their salesforces to personalize?
- How will your company approach social commerce?
- Is live streaming a major component of your upcoming social media plans?
- What will you do to ensure consultants follow social media protocols?
Party Plan Trends
Party plan companies were greatly impacted by restrictions brought about by the pandemic. What is in store for the coming year?
- What’s working well now in the party plan space?
- Were there any pivots in the last year that worked out well and will likely continue to work out well in response to coronavirus challenges?
- What will parties look like in the future?
- Will in-person parties be replaced with virtual ones in the long-term?
- Do you see pent-up demand for in-person connection?
Safeguarding Your Business
Joseph Mariano, President and CEO of the Direct Selling Association (DSA), believes there are five specific actions that direct selling companies can take that will not only help with the growth and sustainability of the channel, but will also increase confidence in it by the public, lessen regulatory skepticism and misunderstanding, and enable direct sellers to grow market share and compete effectively with online sales and gig opportunities. They are:
- Focus on Product Sales – This seems like common sense for an industry that calls itself “direct selling,” but the reality is that we have always balanced offering our opportunity with product sales. Many observers believe we have shifted too much toward recruitment and building sales organizations in recent years. Whether or not that is true, it is true that the key to growth and sustainability is ensuring that our products can compete effectively in the marketplace and that our primary focus is getting products into the homes of ultimate users. Demonstration of and commitment to that focus will better the understanding of the model by the press, investors, and skeptical regulators. A corresponding element of this approach is an implicit lessening—not abandonment—of overt recruitment in our marketing and sales approaches.
- Focus on the End Customer – As the retail economy has transformed, it has become clear that businesses, including direct selling companies, must have a better understanding of and fuller relationship with their ultimate consumers. Many direct selling organizations have begun the tricky transition of developing that relationship without doing any disservice to the core of our model: the independent seller.
The most successful direct selling companies have proven time and again that realistic product and income claims are the keys to customer and salesperson confidence, as well as to business success.
- Simplify Direct Selling Nomenclature – At a DSA retreat of industry communications executives last year, there was an absolute consensus that the language of direct selling could be arcane, confusing, and even deceptive, albeit unintentionally. The nomenclature of direct selling—a by-product of years of history as a unique business niche—was, these experts agreed, a significant contributor to the myths and misunderstandings surrounding direct selling. In turn, these myths and misunderstandings have made it more challenging to attract people to our channel as customers and sellers, discouraged investors and other financial partners, and caused regulators to believe our language is likely, if not intended, to deceive. The solution seems straightforward: avoid the confusing language and simplify our terms so every audience can more easily understand them.
- Simplify Our Compensation Plans – Similarly, direct selling compensation plans can be complex and difficult. Like the language that describes them, these plans can be daunting. While designed to be competitive with other plans and encourage the desired behavior, they can also be discouraging and create hurdles to the potential or new individual seller. (Even industry veteran executives have acknowledged to me that they can become confused by the compensation and incentive plans of some companies.) It is little wonder then that such plans are ultimately counterproductive in attracting members of the broader public, even while they may offer short-term appeal to more experienced and savvy salesforce members. Like the language used to describe them, complex compensation plans have also had the effect of inviting regulatory scrutiny and calls for increased regulation to protect potential recruits. Plan simplification will eliminate these concerns.
- Give Scrupulous Attention to Income and Product Claims – The most successful direct selling companies have proven time and again that realistic product and income claims are the keys to customer and salesperson confidence, as well as to business success. Similarly, inaccurate claims have been the key element of legal actions against direct sellers and others. Direct sellers must be scrupulous about ensuring that both companies’ and individual sellers’ claims are accurate and not misleading. Recent government actions, industry and Association guidance, social media comments, and press and media coverage make clear that inaccurate and misleading claims will be dealt with harshly. These are existential issues for direct sellers.
Develop a Focused Growth Mindset
Dan Chard, President and CEO of Medifast, says that aligning direct selling organizations is an essential component to delivering long-term sustainable growth. When expansion seems to offer so much opportunity, he says focusing on the core of what you do best is more important than ever.
“Regardless of sector or challenge, there is more that unites rather than separates us all,” Chard states. “Growth is a key element to the success of every business, and there is pressure from investors, media, and other stakeholders to continue to expand. For growth to be sustainable, however, it’s vital that all businesses maintain focus.”
Chard says there’s a consistent temptation to expand away from what made companies successful in the first place. Leaders have to understand what it is that the channel does better than anyone else, and find ways to do that better, faster, and more efficiently.
“Diversification has its place, there’s no doubt,” he says, “but lose sight of your core and you risk creating more problems than solutions.”