Letting go of what was and doubling down on what’s next.

We’re experiencing a return to normal. Does this phrase sound familiar?

The pandemic brought an unexpected boom to the direct selling industry. Many companies saw revenue increases and incredible growth. As the pandemic has eased, so too has that explosive growth. Only 18 companies made our 2023 list of companies who experienced three consecutive years of revenue growth. And overall, the industry saw the beginning of a decline in total retail sales at the end of 2022.

It would be easy to assume that these numbers reflect a natural market correction—one that doesn’t signify a decline in progress or relevancy, but rather a return to pre-pandemic levels. After all, U.S. direct selling revenues reached $40.5 billion in 2022, which is a decline from 2021, but still a sizeable increase from $35.2 billion in 2019.

The problem with this theory is that consumer spending hasn’t followed this trajectory. In July, Deloitte released its State of the U.S. Consumer report, revealing that retail sales were up 31.6 percent from pre-pandemic levels and non-store sales were up 69 percent. Consumers are buying—particularly in discretionary categories—so why aren’t direct selling revenues reflecting that boost?

As the research shows in The Future of Work: Insights into the Gig Economy Workforce, the gig economy is growing four times faster than the traditional economy. However, the number of gig workers representing direct selling has decreased from 5.2 percent to 2.3 percent. The DSEF Growth and Outlook Study shows an eight percent decline in the number of direct sellers in 2022.

At Direct Selling News, we believe the direct selling industry is in, perhaps, one of the most important Inflection Points in its entire 100+ year history. The term inflection point originated as a mathematical description depicting that moment when the curve of a graph changes direction moving up or down. A point when business leaders must proactively address the future of their brands and the relevancy they bring to market.

What we are experiencing is not a return to normal; it’s a critical moment to address the channel’s strengths and opportunities to evolve forward. A time to determine if next year’s P&L sheets will reflect a positive shift in momentum or another year of steady decline?

DSN worked closely with channel advisors, executives and analysts, compiling five strategies to help companies understand the current state of their business so they can more effectively position themselves for growth.

We must be candid and honest about where the channel has been and is. The so-called normal of 2019 doesn’t exist anymore. This is a critical moment in time where companies have two choices. Stay in a state of comfort and complacency and expect similar results. Or, let go of what was and move forward with open, innovative minds and embrace evolution to build for the future.

Ultimately, the choice is yours. But the time has come to make that choice.

1 / Dig into the Data

It’s time to take a brutally honest look at the statistics surrounding the last few years. The drastic bump that most of the industry enjoyed during 2020 and 2021 was not typical, nor does it appear to be continuing. Allowing this data set to incorrectly inform future projections and strategies prevents companies from reaching their full potential.

It is imperative that companies dig into their historical information to genuinely understand the impact the pandemic had on their most important statistics. The priority must be to look for trends that indicate future habits; identify key patterns; and discover exactly what behaviors your fields are engaging with today—successfully and perhaps not-so successfully.

2 / Avoid Being a Regulatory and Compliance Target

The channel has to work together. Clean, simple and transparent are the obvious antidotes to a tough regulatory environment, but no one company or brand can turn the tide in the industry’s favor to heal decades of reputational damage.

“We have got to make ourselves unimpeachable,” said Heather Chastain, Founder and CEO of Bridgehead Collective, a consulting firm for the direct selling industry. “You don’t have to be a bad actor in the channel to gain a bad reputation. Take a look at the transparency of your programs, incentives and compensation plans and eliminate any loopholes or obfuscation. We have to be on a mission for transparency.”

Larry Steinberg, chair of the Buchalter Law Firm’s MLM Practice Group agreed, “Now is as good a time as ever to refocus your business plan on retail sales, a robust preferred customer program and communications with your field about the importance of compliance. There is ongoing rulemaking activity in the business opportunity, earnings claim and restrictive covenant areas. Staying under the radar is becoming increasingly more difficult, and the stakes are higher than ever.”

Eliminate hidden fees. Make it simple to opt out of an auto-ship agreement. Communicate with the field about the importance of compliance. Use dollar amounts instead of points to pay commissions and achieve bonuses. Do whatever it takes to communicate that your product and opportunity can withstand a critical eye. When in doubt, choose transparency.

3 / Understand Changes in the Marketplace

Today, customers want a seamless shopping experience that is transparent from end-to-end. They want to engage with companies who deliver on their promises with little-to-no barrier to entry, frictionless experiences, minimal clicks, streamlined shopping cart processes and reward incentives that are attainable and delightful. If there are 17 hoops to jump through to get the prize, you’ve missed the point—and you’ve likely lost a loyal customer.

Zooming out a bit, digital fluency is crucial. Consumers, particularly younger generations, expect everything from first impressions to shopping, purchasing and delivery, to have a simple, yet impressive, responsive digital component. The way people buy is now staggeringly influenced by a brand’s digital footprint, even if they ultimately buy in person or in a retail environment.

Shoppers are still spending, but only where and how they want to shop. The direct selling product and customer proposition must be on point and at the same level or greater than massive online platforms like eBay and Amazon.

The growth of ecommerce is proof of the concept that people are shopping differently. The growth and use of the digital platform provides an opportunity to compete with any brand, at any time, through people who love what they are experiencing and desire to share with others what was shared with them.

Make sure your products and platform serve today’s customer in meaningful, memorable ways that will make them want to come back time and time again—and bring their friends along with them.

4 / Challenge Old Mindsets

For decades, the direct selling industry has positioned itself as a massive, team-building opportunity. Marketing messages traditionally lauded the six-figure earner, the luxury car bonus and a certain lifestyle to spark interest. Not so much today.

“Gen Z and Millennials don’t respond to that like generations before them did,” Chastain said. “They are more interested in making an extra $250 or $500 a month to supplement additional income streams and rarely have an interest in building a downline, much less lead a team.”

Chastain and her company Bridgehead Collective recently released a first-ever research study conducted with Jason Dorsey on the impact of Gen Z and Millennials on the marketplace including specific implications for direct selling.

Businesses and brands are more than their compensation plans, but it’s imperative to analyze whether the incentive and payout structures in place are truly meeting consumer and distributor demands. Take a deeper look at the touchpoints that could move customers from casual purchasers to loyal repeat buyers.

Direct selling companies should be thinking of themselves as brands first. If you still think your compensation plan is the most important way you can attract new customers and prospective independent contractors to your company, it may be time to change your mindset and the language you use to position yourself in the marketplace.

5 / Be Mindful of Chasing Trends

Identify what needle you’re trying to move and then put straightforward, clear strategies in place to deliver those results.

“Be really thoughtful about the buzzwords you use to describe your strategic decisions,” Chastain said. “Some companies are saying they are jumping on the affiliate trend, but are they really? Or are they just simplifying the front end of their compensation plans?”

Consider how your culture supports ordinary people who want to participate in your company’s unique niche and mission. Grow your customer base to boost revenue, rather than investing in a few top team-building leaders. And—above all else—cultivate a brand identity, shopping experience and product story that sparks love, loyalty and longevity in the hearts of shoppers.

Straightforward Strategies Win

There appears to be a clear direction that industry analysts and experts agree will move the channel in the right direction: streamlined, transparent operations focused on selling quality, high-value products and services.

A focus on the fundamentals of brand building means a focus on everything—not just commissions or compensation plans, but incentives, recognition, gifts—everything. If that sounds like it might dig into the bottom line, that’s because it likely will. But the payoff, Chastain says, is well worth it.

“Find profitability elsewhere,” she said. “The dated approach to compensation plan design may be costing the company too much as it attempts to be relevant in a very different marketplace. Refocus your energy on delivering quality content. Be ruthless with the products that earn a spot in your lineup. When you focus that kind of efficiency within your company, it will free up the few margin points you need to support a simple, generous combination of commissions, incentives, recognition and community for affiliates, distributors and customers.”

A lot has changed since early 2020. Smart and strategic companies aren’t focusing on what they see in the rear-view mirror. They are focused on the road ahead—what’s working today and how to build for the future.

Believing that the industry’s recent dip in overall numbers is simply a “return to normal” means buying into a strategy of a pandemic era when nothing was truly normal—not the economic landscape, not shopping habits, not everyday life.

We can all agree that there will be geopolitical challenges domestically and globally as we move forward. But in spite of those uncertainties, direct selling decision makers must look to the future based solely on current market conditions and best practices, free from outdated models, ideals and traditions.

As company leaders prepare to make strategic plans for 2024, they will have to decide if this will be the year the direct selling industry participates in an evolution that will make it more relevant and accessible for the months, years and decades to come.

From the September 2023 issue of Direct Selling News magazine.

The post The Inflection Point first appeared on Direct Selling News.

Nobody saw it coming.

Without rehashing it, I think we can all agree that the last few years are unlike anything we’ve ever experienced and never want to go through again. As people. As families. And, as businesses. But from a business perspective, it has been nothing short of fascinating.

In our channel, we started off with massive uncertainty. What was going to happen? Would we survive? How would people react? Could we stay open? How could we work almost completely remotely? Who would have believed that—within weeks—we would all be experts on something called Zoom.

We saw an amazing growth happen immediately after we thought we might not survive. And now unfortunately many have seen tremendous slowing, with some going back to “pre-pandemic” levels.

Companies of all shapes and sizes had issues with supply chain. I saw firsthand all sorts of problems.

Ingredients could not be manufactured fast enough to keep up with demand. Suppliers shut down with entire staffs being quarantined. This happened with both product manufacturers as well as 3PL partners. Both can be devastating.

After finally getting their ingredients in and product manufactured, I saw one company ship completed product from the US to the Philippines only to realize that the boat the container was on stopped in China for either a pick up or delivery and detained “in quarantine” for nearly 6 months. Who knew? They had one container on a ship with hundreds—if not thousands—of other containers. And they were stuck.

If you were doing business in China, you saw it all. Products couldn’t get into or out of the country. Or, even if you were manufacturing “in-country,” when the major cities locked down completely, you were still out of luck.

Amazing.

Trying Times and Trust Issues

With the unpredictable elements we all faced, somehow, some way, against all odds, we have had to try to keep our customers and distributors happy. If they were simply buying a product from Amazon, and their first choice was “out of stock” due to supply chain issues, they could easily just search for a replacement and, one click later, it was on the way to their home. It will be there tomorrow…or sooner.

While our customers are, obviously, purchasing other products from other retailers, they choose our products for a reason. Perhaps they cannot find a similar product from another resource. They appreciate and trust the quality they get from us. Or, they are trying to make a few extra dollars so they are willing to wait.

But at some point, their patience was understandably tested.

Through it all, one thing became clear: we had to earn and keep the trust of our customers and distributors. We had to be honest and communicate more than ever with relevant information. Not just fluffy marketing. Tell people what they needed to hear. If the product was going to be out of stock for a few weeks, tell them. And, more importantly, tell them how we were going to help them through the challenges.

Trust is hard earned and easily lost.

Transparency Leads to Trust

I watched closely as one client had ongoing/recurring issues with their supply chain. Generally speaking, the challenges were caused by specific ingredient(s) within their formulation of a key product. Repeatedly, they bumped into issues that caused delays in getting those important products into the marketplace. And, repeatedly, they reached out to the customers and distributors to inform them about the challenge and to offer high-value alternatives.

They were honest. They were timely. They were humble. They showed a level of care that people appreciated and believed.

But, it’s hard to imagine that everyone would just accept their explanations and be “ok” with it.

They didn’t. But, they appreciated their efforts and openness.

Recently, that same client conducted a series of “road show” events to get in front of their distributors. A dozen or so events, spread out across the country, were designed to promote new incentives and initiatives. It was a chance to be face-to-face with people who they hadn’t been in front of for a couple of years.

From city to city, they talked, asked questions and listened. They shared optimism and asked to hear how they could help their people succeed.

Yet, from city to city, nobody complained about the supply chain challenges. They could have been mad or disappointed. But, they knew what was happening and appreciated the level of communication from the company. Kudos to them for being open and honest. It was recognized by all involved.

How Direct Selling Differentiates

In our channel, our customers are not just numbers. They are people we know. They are our friends and colleagues. We have asked them what they are looking for and provided solutions that could have a real impact. And not just in some generic sense. We are focused on creating an impact on a person—a real person—not a number.

We build our businesses one person at a time.

The words “customer obsessed” have become a sort of catch phrase for creating an experience for our customers that is special. For the most part, I think the channel does a pretty good job of it, but we can do much better. Most of us have call centers and our distributors and customers call us. They ask questions. They want clarity on products and compensation. We give it to them. Fast, efficient and friendly. I cannot count the number of client events I’ve attended and observed distributors at the onsite company store searching for their favorite person from the call center. They exchange hugs and ask about each other’s families.

THROUGH IT ALL, one thing became clear: we had to earn and keep the trust of our customers and distributors.

It’s real. We care. They care back.

While the rest of the world struggles with email open rates, we send emails to our customers and distributors, and they actually read them at an extraordinary rate. They seem to appreciate that we try to provide information they want to know about.

Where We Can Do More

Interestingly, in research we have done for a number of different companies, one of the biggest complaints we hear from distributors is about the website/shopping cart. Amazon raised the bar and, in many cases, we are still way behind in technical advancements.

We haven’t stepped up to be what we need to be. Instead, we are cumbersome—too much friction. Yet, our customers and distributors still come back. They fight through our inadequacies and order products.

I’ve read countless monthly surveys where we ask the customers about their experiences with our companies. The Net Promoter Scores are off-the-charts. They love our companies and our products. Even when they have concerns and write-in comments with real grievances about backorders, boxes damaged in transit or some other issue, they consistently rank the company with amazingly high scores. They are so high, in fact, that we’ve had to adjust how we read the NPS scores. While we love to read high scores, the real gold and guidance is in the comments, not the score itself.

As I’ve said recently in a previous article, your culture is your superpower. The feeling from a customer that we obsess over them is 100 percent due to your internal team. If they feel obsessed to make distributors and customers happy, everyone feels it. The conversations in your building (or Zoom) become much more focused on fixing things that increase the customer satisfaction.

If your team is truly obsessed with the experience, you will hear questions such as, “If we do this, how will it impact the customer?” or “How can we make the process smoother and easier?” or, perhaps, “Is there a way to make sure the customer gets the most value or best experience from the product?” Or, best of all, “Instead of coming up with good explanations and answers when the customer calls, how do we fix the problem so that the customer doesn’t have to call in the first place?”

Those are variations of real questions I’ve heard from teams that are truly obsessed and willing to go the extra step to make sure customers are happy.

Even in a time of massive technical advancement, we have a special place in the minds of our customers and distributors. If we take it for granted, we lose. But, if we continue to truly obsess to create a team that “gets it” and is willing to ask the tough questions and make real change happen, we can continue to earn and keep the trust of our customers and distributors.

The best advice I’ve ever received in business definitely applies to this.

Ask questions and listen.

If we follow those four words, we will be able to withstand whatever gets tossed our way. 

Paul Adams has been involved in the direct selling channel for more than 30 years. Over the decades, he has worked with hundreds of companies and been a trusted advisor in boardrooms with countless executive teams. From corporate giants to pre-startup, Paul has helped companies invent, reinvent and solidify their messaging, strategy and execution.

From the November 2022 issue of Direct Selling News magazine.

The post Why (and How) Customers Choose Direct Selling first appeared on Direct Selling News.