November 7, 2014 Leave a comment
The New Main Street is a 16-page supplement that appeared in The Wall Street Journal that educates and informs readers of the incredible opportunity and the positive economic and social impact of direct selling.
Direct Selling News has been serving direct selling and network marketing executives since 2004.
November 7, 2014 Leave a comment
April 25, 2014 2 Comments
LAKE DALLAS, Texas — With millions of adults actively engaged in buying products or services from independent sales representatives, the prevalence of direct selling is high, new research from Harris Poll shows. The study was commissioned by Direct Selling News, the industry’s leading trade publication.
The online survey of 2,060 U.S. adults 18 and older found that 156 million people , 66 percent of U.S. adults, have made a purchase from a direct seller — buying a consumer product or service person-to-person away from a fixed retail location. Of those, about 81 million people have done so within the past six months.
“Direct selling has evolved a lot over the past 50 years,” said John Fleming, publisher and editor in chief of Direct Selling News. “Today, many of the companies that utilize the distribution channel refer to it as social selling, network marketing or referral marketing. But whatever the name, with one in three U.S. adults making a purchase in this way in the past six months, it is a powerful part of the economy indeed.”
Other key findings from the survey include:
This survey was conducted in advance of a larger, custom research project Harris Poll will undertake on behalf of DSN.
“Direct selling is an experience shared by millions of Americans. Our goal is to better educate and explain its scope today,” Fleming said. “It is our hope that this research and our continued work with Harris will provide better value for industry leaders, regulators, consumers and anyone else interested in better understanding this channel of distribution and tapping into the strength that it offers.”
This survey was conducted online within the United States by Harris Poll on behalf of Direct Selling News from April 3 to April 7, 2014, among 2,060 adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and complete definition of direct selling, please contact DSN Publisher and Editor in Chief John Fleming, firstname.lastname@example.org.
Direct Selling News is the only trade publication serving the executive-level ranks of direct selling companies and their suppliers. Based in Lake Dallas, Texas, DSN is celebrating its 10th anniversary.
On February 3, 2014, Nielsen acquired Harris Interactive and The Harris Poll. Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com.
December 5, 2013 Leave a comment
by DSN Staff
Editor’s Note: Nu Skin Enterprises held a ribbon-cutting ceremony at its new global headquarters in Provo, Utah, in conjunction with its biannual global convention. They invited Direct Selling News along with press from Greater China, Korea and Southeast Asia. This report is our exclusive coverage of the events.
Original expansion plans for the Nu Skin offices only involved reimagining the space for a data center. But Nu Skin executives are fond of dreaming, and dreaming big. The end result is a stunningly beautiful modern building that is also environmentally friendly, achieving a LEED Silver certification upon opening. The team is planning to achieve Gold status next year.
On Wednesday, Oct. 23, Co-Founder and Chairman of the Board Steve Lund opened the ribbon-cutting ceremony by saying, “The Innovation Center may be a strange name for a business building, but innovation is central to success in this business. For 29 years we’ve been about reinventing ourselves and our product line.”
The “always innovating” mantra spoken at Nu Skin is clearly evident in the architecture and design of the new building. Sleek and modern, with clean lines, blond maple wood floors, crisp metal and glass accents, along with 26 tons of Virginia mist stone, the building also incorporates one material that’s constantly changing: the beautiful natural light that floods the place through the walls of glass.
“The Innovation Center may be a strange name for a business building, but innovation is central to success in this business. For 29 years we’ve been about reinventing ourselves and our product line.”
—Steve Lund, Co-Founder and Chairman of the Board, Nu Skin
In addition to innovation, executives at Nu Skin often speak of their commitment to Provo, Utah, and the surrounding community, where they have been located since the company founding in 1984. This commitment was literally carved in stone during the design phase of this building. The atrium—a beautiful open space between two walls of glass—is open to the public as a pass-through for downtown shoppers and pedestrians. With leather couches, a mesmerizing fountain and a spectacular view of the Wasatch Mountains, the atrium could become a tourist destination all its own.
Furthering the commitment to the community, the building houses a restaurant open to the public—The Spoon—named in honor of the founding days of Nu Skin, when samples of the products would be “spooned” out to distributors who brought their own containers. The menu features a healthy approach to eating and is based on the principles woven into Nu Skin’s anti-aging products.
|The new center is outfitted with five research labs.
The company is also committed to providing its employees with a great place to work. When the executives realized they had several thousand square feet for future expansion of the data center, they decided that while waiting for its future to arrive, they’d turn the space into a top-notch gym facility. The building also houses eight installations of original art throughout for employees to enjoy. Outside, the grounds feature an acre of open green space, gardens and extensive landscaping.
As Lund opened the ribbon-cutting ceremony, he was standing in front of one of the most impressive features of the Innovation Center—a piece of innovation itself—one of the largest HD screens in the world, installed at the west end of the building. Containing over 3 million pixels, the screen not only projects large images, but it is also interactive—live texts and tweets can stream across it. A video camera has been set up so consultants all over the world can watch the board and their team members’ “hopes, dreams and aspirations” flying across it.
Also attending the ribbon cutting and speaking to the audience was Mayor of Provo John Curtis, Governor of Utah Gary Herbert, and U.S. Senator Orrin Hatch (Utah). Each spoke about the impact that Nu Skin has had on the local and state economy, noting that this global convention alone would bring more than $14 million to the Provo and Salt Lake City economies. Mayor Curtis called Nu Skin a “key stakeholder” in Provo.
Nu Skin executives say that the heart of the Innovation Center is the cluster of world-class research labs—five in total—that look out over the atrium from the second floor. Outfitted with best-in-class materials and equipment, these labs cover 22,000 square feet and are where Nu Skin scientists will perform over 70,000 testing procedures. These scientists will also be researching and developing the future Nu Skin anti-aging products.
|Enjoying the view through the glass wall, a Nu Skin employee runs on the treadmill.||Nu Skin executive staff and board members pose in front of the Innovation Center.||Over 15,000 people attended the biannual global conference in Salt Lake City.|
Nu Skin anticipated more than 15,000 people coming to Salt Lake City to attend the conference. Many individuals came from Japan, Korea, Europe, Greater China and Southeast Asia. The attendance marked this convention as the largest from a Utah-based company.
President and CEO Truman Hunt addressed the record-breaking crowd with the good news that company officials expect fourth quarter 2013 to be their first $1 billion quarter. The company is growing in all markets, most notably in Greater China, though results in South Asia and in the Americas also rose significantly over the same period last year.
During the conference, Hunt reiterated that Nu Skin focuses on renewing itself—by opening new markets, by refining business processes and by “continually renewing the vibrancy of the opportunity.”
During his presentation, Hunt encouraged the sales leaders in the audience by acknowledging their achievements. He said, “It takes tremendously hard work and great sacrifice to be successful in this business. The leaders who are recognized on the wall [at the Innovation Center] and the many others who will join them set their goals and went to work.” There are 762 names on the wall, and plenty of room for more.
September 3, 2013 7 Comments
by Beth Douglass Silcox
Our September cover story is an update on the March 2013 story, “Direct Selling’s Billion Dollar Markets,” with a focus on the great potential of emerging countries. We have elected to move our annual research on billion dollar markets from March to September each year in order to best utilize the extensive research conducted by the World Federation of Direct Selling Associations’ (WFDSA) Research Committee. (The most recent statistics, 2012, were just released this summer.) This team works over 5,500 person hours to gather, vet, analyze and report annual data to assess and size the direct selling market in each region of the world, and their data provides us with one of the primary sources for our own research.
Enjoy the update in this issue, and look for the next full coverage of DSN’s Billion Dollar Markets annual research each September going forward.
Globally, the direct selling industry grew 5.4 percent in 2012 and a cumulative 13.9 percent since 2010. Posting that kind of increase is impressive, especially during a global economic recovery. But dissecting WFDSA’s 2012 global direct selling survey proved equally impressive when statistics showed emerging markets were responsible for 44 percent of global direct sales, a gain of 9 percent in just two years.
Of the 23 countries on Direct Selling News’ Billion Dollar Markets for 2012, only 10 are considered advanced direct selling markets. The remaining 13 are young and emerging. Markets like China, Malaysia, Colombia, Thailand, Russia and India have come on strong despite legislative and importing restrictions, cultural complications and lower GDPs. In these emerging markets—where 85 percent of the world’s population base lies—direct selling’s “Great Potential” is waiting.
“From an economic perspective, you have people with lower levels of education and little discretionary income or resources to invest in a business, and at the same time you have a rapidly growing middle class that can now afford to buy products like this from friends and family. You have demand and supply growing together, and it’s kind of like the perfect storm,” says Jeffrey Dahl, President of Amway Latin America.
This scenario plays out wherever emerging markets exist, wherever there are entrepreneurial-minded individuals who seek to improve their socioeconomic status.
European economic strife has caused a “classical story” to play out in recent years, according to Maurits Bruggink, Executive Director of SELDIA, the European Direct Selling Association. “When things go bad and people lose their jobs, they start being more interested in direct selling to complement and increase their incomes. It is a phenomenon in Europe right now that is a bit bigger and wider,” he says.
“You have demand and supply growing together, and it’s kind of like the perfect storm.”
—Jeffrey Dahl, President, Amway Latin America
While some emerging market direct sellers are motivated by disappearing job opportunities, for others high-wage jobs never existed in the first place. Dahl says, “In many emerging markets they aren’t used to the corporate orientation. They are entrepreneurs and work with small commercial opportunities. So direct selling is a natural extension for them.” And for many, direct selling is a socioeconomic equalizer and a path to the middle class.
CAPEVEDI, Peru’s direct selling association, surveyed 600 people about the socioeconomic impact of direct selling on families. Of respondents, 90 percent were women, 50 percent were over 40 years old and most were married with an average of five children at home. Also, 62 percent of the respondents indicated they did not have a job, were retired or only worked part time before entering direct sales.
Those families feel the impact of extra income generated by direct selling, and Lourdes Montagne, a staff member at CAPEVEDI, says, “Direct selling fosters a more democratized environment in many Peruvian families, providing the opportunity for equality or balance of economic income for each family member.”
Dr. Dora Hoan, Founder of Best World International, a direct seller based in Singapore, says, “The growth of the middle class means higher purchasing power and greater desire to improve their quality of life. This means more customers with more disposable income for direct sellers.”
Montagne agrees: “The growth of the middle class in Peru is hand-in-hand with the increase in their purchasing power, which automatically generates changes in the consumption habits of this social class.”
“The growth of the middle class means higher purchasing power and greater desire to improve their quality of life.”
—Dr. Dora Hoan, Founder, Best World International
People in emerging European markets like Poland or Slovenia, Bruggink says, want to be involved in direct selling because they don’t have access to Western products and retail distribution systems.
“The retail that you have in a lot of emerging markets is Mom and Pop,” Dahl says. “Buying from a Mom and Pop is a lot like the direct selling dynamic. You are buying from a family in the neighborhood. So it is little wonder that emerging markets are grabbing hold of direct selling as a viable business model.”
“We believe that emerging markets are ‘The Great Potential,’ ” Hoan says. “After all, there are many enterprising people there who welcome business opportunities from direct selling. That being said, there are risks in these markets. The business regulations may not be conducive to direct selling; the people may not be welcoming or they may have limited purchasing power… but remember, no risk, no gain.”
The decision to expand internationally is certainly not as simple as contemplating mature versus emerging markets, but Dahl asserts, “It is a fair filter.” The regulatory environment, economic indicators and competition must be considered.
“Many companies choose to expand where direct selling associations are located and the industry is established,” says Jose Paez, Director General of Amway Mexico. “It’s easier to get in there and communicate your systems, communicate your mechanics, and get your permits to legally operate.”
But expansion strategies differ, depending upon the company and the target region. Miguel Arismendi, Chairman of ACOVEDI, Colombia’s direct selling association, sees new companies entering small and medium markets to test the Latin American waters before expanding to larger markets.
In Europe, the opposite is true. “When companies enter Europe, they do not enter in emerging markets,” Bruggink says. “They always seek a foothold in Western Europe, and that remains the strength of Western Europe—the economic stability of GDP, income per capita and regulatory assurance.”
Arismendi says, “It is a challenge and can be more difficult in some emerging markets than in others, but in general direct selling companies have adapted their portfolios and operations to the regulatory issues in the markets.”
“Companies are excelling in a very hybrid way and adapting their own operations to what these countries can provide.”
—Jose Paez, Director General, Amway Mexico
Explosive expansion of direct selling in China and India are a case in point. “If you look at what companies have done in those markets, they have adapted themselves. Companies in China can’t do what they have done in the U.S. or Europe,” Paez says.
In the case of most companies operating in China, for instance, they must open stores or nutritional centers in every small city because Chinese law forbids gathering or networking. “Companies have to adapt to these situations,” he says. “They are excelling in a very hybrid way and adapting their own operations to what these countries can provide. It is true that direct sales is having an impact and growing day by day, but again, not with the same mechanisms.”
Best World International is a medium-sized direct selling company based in Asia that cautiously and gradually expands into nearby countries. But, Hoan admits, chance and distributor connections have played a role in some expansions into “uncharted” countries. “Our overseas expansions happened this way. Nevertheless, for this type of expansion to happen, the direct sellers have to be very motivated and willing to brave all odds,” she says.
Paez adds, “Social media has helped almost everyone get connected wherever they are. People with friends in the U.S. are opening lines there using social media to do so.”
Dahl confirms, “There’s definitely a bounce-back effect that companies who operate in multiple markets are starting to dig into, focus on and build strategies to develop. Technology makes it much easier. People coming to the U.S., for instance, get exposed to a direct selling opportunity, and then it bounces back to friends and family in their homeland, and vice versa.”
“There’s definitely a bounce-back effect that companies who operate in multiple markets are starting to dig into, focus on and build strategies to develop. Technology makes it much easier.”
Even some advanced market growth, Dahl supposes, is likely the result of immigrants bringing positive cultural attitudes about direct selling to places like the U.S., where Hispanics, Koreans and Asian Indians are doing very, very well. “If I were a struggling company in the U.S. or another mature market, I would vector my resources to some of these segments that are limited in investment opportunity due to lack of resources, and with a cultural attraction to direct selling,” Dahl says.
Flexibility, sustainable systems, cultural awareness, and tenacious, open-minded staff and distributors make growth of any kind easier, whether the target is an emerging market or not.
Success in an emerging market is by no means easy or certain, but that could be said of mature markets as well. There are legislative hurdles to clear and reputations to build. But as more direct selling companies enter emerging markets, greater understanding takes hold and adds legitimacy to the industry in that market.
The acceptance of direct selling as a viable business option within emerging markets can empower individuals, improve the socioeconomic status of families and have far-reaching impact on the local, regional and national economies. As Hoan puts it, “The industry has room for growth, while the countries can benefit from its revenue. Individuals can make use of the business platform to empower themselves. On the whole, expansion into emerging markets is good for all parties involved.”
The United States occupies the top spot on the 2012 Billion Dollar Markets list, up 5.9 percent since 2011 and outpacing overall U.S. GDP economic growth of 4 percent for 2012. The U.S. market makes up 19 percent of global direct sales overall. A closer look at U.S. growth by the U.S. Direct Selling Association showed that 60 percent of companies experienced growth in 2012.
The direct selling community includes some 15.9 million independent representatives, of which 77 percent are female and 68 percent participate in person-to-person sales. Wellness and services—including utilities and financial products—continue to grow steadily, thanks to increased consumer awareness and the deregulation of the energy industry. The breakdown by product category: wellness products (27 percent), household goods and durables (19 percent), cosmetics and personal care (17 percent), clothing and accessories (12 percent), financial services (10 percent), and utilities (8 percent).
“The strong performance of direct selling in the United States and around the world continues to underscore the economic and social relevance of this business model,” USDSA President Joseph Mariano says. “Despite progress toward economic recovery, there are still many Americans looking for a source of supplemental income. Coupled with increasing consumer confidence, both sales and interest in the opportunity are at near-record levels.”
“The strong performance of direct selling in the United States and around the world continues to underscore the economic and social relevance of this business model.”
—Joseph Mariano, President, USDSA
The Japanese direct selling market decreased by 4.8 percent in 2012, and if trends continue this year they may slip rank to No. 3. Japan comprises 14 percent of global direct sales, with 3.4 million sellers (78 percent female) participating primarily in person-to-person (95 percent) sales. Cosmetics and personal care (30 percent), wellness (29 percent), and household goods and durables (19 percent) led Japanese product sales.
China is a rapidly growing market and could eclipse Japan’s No. 2 ranking when 2013 statistics are available next June. WFDSA’s research estimates indicate China’s growth at 13.5 percent in 2012 with a market comprising 12 percent of global direct sales. Statistical reporting of product categories, number of direct sellers or sales by method are not available.
Comprising 9 percent of the global direct selling market, Brazil’s 6.7 million sellers grew this Latin American powerhouse 13.1 percent in 2012 through 100 percent person-to-person sales. While gender breakdowns were not available, Latin American direct selling is predominantly female.
The direct selling community in Korea grew to 5 million sellers (79 percent female), up from 4.2 million in 2011. They expanded this market 4.3 percent and brought the global direct selling share of their country to 8 percent through person-to-person (75 percent) and party plan (25 percent) sales. Wellness (35 percent); cosmetics and personal care (26 percent); household goods and durables (12 percent); and books, toys and stationery (11 percent) led product sales.
Mexico’s direct selling community is 96 percent female and dominated by cosmetics and personal-care products (42 percent) and clothing and accessories (31 percent), while wellness (21 percent) is gaining traction. All told, Mexico increased revenues 7 percent in 2012; they comprise 4.3 percent of global direct sales.
France formally recognized direct selling in 2012, which contributed to the country’s 4.1 percent revenue growth. In total, 500,000 sellers (79 percent female) participate in person-to-person (61 percent) and party plan (39 percent) direct selling methods. The home improvement category uniquely leads French direct selling at 37 percent, with household and durable goods second at 15 percent. France comprises 3 percent of global direct sales market share.
Rising 7 percent and gaining 250,000 sellers, Malaysia’s direct selling market diversified from a 100 percent person-to-person in 2011 to a 90/10 split with party plan in 2012. Today some 4.8 million sellers (61 percent female) represent wellness (43 percent), household goods and durables (23 percent), as well as cosmetics and personal-care products (16 percent).
From 2011 to 2012, the Russian direct selling market grew 4.1 percent, from $4.1 billion with 4.3 million sellers (86 percent female). Cosmetics and personal-care products comprised 67 percent of the Russian market, with wellness ranking second at 11 percent. And 86 percent of all sales are person-to-person.
Despite economic turmoil within the European Union countries, Germany’s direct selling industry rose slightly—up 0.8 percent from $3.8 billion—as did their number of direct sellers (300,000 in 2012 versus 285,000 in 2011). Sales methods are split almost evenly, but females continue to dominate the field at 80 percent for the second year. Product category breakdowns are: household goods (34 percent), cosmetics (19 percent), wellness (11 percent) and home improvement (10 percent).
The United Kingdom’s direct selling revenue grew the most of any other European country in 2012, with overall revenues rising 7.2 percent from $2.9 billion. Wellness led the way in product category sales in the UK, comprising 39 percent of direct sales, while a mix of cosmetics and personal care (18 percent) and household goods and durables (16 percent) rounded out the industry. The size of the direct selling community was at 400,000, with 75 percent female. Of that, 70 percent are selling person-to-person, while 30 percent are earning through party plan sales models.
Rapid growth is seen in the emerging Latin American market of Colombia, where 1.5 million sellers caused that country’s direct selling revenue to rise 7.6 percent from $2.8 billion in 2011. Dominated by females (95 percent) conducting person-to-person sales (86 percent), Colombia’s direct selling customer wants cosmetics and personal-care (59 percent), clothing and accessories (23 percent), and wellness (10 percent) products.
Slight growth (0.6 percent) was witnessed in the Taiwanese market in 2012, where 2.7 million sellers (70 percent female) represent wellness (58 percent), cosmetics and personal-care (15 percent), as well as home-care, household goods and durables, and clothing and accessories.
Italy’s direct selling market suffered a loss of 4.9 percent in 2012, while gaining nearly 100,000 new members of its direct selling community (500,000). Females continued to dominate the Italian direct selling community (71 percent), and cosmetics and personal-care products comprised 33 percent of the market. Participation by males grew 5 percent in 2012 (29 percent), which may explain the 6 percent growth of person-to-person sales models and increased market share of wellness (20 percent) and foodstuffs and beverages (15 percent) companies.
2012 was a year of explosive growth in Thailand’s direct selling community, with some 800,000 new direct sellers signing on with companies, resulting in total revenue growth of 7 percent. Wellness products surged ahead to 39 percent of total category sales, while cosmetics and personal-care products dipped to 27 percent. Person-to-person sales increased 10 percent, totaling 69 percent of all sales methods used by a mostly female (67 percent) representative field; however, 3 percent more Thai males jumped into direct selling (33 percent).
Despite appearing lower in the ranking this year, Venezuela’s direct selling industry increased 6.8 percent. Of the country’s 1.2 million sellers, 80 percent were female; however, an 11 percent increase in male participation in 2012 may be due in part to the growing wellness product category. While the traditionally female stronghold of cosmetics and personal-care items still led category sales at 30 percent, statistics show that wellness gained 13 percent in 2012. Person-to-person made up 95 percent of all sales.
Canada’s 1 percent growth may be the result of the expanding category of cosmetics and personal care, which comprised 39 percent of product sales in 2012, as well as utilities, which posted 10 percent this year. All other categories suffered losses. Sales methodologies were almost evenly split within Canada’s salesforce of 700,000 independent representatives, of which 84 percent were female.
Marked growth in other Billion Dollar Markets caused Argentina to hold its No. 18 rank despite an astounding 12.5 percent growth in the country. Almost exclusively female (96 percent), Argentina’s direct selling community of 700,000 grew by nearly 80,000 in 2012. They were meeting the needs of customers, 67 percent of which sought cosmetics and personal-care items through one-on-one relationships (84 percent) with direct sellers.
Cosmetics/personal-care and wellness products made up more than half of Australia’s direct selling product sales. Some 400,000 direct sellers (85 percent female) were practically split in half between party plan and person-to-person sales models. Australia’s direct selling revenues were up 4 percent from 2011 statistics.
Adding some 50,000 Peruvian direct sellers to the community brought an 11.2 percent increase in revenues to this emerging market. Peru’s salesforce is predominately female at 91 percent, and examination of the most successful direct selling product categories reflects the gender of the selling community. Cosmetics and personal care rank No. 1 at 36 percent, with clothing and accessories (29 percent) a close second. Wellness represents 19 percent of the market.
Indonesia advanced one ranking this year, having 11 percent growth due to nearly 1 million more direct sellers in country. Sales methodology and product category statistics were not reported in 2011 or 2012.
Growth of 22.6 percent from $858 million in revenue in 2011 landed India on the Billion Dollar Markets list for the first time. India’s market is comprised primarily of wellness products (44 percent), but cosmetics and personal-care (33 percent) and home-care products (14 percent) are also integral to their success. With an ever-expanding seller base (4.9 million), nearly 1 million more in 2012 than the previous year, 63 percent are female and 38 percent are male, participating in person-to-person (69 percent) and party plan (23 percent) sales.
Wellness products are far and away the leading cause of the Philippines’ rise to the Billion Dollar Markets list for the first time this year. Revenues rose 31.3 percent from $770 million in 2011, thanks to 3 million sellers, split 60/40 female, conducting virtually all sales via person-to-person contact.
Asia Pacific is the largest region for direct selling, making up 44 percent of the industry’s global sales. Retail sales rose 4.4 percent in this region to $73.3 billion. Within this region the direct selling community experienced tremendous growth at 9.9 percent, raising the count of people participating in direct selling to 46.1 million in 2012.
Asia is home to much of the world’s population, so clearly part of these statistics is due to the sheer volume of people in that region; however, direct selling seems to be a great fit for the Asian markets and cultures as well. And because direct selling is profitable, it has become increasingly legitimate to choose it as a potential career—not merely as a fallback position.
There is a very strong work ethic in Asia. With few government security nets, people often want multiple jobs and income streams. Their entrepreneurial spirit and desire to have their own businesses are also strong. While in the Western world one goes to college and then gets a job, the preferred path in Asia is to start a business. Direct selling offers them this entrepreneurial fulfillment at a very low cost.
The Asian cultures are very comfortable with purchasing from friends or on the recommendation of friends or family members. For these reasons and more, the Asia/Pacific region will likely continue to experience significant growth in the foreseeable future.
The Americas comprise 40 percent of global industry sales, split evenly between North America’s U.S. and Canadian market and the 11 markets that comprise South and Central America. Overall retail sales in the Americas rose 7.9 percent to $66.4 billion. While North America saw growth of 5.6 percent ($33.9 billion), South and Central America saw a double-digit increase of 10.4 percent, with sales reported at $32.6 billion.
Latin America’s impact on worldwide sales figures is notable. Miguel Arismendi, Chairman of ACOVEDI, the Colombian direct selling association, says the expanding middle class is causing health and wellness product categories to gain traction. “It is effectively, positively the entrance of males into the direct selling industry because it is an attractive category for them.”
The European market is comprised of Western, Central and Eastern Europe. All are governed by SELDIA, the European Direct Selling Association, and play by the same direct selling code of ethics as a result. Together, Europe makes up 16 percent of global industry sales—11 percent, Western; 5 percent, Central and Eastern.
European growth is holding steady despite a financial crisis still hanging over many European Union countries. While Western Europe, with more established and mature direct selling markets, rose 1.3 percent to sales totaling $17.7 billion, Central and Eastern European markets enjoyed a 4.3 percent increase. That brought their sales to $8.1 billion. In all, Europe rose 2.2 percent, totaling $25.9 billion.
Widely differing GDPs, income per capita, government interaction, familiarity with direct selling and cultural differences all weigh into the direct selling activity measured in Europe. Often, direct selling growth is a tug-of-war between the European Union regulation originating in mature markets and Central and Eastern Europe’s less restrictive governmental policies that give them competitive advantage. Maurits Bruggink, Executive Director of SELDIA, says, “I am hopeful that Central and Eastern European member states will be successful in overhauling pieces of over-regulation by the European Union.”
Africa and Middle East
Africa and the Middle East had an estimated 1 percent of global industry retail sales in 2012.
June 12, 2013 Leave a comment
by Barbara Seale
Alessandro Carlucci, (left) CEO of Natura and Chairman of WFDSA, accepts the Bravo Leadership Award from DSN Publisher and Editor in Chief John Fleming at the DSN Global 100 Celebration held in April.
For those exceptional achievements, Carlucci accepted the Direct Selling News Bravo Leadership Award. The prestigious prize is presented to an individual who personifies leadership, who guides and directs, and who leads those around him toward greater good, progress and achievement, all while earning the respect and admiration of those he leads.
Carlucci could have been considered for the award based on his impact on Natura alone. The cosmetics, fragrances and personal-care company has long been one of the industry’s stars, admired for its consistent growth and strong management, but also for its dedication to social progress and environmental sustainability. Headquartered in Greater São Paulo, Brazil, and with operations in Argentina, Mexico, Chile, Peru, Colombia and France, the $3.2 billion company has a 1.5 million member salesforce. In 2011 Forbesmagazine named it one of the 10 most innovative companies in the world.
The Bravo Leadership Award is presented to an individual who personifies leadership, who guides and directs, and who leads those around him toward greater good, progress and achievement.
Carlucci’s WFDSA leadership elevates his considerable accomplishments to the next level. The organization’s key long-range objectives include promoting ethics and bolstering the industry’s image—both Natura strengths. Carlucci believes that the industry is succeeding in both areas. He says that building a strong industry reputation is the WFDSA’s most important project.
“Around the world, the direct selling industry’s image is totally correlated with results,” he notes. “When you have good results, you have a good image. Even when the industry is under attack, it’s because of a financial issue. It isn’t customers complaining. The reputation of our industry with customers is a good one. But the financial community doesn’t know us well.”
|2013 Bravo Leadership Award:
Alessandro Carlucci, Natura
Carlucci points out that 90 million people around the world are connected with direct selling, either as customers or entrepreneurs. When they have good experiences, he says, they tell their friends, and that builds reputation.
“To me the most powerful way to build the industry’s reputation is with public relations,” Carlucci says. “The press doesn’t usually know us very well, but they’re interested to learn more. Each company has a good opportunity to have a PR program. It typically doesn’t cost much, and it brings a lot of good results.”
Achieving a good reputation is like an ongoing journey. At no point will the industry reach a destination, Carlucci observes. Instead, opportunities always exist to enhance and improve the image of the industry and the individual companies within it.
“All the companies need to do things right, behave right, be very transparent and open with their salespeople and customers,” he says. “That’s the beginning of the story. Do that and people will say nice things about the company and its products. It’s the best advertising ever.”
Carlucci also believes that direct selling can play a role in boosting the global economy, especially as people live longer and companies shrink. As always, he views the opportunity from both economic and social perspectives.
As life expectancies increase, people need to earn money for longer periods, he says. At the same time, recent college graduates are having difficulties finding traditional jobs. Direct selling offers opportunities for careers and earning prospects to millions of people around the world. Those people encompass every age range and, from a larger perspective, entire economies that are either thriving or in crisis.
In addition, the training that direct sellers offer elevates the industry’s reputation, as it creates more competent, successful distributors.
Especially in countries such as Brazil, Carlucci points out that becoming a direct selling distributor offers educational opportunities that citizens may not have in their day-to-day lives. To sell their company’s high-quality products and services and to present the opportunity in a transparent way, they must learn new skills. The process even creates higher self-esteem, as it improves economic results—for society as well as for individuals.
“We have two sides of the same equation,” Carlucci says. “The opportunities in our industry are part of the solution for the society. With new technology available and most direct selling companies using these technologies to engage the millennials, we have a huge way to modernize our industry and be totally connected with the needs and behavior of new generations and new customers that are emerging.”
He notes that millennials are both an opportunity and a challenge for the industry. Carlucci says that direct sellers must speak the language of this new generation—a demographic that expects to have full access to information and maintains relationships through social networks, the Internet, mobile phones and tablets. Every industry already leans more heavily on technology to transform their sales and customer-acquisition processes. Direct selling, which Carlucci calls the original social network, has to do the same.
“We have two sides of the same equation. The opportunities in our industry are part of the solution for the society.”
—Alessandro Carlucci, CEO of Natura and Chairman of WFDSA
“Today we know that customers rely more on product recommendations from friends or the number of stars a product or service has on the Internet than on advertising on TV,” he notes. “One of the main principles of our industry is recommendation. There is nothing more contemporary than what direct selling does. If we can leverage this recommendation—the trust between direct seller and customer—then we are in a very good position compared with other channels. Retail or Internet sellers don’t have the opportunity to do that.”
All of Carlucci’s comments are more than philosophies. They’re also action items at Natura, the company he has embraced since he finished business school in 1989. He became its CEO in 2005—the company’s first top executive from outside its three controlling stockholders. At that time, the company’s founder, Luiz Seabra, along with Guilherme Peirao Leal and Pedro Luiz Passos, moved out of day-to-day operations but remained co-chairmen of the board of directors. After running the company for 30 years, and just a year after the company went public, they signaled their trust in Carlucci by passing the torch to him—a man whose name has become virtually synonymous with Natura. When he accepted the Bravo Leadership Award in April during a special ceremony, a unique mini-movie introduced him and his company. When he spoke recently with Direct Selling News, his descriptions of the video and of Natura were clearly heartfelt.
|Carlucci (center) and other team members are presented with an award in honor of Natura’s ranking at No. 5 on the DSN Global 100.
“It’s about the pleasure, honor and responsibility of taking care of ourselves, of others and of the planet,” Carlucci says. “The belief that all of us have a unique and irreplaceable role in this world drives Natura and its value proposition to find innovative ways of doing business. We want to be a profitable enterprise that generates positive impact in people’s lives and in the environment. And we want to do that with joy, always seeking beauty and sharing the dream of a better world. What can be more universal than those themes?”
Those themes are captured in Natura’s motto: well-being/being well. The company describes well-being as the harmonious and pleasant relationship of a person with one’s body. Being well is the empathetic, successful and gratifying relationship of a person with others, with nature and with the whole.
Those beliefs are thoroughly integrated into Natura’s business practices. For example, six years ago Natura committed to reduce CO2 (carbon dioxide) emissions by 33 percent by 2013. It has made consistent progress, and last year the company was able to decrease its emissions by 4 percent over 2011 levels. Since 2006, it has reduced CO2 levels by 28.4 percent. By the end of 2013 it will have reached its goal of a 33 percent reduction by investing in reforestation, energy efficiency and fossil-fuel-substitution programs. It fights for efficiency in its distribution network, and it also selects its suppliers based on social and environmental criteria, as well as technical and economic criteria. In 2012, Natura reached a reduction of 7.4 percent of absolute greenhouse gases, compared to the amount in 2008. Carlucci emphasizes that its environmental results are as important as economic results to Natura.
“We want to be a profitable enterprise that generates positive impact in people’s lives and in the environment. And we want to do that with joy, always seeking beauty and sharing the dream of a better world.”
That distribution network is not only environmentally efficient, but it also delivers continuously improving service to Natura’s consultants. Carlucci says that the logistic footprint is designed to deliver any order in Brazil—the company’s largest market—within 48 hours, 93 percent of the time. And in keeping with the company’s emphasis on transparency, he acknowledges that, as good as it is, the system isn’t quite meeting its goals yet because costs are still a little too high. But the system has reduced out-of-stock products while it provides better information to the company’s consultants. That translates to better service to customers.
The salesforce and its customers are major focuses at Natura, and the company is investing in a project it calls the Natura Network to better understand its customers. Natura has launched a pilot project in the city of Campinas near São Paulo. In the city of almost 2 million people, Natura is using analytics to better understand the buying behavior of customers. The goal: to promote a significant evolution in the purchase experience of consumers, while increasing the capacity for consultants to generate business.
“Using analytics, we can give our consultants very good information about customers, which lets them offer very good service to customers,” Carlucci explains. “They will be able to offer customers what they really need and want without bothering them with offers they don’t want. We will be able to understand individual preferences and help our distributors offer the right thing to the right customer.”
Since in Carlucci’s view Natura is already a social network, analytics help the company and its consultants leverage those relationships, creating a winning scenario for everyone. Information gained in the Campinas pilot project will enable Natura to refine tools it can roll out soon to the rest of its salesforce. Carlucci notes that the consultants are partners in the project.
Other big plans include greater international expansion. Most of Natura’s business is in Latin America, especially Brazil. But with its universal principles, high-quality product line and appealing opportunity, Carlucci believes Natura would be well received in other parts of the world, including in the United States—the world’s largest market for direct selling and for cosmetics. But Natura executives believe that understanding culture in new markets is key, so they take a methodical approach and consider a variety of options for expansion.
“When you learn about different cultures, you don’t learn it from a book. You need to live it to understand it,” Carlucci says. “The best way to export good initiatives from one country to another is to do business in that place and really try to understand the local culture. Otherwise, you will have stereotypes that don’t explain how people behave and why people buy.”
He believes the key is hiring experienced people who already live in the new markets. For example, he points out that the companies that are being successful in China are doing well because they understand the way of life there. He compares Chinese culture to Latin American culture.
“China is a big country. What’s happening in one part of the country is different than in another,” he explains. “In Natura, Argentina and Chile are geographically close, but very different in values. It’s important for companies to have local people. Distributors can accelerate the international growth process, but it’s very important to be connected locally.”
With all that in mind, Natura hopes to accelerate the expansion process. It has been looking for new opportunities or even partnerships with other companies outside Latin America.
“We believe our brand and value proposition would be well accepted in the United States, but only by knowing the culture can we do good business,” he says. “We want to expand with some kind of partnership with someone who already knows how to do business there. If we try to do it alone, it will take a long time.”
Natura’s use of technology, its cultural and environmental sensitivity, as well as its creative expansion methods predict continued growth for the company. Carlucci reflects proudly on the opportunities his company has already created and looks forward to the future.
“We have a sales network of 1.5 million people in Latin America,” he observes. “We’ve been growing a lot, especially in new markets in Latin America. That’s an important sign that our value proposition is accepted. I believe we can still grow more, but this is a landmark for us. Direct selling is an amazing way to offer an opportunity for people to sell products and services.”
September 3, 2012 Leave a comment
Acquisition strategies to bring about growth have been tried by only a few direct selling companies, with Tupperware probably being the most successful. Tupperware is now known as Tupperware Brands and many product categories are now under their umbrella. The acquired company is most often operated as a completely separate company, for example in Avon’s acquisition of Silpada and Liz Earle and Tupperware’s acquisition of BeautiControl.
Heidi and Orville Thompson
Orville and Heidi Thompson, along with their company Scentsy, are introducing a strategy new to the industry. It could be breaking a paradigm. Scentsy is not only creating new brands but new and completely separate businesses under an umbrella named “The Scentsy Family.” We have not seen a strategy such as the one now executed by Scentsy, where new businesses are started that allow core consultant participation, but are structured as completely separate businesses. Scentsy has introduced two new businesses within the last 90 days. Scentsy is indeed making bold moves.
In considering the products themselves, there doesn’t seem to be continuity—from wickless candles to chocolate fondue to fashion and accessories. The owners, however, speak about simplicity, authenticity, generosity, aspirations and value—the intangibles that make up the Scentsy ethos—and how they all apply to each business.
An outsider may look at all of this as a bold but risky move. What is the strategic rationale from the founders’ point of view? How long did it take to complete the research, arrive at decisions and develop the concepts surrounding the new businesses? Where does the name Grace Adele come from? What measures were taken to keep the new businesses from distracting the current Scentsy sales organization as well as corporate staff? After all, Scentsy is considered a huge success in the industry, having achieved $537 million in revenue in 2011, up $155 million over the prior year, resulting in the achievement of being the 20th largest direct selling company in the world!
Most amazing to Direct Selling News was to find that the core management team, along with very insightful Scentsy consultants, helped to develop the founders’ vision. Core Scentsy staff—not new staff brought in to design and brand the new businesses—executed and launched two new and very different businesses within one year!
Their amazing story is an exclusive of Direct Selling News.
by Barbara Seale
Grace Adele joins the company’s original Scentsy Wickless brand of scented, wickless candles and other fragrance products. Velata, which offers patent-pending silicone fondue warmers and premium Belgian melting chocolate, was launched by Scentsy Inc. on May 1.
The Grace Adele product lineup is an integrated collection of accessories that consumers may mix and match to create their own unique look. The five-step process begins with a consumer choosing the color she wants to wear. Then the consumer chooses the handbag itself. Each handbag is designed with an Intelligent Interior™ that keeps the bag neatly organized, with inside pockets for cellphones, keys or Grace Adele accessories. Step three is choosing a clutch—one of six matching or contrasting mini handbags—that either tucks into the outside pocket of any Grace Adele bag or can be carried alone. Step four of the process lets the consumer accessorize the purse with a wallet, makeup bag, scarf or other finishing touch. Coordinating jewelry is the final step. Nine collections are available.
Scentsy Inc. executives worked with international designers to create the Grace Adele fall collection, which includes high-quality, faux-leather bags in five styles and seven colors, faux-leather clutches available in six styles and seven colors, and premium leather bags and clutches in four colors.
Scentsy founders and co-owners, CEO Orville Thompson and President Heidi Thompson, told Direct Selling News that the expansion provides their consultants a way to get a larger slice of the economy while providing additional opportunities to engage with hostesses. Each of the company’s brands appeals to a slightly different group.
“The secret to success in a party-plan business,” Orville says, “is the ability for consultants to get hosts to put on a party.” He notes that having additional products gives hostesses more incentives and confidence to hold parties more often for a wider group of friends.
Heidi adds, “A hostess might not be interested in candles, but she may be interested in chocolate or handbags or jewelry. We want them to do what they’re passionate about.”
Consultants can choose to offer any or all of the company’s three product lines. Each has a separate consultant agreement and starter kit.
The Thompsons told consultants in July 2011 that Scentsy would launch a new brand in another year, but while they had done basic research on options, they hadn’t identified the product line. They convened a Super Star Director summit, bringing in their top-ranked consultants to work on committees that made decisions about aspects of the new brand, including strategy and product development. The consultants signed nondisclosure agreements and then provided feedback on the possible new product line.
“We had samples to show them so they understood what we were thinking about,” Heidi explains. “They loved the concept we finally chose. For the past year we have met with them, had phone calls and talked about what we were planning to do.”
Orville says the core idea for Grace Adele came out of the frustration he saw Heidi experience when she shopped for clothing and accessories.
“Watching beautiful people who are extremely successful constantly question whether they’ve picked the right look inspired us to create a system of accessories that is decoded and has an intelligent concept,” he says. “We looked into all aspects of fashion and then narrowed it down with our Super Star Director committees to where it was a product we could launch with, but was expandable. It’s large enough to be a system but as small as it can be so that we can grow it based on the feedback of our consultants.”
As time grew closer to the launch at the company’s July annual convention, Scentsy began to tease its salesforce, offering clues about the much-anticipated new brand to add to the excitement. At the same time, they planned to introduce the new line with humor.
On the day of the big reveal, the Thompsons walked on stage wearing carefully constructed, designer duct tape outfits. Orville sported a duct tape suit, plus duct tape shoes designed by his son, and Heidi donned a duct tape dress. Calling on their best acting skills, they announced that the new brand would be called Sticky Style. They even explained the benefits of the sturdy fashion line. The crowd didn’t know how to react. But humor is a tradition at Scentsy, and veterans suspected something was up.
Then the Thompsons’ daughter, 9-year-old Grace, took the stage alone. Unbeknownst to consultants, she wore jewelry from the new Grace Adele collection—the brand named for her. She opened by humorously reviewing her own lifelong history with Scentsy, telling consultants that they were truly her family. She segued into her announcement that consultants would have an exciting new brand to offer their customers. Then she said, “But I’m just a little girl. I can’t tell you everything. Why don’t I just show you?”
Suddenly the stage became a fashion runway filled with wave after wave of Scentsy Super Star directors, along with the Spirit of Scentsy award finalists from previous years—all strutting like supermodels while they modeled Grace Adele handbags, accessories and jewelry in a myriad of combinations. When the fashion show ended, a video explained the product line’s concept and showed how each piece worked together. Then the Thompsons—sans Sticky Style—explained the system piece by piece.
“You could see the crowd change as they understood that Grace Adele wasn’t just random handbags and jewelry, but a full system,” Orville recalls. “You could see the moment when person after person realized: Holy cow, this is a game-changer. They all went through that process.”
Scentsy gave each attendee a free Grace Adele handbag—plus one of six different clutches and various pieces of coordinating jewelry. As the convention continued, consultants became walking demonstrations of how the system works.
“When they saw each other with each one carrying a basic purse that was accessorized with a different clutch and different pieces of coordinating jewelry, you could see the light bulbs coming on,” Heidi recalls. “They were saying, ‘Now I get it. Hostesses and customers will jump on this.’ ”
Consultants are already jumping on it. The brand announcement was at the Scentsy Family convention on July 26, and the new brand officially launched Aug. 1. The Thompsons spoke with Direct Selling News about 27 hours later, and by that time 5,000 people had signed up as Grace Adele consultants. About 170 of them were consultants who previously were unaffiliated with Scentsy. By the end of that first day, the company had sold $1.2 million of Grace Adele products. Orville believes that the Grace Adele brand has the potential to equal Scentsy Wickless revenues in three years.
That blastoff carried on a tradition of rapid growth for rocket ship Scentsy Inc., and it represents one more step toward the Thompsons’ goal of building a company that lets consultants create legacy organizations that they can pass on to their children and grandchildren.
Learn by Multitasking
Developing and launching the Grace Adele brand was a collaborative effort between Scentsy’s top consultants and corporate staff, but the staff did the legwork.
The Scentsy Inc. corporate staff took their consultants’ comments and critiques and incorporated them into the final product. The same team that runs Scentsy Wickless every day and develops new product extensions in that brand also put on new hats to develop chocolate-fondue brand Velata and then Grace Adele.
Company CEO Orville Thompson says the team successfully innovated a process of rapid prototyping, getting feedback and reacting quickly to that feedback to take a great product to launch. But he sees room for improvement.
“After the Velata launch we discovered that we’re good at launching, but after launch we’re not as good at continuing that same level of development and support on the brand,” Thompson says. “We’re in the process of making some changes.”
In addition to the functional groups, such as design, legal or public relations, the company has regions that are responsible for the consultant experience. Executives are leaning toward developing a third group of brand managers who focus on individual brands and the processes that support each.
“We think that the direct selling model we’re creating is a three-legged stool that is co-equal, strong and supported,” Thompson explains. “Right now we’re a little weak on the brand side, but we’ll get that tweaked over the next few weeks.”