December 3, 2014 Leave a comment
by J.M. Emmert
“Life’s a bit like mountaineering,” said Sir Edmund Hillary. “Never look down.”
It’s what direct sellers do, too—never look down. The direct selling industry is an industry comprising people who seek to achieve things never thought possible, scaling new heights, whether reaching inside oneself to achieve personal goals or driving a company toward what is considered the Mount Everest in direct selling, the $1 billion summit.
But like Hillary, only a few direct selling companies have managed to reach that elite status. In the 159-year history of direct selling in the United States, Avon was the first to achieve the feat in 1972. Amway followed in 1980. In 1996, Mary Kay Inc. and Tupperware both reached $1 billion. In 2004, Nu Skin and Herbalife joined the group. But another nine years passed before the next company, Ambit Energy, reached $1 billion in sales. Many companies are turned back in their efforts to reach that summit. But why? What makes it so difficult?
The simple answer is that growing a company to such an extraordinary level brings with it new challenges, and, like experienced climbers, extraordinary companies know to stop when the footing gets treacherous, even if the summit is close. Because it is an industry focused on people, direct selling companies understand that the welfare of the entire team is more important than putting up numbers. One tragic misstep and the whole team could come tumbling down.
Orville Thompson, CEO of Scentsy and a former chairman of the U.S. Direct Selling Association, once analogized direct selling and the quest to reach $1 billion to scaling Borah Peak in Idaho. At 12,668 feet, Borah Peak, or Mount Borah, is the highest mountain in the state and among the 100 highest summits in the Rocky Mountains. The most popular route to the top of Borah Peak follows the southwest ridge, ascending 5,262 vertical feet from the trailhead in a little more than 3.5 miles. Just prior to reaching the top, climbers encounter Chicken Out Ridge, a thin ridge of rock with steep slopes so intimidating that many abort their summit attempt.
For those chasing after the $1 billion summit in direct selling, the biggest challenge, says Thompson, is simply finding the right path to follow, those “smooth areas worn down by countless others who have blazed trails.” When they reach that direct selling version of Chicken Out Ridge, they must “challenge their skills and test their fears” in the face of new obstacles.
Despite the risks, more companies than ever appear to be chasing the summit. Direct Selling News research has identified 13 U.S. companies with net sales at or approaching the $500 million to $1 billion range and experiencing strong growth. Having as many companies on their way to the $1 billion summit as there are currently at the peak is a testament to the strength of the channel. Here is a closer look at the contenders:
On the Summit Push
In 2011 ACN posted $550 million in sales, down from the previous year’s $553 million. However, the company came back strong the past two years, achieving $582 million in 2012—a 5.8 percent increase—and $700 million in 2013—a 20.2 percent increase. This June, the telecommunications and essential services company launched in Mexico, the seventh-largest direct selling country and the company’s 24th market.
Stream Energy/Ignite has been camped near the billion-dollar summit for the past four years, breaking the $900 million ceiling in 2010. After two years of down sales, the company came back strong in 2013 with $27 million over the previous year—a 3.2 percent increase—putting it at $867 million. The company has seen continued growth, particularly in Hispanic markets, and has significant expectations for company growth across the board in 2014 and beyond as it diversifies its service offerings, allowing it to sell nationwide.
Of the 13 companies, only Thirty-One Gifts uses the party plan method of selling, joining Mary Kay and Tupperware as the only companies in the Top 17 of the Global 100 ranking that employ this sales approach. What makes that especially interesting is that, according to the U.S. Direct Selling Association, the party plan method of selling has decreased 4 percent in each of the past two years, going from a high of 31 percent in 2011 to just 23 percent in 2013. The person-to-person method, on the other hand, accounted for two-thirds of sales in 2013, according to the DSA.
Thirty-One also has made one of the fastest ascents in recent years. The company posted sales of $100 million in 2010 and then climbed to $482 million in 2011, a 382 percent increase. Sales continued to rise in 2012—a 48.9 percent increase to $718 million. In 2013, Thirty-One achieved a 6.2 percent increase, ending the year at $763 million. Its four-year growth rate: 663 percent.
USANA, which surpassed $100 million in its first six years, has been the steadiest climber in the group over the past few years. It has maintained an average of $67 million in sales growth annually for the past three years—ranging from a 10.6 percent to 12.5 percent increase—to bring it to $718 million. The company reported $182.4 million in sales for the first quarter of 2014, a 7.9 percent increase over the prior year; second quarter results saw a 0.4 percent decrease, with $188.3 million compared to $189.1 million in 2013; and the third quarter saw record sales of $191.9 million, a 10.5 percent increase over the prior-year period of $173.7 million. For the first half of 2014, USANA generated sales and customer growth in nearly every market in which it operates. Strong growth was seen particularly in Mainland China, the Philippines, Singapore and Mexico.
Expectations are that the wellness industry in particular will continue to thrive in the coming years. In a Sept. 29 article on the health and wellness industry’s global performance, Euromonitor International reported that the United States was leading all countries in 2014 with more than $160 billion in sales. The global industry is expected to reach $1 trillion by … Click here to read the rest of the story