2019: The Year Direct Selling As We Know It Changed Forever
Brett Duncan is a “transitionist” who specializes in helping direct selling companies define their best next steps as they transition into the new era of direct selling. He is co-founder and managing partner of Strategic Choice Partners, a consulting firm that offers strategic support and services to direct selling companies.
Guest Post by Brett Duncan
2019: The Year Direct Selling As We Know It Changed Forever
I know. It has quite an ominous sound.
And then, it also seems a tad presumptuous and oddly grandiose.
Of course, it could also just be another click-baity, news-jacky headline whipped up by a consultant trying to drum up business ;-).
I guess all of the above is possible. But none of it can dismiss the point that 2019 may indeed be the year we look back and realize it all changed. Direct selling as we’ve known it will never be the same. And I think I’m OK with that.
There’s a quote I’ve been thinking about a lot lately: “the revolution you’ve always wanted never looks like what you thought it would.” Isn’t that the truth?!? We’ve been talking about the eminent changes coming to direct selling for several years now. And we’ve certainly seen the shifts roll out steadily during that same time frame. To pin a date on when “it all changed” is silly.
But I must say, after leaving this year’s US DSA Annual Meeting in Austin, I felt the difference like I never have before. It was something in the air. You could see it in people’s eyes. It became quite clear in the conversations. It wasn’t fear, but it want’s certainty, either. Companies and executives seem to be more open to anything and everything than ever before. Even if it denies what we’ve regarded as sacred in direct selling crowds for some time.
No one was talking about the changes that were coming; we were all talking about the changes that are happening right now.
Crazy Times in Direct Selling
The last eight weeks have been relatively crazy ones for our industry, even for direct selling. AdvoCare is moving into a single-level compensation structure after ongoing conversations with the FTC. Stream is selling its energy business to NRG. Avon, both old and new, is forming new alliances with companies all over the world. It’s a lot to digest.
On top of it all, companies are pioneering new ways to combat today’s most popular challenges. Some have found the best way to fight Amazon as a direct seller is to join them. Others have embraced an omni-channel existence, where direct selling is one way their product is taken to the market. Complicated compensation plans are being traded in for something that looks more like affiliate marketing and rewards programs. Even Amway has a CEO with a last name other than DeVos or Van Andel.
The times, they are a changin.’
As tempted as I am to ramble on in a puddle of speculation, I will resist. Instead, I’d like to look at the three forces that are causing the shift, and that have, in my mind, made 2019 the milestone year we will remember in the future. While none of us will agree as to the year the changes began (did they ever stop?), I do believe we can all agree that the change is unmistakably upon us in 2019. Here are the market forces that have made it so.
My goal in pointing out these rather obvious forces is not to exhaustively describe them as though they are new. Rather, I want to remind us all of what they are, so that we can take a fresh look at our new world through the lens of these three viewpoints. Sometimes taking a new look at what you’ve always known is the ultimate form of innovation.
Market Force #1 = New Regulations
No reader of this newsletter is a stranger to all of the updates in our regulatory world. There’s no need to rehash that here. The government forces at play have certainly changed how they think of direct selling. And it’s forcing the way we have to think about it, too.
When I think of regulations, I think of rules. And when I think of rules, I think of a game, or a sport. Every game has rules. It’s what makes the game fair, clear and competitive. The rules are actually what makes a game fun.
I’m a big football fan. In the NFL, a committee meets every year to suggest, discuss and vote on new rules and updates. Over the past few years, some significant decisions have been made, all in a spirit to make the game better. There have been pretty significant changes to how kickoffs will work in an effort to improve the safety of the game. They moved the PAT (point after touchdown) back several yards a couple years ago to make that part of the game more engaging (and boy, has that worked!). They’ve gotten more sensitive on pass interference to … well, I’m still not sure what they’re doing with that one!
As you can imagine, coaches and players alike have all kinds of opinions about every rule change. And there’s no shortage of their expression of these opinions, either. But I can promise you this: they adjust their style of play pretty quickly to adhere to the new rules. It would be foolish not to. Their success is dictated by how well they play the game within the confines of the current rules.
The rules of direct selling are changing. And it’s not those of us in the industry that are making the changes, for the most part. I personally don’t agree with all of the rule changes, and I bet you struggle with them, too. I find myself trying to figure how and when to fight back and appeal, and when to take note and adjust accordingly.
But here’s what I do know: the rules have most definitely changed. The term “game changer” is almost cliché and certainly misused, but that’s exactly what we are experiencing in direct selling due to these new regulations. The game has changed. For me to play my best game, I better figure out how to play within the confines of those rules. Otherwise, I’m not even playing the right game!
It doesn’t help that the interpretation of the rules is murky right now. Where we want clear boundaries, we get “guidance” instead. Maybe that’s just the process. In the meantime, I know there are plenty of no-brainer areas where embracing the shift whole-heartedly would not only be prudent, but even opportunistic.
It really comes down to where we want to invest our best efforts. Do you want to spend your resources getting better at playing yesterday’s game, or preparing to play the new game?
Market Force #2 = The Consumer Marketplace
I think I’ve used the word “marketplace” more in the last year than I have in all the other years of my life combined. That’s because the marketplace is a powerful force. And it’s one that is begging direct selling to change so it can continue to be relevant for decades to come.
Even if the regulatory environment was not forcing certain changes, the consumer marketplace most certainly still would. And in many cases, the changes would be the same.
I’ve distinguished this as the “consumer” marketplace for reasons you’ll see shortly down below. I think of the consumer marketplace in these main areas:
- The way people want to shop and buy.
- The access consumers have to brands and options.
- The way people want to interact with brands.
- The shorter lifespan of success for any brand.
Firstly, the marketplace is telling us it wants to shop for and buy stuff in a new way. And it goes way beyond ecommerce. From curated subscriptions to marketplace apps to influencer marketing to so much more, the actual experience and psychology of shopping is changing. It’s not just about simple checkout processes and payment options. In a world with so many choices, what the consumer experiences during the buying process on an emotional level is just as important as the functional level.
Access to more brands, more products and more options has compounded with the onset of the Internet. And since access to brands has gotten easier, the quantity of brands has increased. It’s easier than ever to create new products and offer them to a market. And because there are so many options for so many specific products, building actual brands that connect has become more important than ever. When 30 different companies are trying to build a better mousetrap, it’s the mousetrap that finds a way to connect with me emotionally and align with my worldview that gets my vote, and my money.
Because the experience of shopping has fundamentally changed, and because access to the products I want is overflowing, the expectations I have as a consumer in terms of how I interact with a brand has also fundamentally changed. Sure, social media has a lot to do with this, but it transcends social media. Simply “meeting expectations” no longer meets expectations. Consumers expect to be rewarded for their loyalty and patronage. We expect to be treated as a precious gift. In addition, consumers are just as interested in what their association with a brand says about them as what the product does for them.
Finally, with the added importance of the shopping experience, increased access and higher consumer expectations, you see a shorter lifespan for most brands. Of course, it’s not impossible to build long term brands right now; it’s just less likely. And that’s because consumers are constantly looking for new experiences, access to new brands and interactions that exceed their perpetually growing expectations. In a world where overnight sensations sometimes don’t even take a night to go viral, we also see brand lifespans shortening at an alarming rate.
There are other components of the consumer marketplace, of course. But to think about these four areas are enough to prompt some deep thought. Direct selling could claim both advantages and disadvantages in every area. Here are some quick advantages:
- Shopping Experience: the in-person, community-centric shopping experience could actually become more attractive to some shoppers.
- Access: we provide curated access to unique products, typically not available anywhere else, with a personal touch.
- Interaction: what’s more interactive than an Independent Distributor with a customer?!?
- Lifespan: direct selling is a great go-to market strategy. In a world where everyone is trying to figure out how to go to the market, could we have a secret weapon?
Now, let’s look at some disadvantages:
- Shopping: direct selling companies are notorious for creating complicated shopping processes, mostly due to components of their compensation plan, hostess perks, etc.
- Access: Distributors may not be willing to compete with a seemingly endless list of options and marketplaces (e.g. Amazon, eBay, etc.)
- Interaction: Direct selling companies have long relied on their Distributors to interact with consumers. Now, consumers expect more, and that’s new ground for many of us.
- Lifespan: To be honest, direct selling companies have always struggled a bit with this one. But in a world where the competition compounds every day, could that lifespan shorten even more?
How is your company addressing these four areas?
Market Force #3 = The Entrepreneur Marketplace
I actually believe this market force could be the most powerful of them all, and have the greatest direct impact on our industry.
It wasn’t long ago that direct selling wasn’t only the best gig in town, but it was just about the only gig in town. It seemed ridiculous that anyone could start their own business for only hundreds of dollars. When compared to options like franchises, direct selling was the hands-down winner.
In addition, there weren’t so many direct selling companies. Once I was convinced that direct selling was a great option for me to earn some more income, I had a relatively limited menu to choose from.
Not so anymore. First, the number of active direct selling companies continues to grow. Even if direct selling was the only option, there are now hundreds of options within that one option. I don’t think that’s a bad thing, but it has impacted how we position our opportunity.
Most importantly, direct selling is definitely NOT the only gig in town anymore. As you well know, the “gig” has evolved into its own economy now. The “free agent nation” has emerged. The side hustle has taken center stage. There are endless opportunities for today’s entrepreneur.
There are better resources to explain what the Gig Economy actually is and what it looks like today (take a look at ultimategigbook.com – it’s fantastic) than I can offer here. Suffice it to say that direct selling isn’t exactly the belle of the ball in this space right now. That sounds bad, but I think many of us are beginning to see that we could truly position ourselves as the Ultimate Gig. It will require some fundamental changes in how we approach this entrepreneurial segment, but we definitely have some unfair, and under-leveraged, advantages in our corner.
Let’s briefly take a look at a few of the factors we must consider when thinking about the Entrepreneurial Marketplace:
- The entrepreneurial options are endless.
- Most people aren’t looking to “start a business” anymore.
- The ease of earning trumps the volume of earning.
- Customer acquisition is now on the home office.
Amazon. Uber. Etsy. Freelancing. Virtual employees. Affiliate marketing. The list is endless in terms of how easy and accessible it is for anyone to find a way to be entrepreneurial. Whether you’re looking to strike it rich starting a business, or just make $50 today to pay for dinner tonight, it’s pretty easy to do it. So where does direct selling stand out in a sea of entrepreneurial opportunities?
While direct selling companies keep promoting “business opportunities,” the Gig Economy keeps showing us just how many people aren’t interested in that. In fact, it may actually turn them off. Making an extra $300 a month isn’t typically considered “a business” by a normal person. Sure, it technically is a business, but that’s not how most people think about it. So why do we keep pushing it?
And since most people aren’t interested in starting a business, they definitely aren’t interested in investing in a business. As you compare yourself to the other options in the Gig Economy, ask yourself this: how many of them require an upfront purchase to take part in it? In other words, what is their “Starter Kit?” When choosing between a side hustle that’s free for me to start and one that costs $50, most people go with the free option without even considering the benefits of the $50 investment. What should direct selling companies be doing about this?
So, in a world where the entrepreneurial options are endless, and where “starting a business” isn’t that attractive, then it only makes sense that what most people are looking for is the easiest way to make that side income in a way that fits their schedule the best. The majority of your Distributors, and definitely those who choose an option outside of direct selling, are looking for the easiest, quickest, most streamlined and hassle-free way to earn a modest amount ($100?). And they also want to get paid for it immediately. Sure, there are still some who will realize that, “If working 3 hours got me $100, then I wonder what 10 hours could get me?” But that’s not most people.
And, by the way, direct selling has always been its best and most fruitful when you get a lot of people sharing a little bit of product. If you have lots of Distributors meeting a need by earning an extra $250 a month, you’ll have no problem developing a subset of leaders who can earn substantial incomes that would compete with a full-time job. But we can’t expect everyone to become a leader. I would go so far as to say we should shift our focus to generating the $250 monthly earners.
Finally, the role of customer acquisition is increasingly falling on the home office instead of the Distributors. This is completely new terrain for direct selling. You could easily argue it’s a foundational shift. The whole idea (simplified) around direct selling originally was that the home office would create the products, ship the products and mail the checks, and the Distributors would find the customers and make the sales. Not anymore. As we continue to compete with more and more entrepreneurial opportunities that actually don’t expect the entrepreneur to handle customer acquisition, we must realize how the expectations of the entrepreneurial mindset has shifted away from the traditional form of direct selling I described above. On top of that, the home office now has to find the budget to generate customer acquisition while still funding the rich compensation plans we’re known for.
How is your company attracting today’s entrepreneur? Do you spend your time trying to convince this growing audience of why your way is better? Or are you finding ways to align your business model with what this marketplace is telling you it wants?
Moving Forward With Confidence
So, it’s all here upon us, right now in 2019. The change we’ve been discussing for years is here. Does it look like you thought it would? More importantly, what will your company look like in response to it?