This week’s article is by Brett Duncan, Co-Founder and Managing Principal of Strategic Choice Partners. Brett has worked in direct selling since 2002, holding titles that include Vice President of Global Marketing and Sr. Director of Online Solutions. He works directly with direct selling companies as a strategic facilitator and corporate consultant, specializing in leading marketing, communications and digital teams and projects
Guest Post by Brett Duncan
7 Industry-Changing Trends in Direct Selling That Can’t Be Ignored
For quite a while now, we’ve all been speculating about how much the direct selling industry will change over “the next five to 10 years.”
We make statements like, “All I know is direct selling is going to look very different in five years from now,” or “Today’s direct selling company isn’t doing ‘business as usual.’”
I’ve made statements like that, and I stand by them. They aren’t incorrect.
It’s been a fun and poignant phrase to add to our conversations with colleagues. It’s a sentiment that has captured our sense of change, while also pointing out our lack of clarity on exactly what that change will be.
It’s been the perfect thing to say when we don’t know exactly what to say.
In conversations, we like to think of these shifts as occurring at a specific time. In reality, they happen in micro-phases: An innovation here, a new technology there. So when you’re in the midst of it, it’s hard to see exactly where you sit in all the change.
As a consultant who is privileged to work with many different direct selling companies of all shapes and sizes, I can tell you one thing for sure:
We’re all sitting right in the middle of the change right now.
Just take a look at the news from within our industry over the last 18 months or so. Look at how many direct selling companies have been bought. In some cases, they’re merging into existing direct selling companies. In others, they’re purchased by large firms that aren’t specifically focused on direct selling.
On the other hand, you have noteworthy companies closing their doors, while at the same time investment companies are scrambling to get in on finding the next big company in direct selling.
Entrepreneurs with no direct selling experience at all are choosing the channel as a preferred way to launch their business, while traditional direct sellers are shaking in their boots over how to exist in an Amazon-centric world.
There’s both a heightened sense of excitement and fear that coexists within the industry today. My firm partners and I have personally experienced it with so many companies in the industry.
What does it all tell us? And what are we doing about it all?
Listed below, I’m calling out a few of the trends that I see emerging quickly in our industry. Some are obvious. Some, not so much. And some may even offend a few of your direct selling sensitivities.
The key is realizing these trends cannot be ignored, no matter how much you agree with them. How will you respond to them?
1. It’s About How People Buy, Not About How People Sell.
I’m not even sure this one is a trend, but rather just a principle that’s simply clearer than it’s ever been. In direct selling, we tend to ask ourselves the question, “How does someone sell in party plan these days? How does a network marketer make money? What does the modern sales force look like?” These are all secondary questions. The real question is, “How do people want to buy products in today’s environment?” When you are clear on how people want to buy (vs. forcing the market to buy the way you want them to), then you can develop unique selling experiences that match their buying preferences.
2. The Side Hustle Could Be Hustling You.
The Gig Economy… The You Economy… Side gigs and side hustles… Freelance Nation… We’re surround by clever phrases for the emergence of all the different ways people are looking to earn income outside of (or instead of) a full-time job.
This trend is very attractive to direct sellers (as it should be), because we feel we’ve been offering this since the inception of our industry. On the one hand, you have a marketplace that’s more open to earning income on the side and in the spare time than ever before. On the other hand, we have many people who are looking to their “side hustle” to never be more than that. They aren’t interested in building teams and long-term income. Many have more than one side hustle. They’re interested in squeezing in as many income-generating opportunities as possible into their current life. Many are even foregoing a traditional full-time job and settling for three or four side hustles. What’s this mean for direct sellers? In a land where everyone is open to a side hustle, the one that is the easiest to start, the easiest to understand, fits nicely into my existing lifestyle and provides the lowest risk will win.
3. Compensation Plans Are Flattening.
It’s a running joke in our industry to create compensation plans that make the U.S. tax code seem like a piece of cake. For decades, companies have created compensation plans that provide the “real money” deeper into the plan, rewarding the leaders that build and manage strong teams. And that requires a lot of complicated nuances. That makes sense if making income that rivals a full-time income is the goal. But in the land of the side hustle, as mentioned above, where affiliate programs, crowd-sourcing and virtual work abound, the opportunity to build teams like that (and the time it will take) is not as attractive as it used to be.
More direct selling companies are significantly simplifying their compensation plans, and focusing more on the payout of its early stages. Today’s prospective Consultant isn’t as impressed with “8 Ways to Earn Income,” as they are with “Earn an Extra $200 by Next Week.”
4. Is the Party a Plan, or Just an Event?
Is the party dead? You’d be shocked at how many executives from party plan companies have asked me this question. It almost seems like sacrilege at first, but it’s also quite eye-opening given their personal experience and love of the party, and their current struggles with it. I’m not going to answer the question directly right here.
I still think there are huge opportunities for “buying experiences,” whatever that might look like. What I do know is that the compensation portions that often go along with a true party plan company may no longer be relevant. Most “party orders” aren’t actually coming from parties. They are just lots of individual orders thrown into a single group order so that the Consultant and Hostess can take advantage of all the free and half-price specials. If we think about how people want to buy, though, they rarely answer this way: “I’d really like to submit an order to a Consultant, and then let them show me how to shuffle things around a bit to get the best deal, and then wait two weeks for other people to order until that party closes and the order gets submitted, and then wait for that order to ship to my Hostess so she can then deliver it to me when her schedule allows (or when her Consultant picks it up and does it for her).
I think parties can be a powerful selling experience, but I think it’s going to be difficult for direct selling companies moving forward to make the “party” as we’ve defined it in “party plan” the central unit of commerce. Companies can leverage the discounts and compensation in many other creative ways to drive the results they’re looking for (like preferred customer programs).
5. The Peaks and Valleys Are Steeper Than Ever.
Compared to other industries, direct selling is extremely volatile. Always has been. But it’s more volatile than ever before. That word “volatile” typically has a negative connotation, but it shouldn’t. Looking back at direct selling over the last 10 years, and five years especially, we’ve seen a massive influx of hyper growth situations, most of which occur at or near a company’s launch.
It’s really quite amazing when you look at the overall landscape. At the same time, we’ve seen epic crashes occur at the same rate (and often times to the same companies that rose so fast). There really seems to be a “flavor of the year” when it comes to direct selling companies. Direct selling is an industry of many rises and falls. Some companies recover well after their hyper growth and settle into a nice business. Others never get over it, and come and go within 10 years. I don’t have an opinion on whether that’s good or bad. I think the more important perspective is to understand if it’s simply how our industry works. Are we all simply waiting for the next burst of success, and then saving up for the sure-to-come fall soon after? And do we have to accept it? I’ll let you answer that. Our firm tracks the companies that are listed in the Direct Selling Global 100 each and every year in a single spreadsheet, and the insights when you look at it holistically are quite amazing. While the results aren’t definitive or complete due to how the ranking works and the varying degrees of participation within the industry, it’s definitely the best gauge available.
Since it’s inception based on 2009 revenue numbers, through last year’s listing, there have been 198 different companies listed in the top 100. And of all those companies, there are only TWO companies who have a) had a listing every year since 2009, and b) have had a year-over-year increase in sales every year. Can you guess which two they are? To be clear, there are companies who launched after 2009 who have had year-over-year increases every year since their launch, but only two that go back to 2009. It’s quite telling, isn’t it? We are an industry of big ups and downs.
6. Direct Selling is More Attractive to Investors Than Ever.
On occasion, Strategic Choice Partners is asked to help an investment firm in their due diligence process as they consider investing in a direct selling company. It’s fun work, and helps put our firm’s extensive insights and research capabilities into action. Over the last two years, those requests have increased considerably. Investors see the sharp hockey-stick increases mentioned above with some of the industry’s more recent launches, and they want in on that action.
That’s flattering and impressive. At the same time, I wonder if some investment firms and even seasoned entrepreneurs will begin to see direct selling as a great go-to-market strategy (and it is), but also account for the sharp declines that often occur, and build into their strategy a more multi-channel approach or even forego direct selling altogether once the model has helped them launch. After all, what’s the enduring value of a “go-to-market” strategy after you’ve already gone there?
Let me be clear: Absolutely no investor I’ve worked with has told me this is what their plan is. I have simply wondered if this could become an approach, especially given the volatility factors of the market I expressed above. On paper, from a pure investment standpoint, it’s not a bad plan. Buy low and sell high. For long-term growth of our companies, it’s certainly not a comforting hypothetical scenario.
7. Marketplaces are Replacing Proprietary Products.
It’s amazing to see all of the different types of products that are being offered via direct selling now. Services from electricity to professional services to home care are popping up left and right. There are even companies whose flagship product is toilet paper.
One of the cooler trends you’ll see is direct selling companies that are offering marketplaces, and not just individual products. These companies are creating curated, targeted and unique buying experiences, oftentimes selling products that aren’t exclusively their own. Sometimes they offer their own products in the mix. Some companies only offer the marketplace. This concept is intriguing on so many levels, from operational to marketing to sales. And it’s definitely one that’s popping up quite a bit. Could there be some marketplace opportunities for your company?
What trends did I miss? Which ones that I listed are wrong?
I’d love to get your feedback. Please drop them in the comments below.