Elken Gears Up for Opening of Philippines Market

Photo: Manila, Philippines.


Leading Malaysian direct selling company Elken is tapping into growth in the Asia Pacific region with its forthcoming entry into the Philippines.

The company coordinated a soft launch in the Philippines in December 2015, hosting public events to introduce its business model and extensive range of products, which number more than 500 across the categories of cosmetics, personal care, wellness, food and beverage, and home care. An organic spirulina supplement and water purification system are among the company’s top-selling products.

The Philippines is one of the fastest-growing direct selling markets in the world, according to research by the World Federation of Direct Selling Associations. From 2011 to 2014, constant dollar revenue from direct sales increased at a compound annual growth rate (CAGR) of 17.6 percent, outpaced only by growth in China and Vietnam.

With the official opening of the Philippines, Elken’s operations will extend to 11 markets, including Malaysia, Singapore, Indonesia, Thailand, Brunei, Hong Kong, India, Vietnam, Cambodia and Taiwan. The company, which has been in business for 20 years, has offices in 30 cities. Elken reported revenue of $233 million in 2013, earning the No. 50 spot on the 2014 DSN Global 100, before declining to participate in the 2015 ranking.

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Viridian Energy Brings Sustainable Power to Nicaraguan Community

Photo: The Viridian Energy team works to install solar panels in the village of Potrero Platanal, Nicaragua. (Viridian Energy)


This year residents of a rural Nicaraguan village turned on a light switch for the first time, thanks to Viridian Energy and its 7 Continents in 7 Years global sustainability initiative.

Connecticut-based Viridian launched the initiative in its first year as a company, looking to impact every continent through its sustainable offerings. In its fifth year, the renewable energy company set its sights on Central America and the remote village of Potrero Platanal. There Viridian partnered with GRID Alternatives, a nonprofit organization that provides off-grid solar power to rural communities in Nicaragua.

Viridian brought 36 of its top-performing associates and employees to the village, where they worked to bring solar power and light to 40 families. The team of “voluntourists” received special training before transporting the custom systems by hand or horseback and installing them throughout the village.

“As our fifth project, completed in our fifth year of operation, the work in Portrero Platanal represents our most ambitious project to date, as well as a significant milestone for Viridian,” Founder and CEO Michael Fallquist said in the company’s release. “I was personally proud to be a part of this installation as it serves as further proof of Viridian’s holistic efforts to fulfill our obligation as a responsible, global, corporate citizen.”

7 Continents in 7 Years began with reforestation efforts in the Amazon, where the company has returned annually and planted more than 1,700 trees through its Amazon Preservation Project. Viridian has also brought solar power and lighting and clean water pipelines to villages in Indonesia, Ghana and Fiji.

4Life India Moves into New Mumbai Headquarters

Pictured: 4Life India leaders light a traditional Indian lamp to inaugurate the new office.


4Life recently celebrated a milestone in India, where the company hosted employees and top leaders at the grand opening of its new office in Mumbai. The facility will serve as the new headquarters of 4Life India, which has operated from Mumbai, the capital city of the state of Maharashtra, since the market’s launch in 2008.

The Salt Lake City-based company has also announced an expansion of its Surabaya, Indonesia office. Like most direct selling companies, 4Life designs its offices with the independent distributor in mind. The Mumbai headquarters features meeting rooms for distributor training, a sales counter, and large office space for operations, marketing and distributor services.

“Our office includes a beautiful distributor area with ample space for distributors to interact with their prospects and share the message of 4Life,” said Manoj Shirodkar, 4Life India General Manager. “The look of the office is full of positive energy and represents the 4Life philosophy of Together, Building People.”

India is one of direct selling’s billion dollar markets, and while the regulatory atmosphere has posed challenges to many companies, industry sales show no signs of slowing. Retail sales topped $1.2 billion in 2013, an 11.7 percent increase over the prior year. India ranked sixth—behind China, Argentina, Venezuela, Indonesia and the Philippines—in terms of sales percentage growth.

90 Days of Direct Selling – Day 88

DSN_90Days_Email_Signature

Zhulian Marketing

2013 Net Sales: $127 million

Country: Malaysia

Zhulian Marketing has emerged as a direct selling innovator for its progressive, visionary Golden Business Opportunity as well as its reliable and innovative products. The company is presently doing business in Malaysia, Singapore, Thailand and Indonesia.

 

2012 Rank: 74
2012 Net Sales: $145 million
Sales Method: Not available
Compensation Structure: Not available
Products: Home care, food and beverage, nutritional supplements, personal care, cosmetics, air treatment, water treatment, sleep enhancement, hygiene
Markets: 4
Salespeople: 100,000
Employees: Not available
Headquarters: Penang, Malaysia
Executive: Teoh Beng Seng
Year Founded: 1989
Website: www.zhulian.com.my

 

Billion Dollar Markets

by Andrea Tortora

Direct selling is an industry proving its mettle as it prepares to take advantage of major growth opportunities fueled by technology, increased entrepreneurial support and the new emerging market consumer.

Global estimated retail sales topped US$178 billion in 2013, up 8.1 percent from 2012, according to the most recent data from the World Federation of Direct Selling Associations (WFDSA). The worldwide salesforce also grew, up 7.2 percent to 96 million independent contractors. Both are record numbers.

In 2013 there were 23 countries with annual retail sales above $1 billion. That group accounts for 93 percent of global sales. Of special note is the industry’s 6.8 percent three-year cumulative growth rate (CAGR). The figures reinforce direct selling’s strength and show its potential, says Alessandro Carlucci, CEO of Natura Cosméticos and Chairman of the WFDSA. “The opportunity this industry has to really be even more powerful is in taking advantage of the fact that we are living in a moment in our society when technology is reinforcing relationships and allowing us to do more and better business,” Carlucci says.

STRONG SUSTAINABLE GROWTH

This most recent data clearly illustrates direct selling’s sustainable growth—especially in times of economic recovery and improved governmental policies to support entrepreneurship. Among the direct selling associations reporting their data to the WFDSA Research Committee, about three-fourths of the markets show solid, sustained growth in the three-year compound annual growth rate.

Here’s why that is important: “If the year-over-year percent change represents the snapshot, then the three-year CAGR represents the video and shows the long-term change or the trend. The sustained growth of direct selling is shown in a positive CAGR,” says Amway’s Judy Jones, Chairman of the WFDSA Global Research Committee.

Data is reported using constant 2013 dollars, to remove currency fluctuations from the equation. As more companies participate in sharing sales data with each country’s direct selling association (DSA), the entire industry begins to gain actionable knowledge it can use to enable sellers to better serve customers.


Global estimated retail sales topped US$178 billion in 2013, up 8.1 percent from 2012, according to the most recent data from the World Federation of Direct Selling Associations (WFDSA).


The sales of the 23 billion-dollar markets in 2013 are familiar to those who follow this annual ranking. The top five countries account for 60 percent of direct selling’s global sales. All but one report a positive CAGR:

1.  United States, 4.6 percent
2.  China, 23.3 percent
3.  Japan, -4.4 percent
4.  Korea, 8.0 percent
5.  Brazil, 8.6 percent

China moved into the No. 2 spot for 2013. If the current rates of growth in the United States and China remain steady, China could become the No. 1 direct selling market in the next year or two.

Interestingly, the billion-dollar markets that make up the bottom five show tremendous cumulative growth, particularly in emerging markets:

19.  Australia, 2.3 percent
20.  Venezuela, 15.7 percent
21.  India, 20.0 percent
22.  Philippines, 17.8 percent
23.  Indonesia, 12.0 percent


This most recent data clearly illustrates direct selling’s sustainable growth—especially in times of economic recovery and improved governmental policies to support entrepreneurship.


The numbers reinforce trends seen in the past two years. Direct selling is growing rapidly in the Asia Pacific region and Africa—dubbed the “new frontier” by Carlucci. Africa posted just over 9 percent year-over-year sales change for 2013, trailing only Asia Pacific at 12.6 percent.

“Africa is a place where everyone should put a seat now, because in 15 years it will be very relevant,” Carlucci says.

Following closely is the Central and South American region, which also posted just over a 9 percent year-over-year sales change. Six Latin American countries—Brazil, Mexico, Colombia, Argentina, Peru and Venezuela—are billion-dollar markets. More multinational companies are starting to do business in Central and South America, where consumers embrace direct selling.

POWERFUL NEW MARKETS

The desire to improve one’s socioeconomic standing remains strong in emerging markets, which translates to excellent growth potential for direct selling. In fact, seven of the billion-dollar markets with double-digit cumulative growth rates are emerging markets, according to the WFDSA data:

  • Argentina, 28.1 percent
  • China, 23.3 percent
  • India, 20.0 percent
  • Philippines, 17.8 percent
  • Venezuela, 15.7 percent
  • Indonesia, 12.0 percent
  • Colombia, 11.6 percent

Direct selling is a very relevant marketing and sales model for emerging markets, says Derrick Irwin, Portfolio Manager for the Wells Fargo Advantage Emerging Markets Equity Fund. In many of these countries, the retail industry is not fully developed and companies cannot put products on a Wal-Mart shelf. “There is also skepticism among consumers about counterfeiting and quality products,” Irwin says. “If items are being sold by someone they trust, it is powerful. The opportunities are very, very good.”

Companies like Avon know how important international markets are for growth. The global beauty direct seller derives 85 percent of its business outside the U.S., and 75 percent of revenues come from emerging markets, says CEO Sheri McCoy. Avon’s priority? Growing its top markets, which include: Brazil, United States, Mexico, Russia, Central Europe, Venezuela, Argentina, Colombia, United Kingdom, Philippines, Turkey and South Africa.

China is also a huge market with infinite business opportunities. Leo Zhou, Deputy Director of Media Affairs at Mary Kay China, believes direct selling is a perfect match for China’s huge population, and that the interpersonal interaction at the industry’s core is quite effective in low-tier cities. He says, “It ensures that the direct selling industry could get into contact with female consumers in a faster and more precise way, thus promoting sales growth.”

Despite being a more mature market for the industry, Latin America is still a developing region with an entrepreneurial middle class that is seeking ways to maximize individual and household incomes, as demonstrated by the number of countries represented on the list, and growing activities in even more. Miguel Francisco Arismendi, Amway’s Director General for the Andean area, based in Bogota, Colombia, says, “There is no doubt that direct selling provides opportunity.”


“Africa is a place where everyone should put a seat now, because in 15 years it will be very relevant.”
—Alessandro Carlucci, CEO of Natura Cosméticos and Chairman of the WFDSA


EMERGING MARKET CONSUMERS

The world’s new consumers are a diverse group. Some are affluent and ready to spend their newly robust income on fulfilling their dreams and ensuring a better life for their children. Others are just beginning to realize their buying potential as they are exposed to the wealth of available products. The new middle class in Indonesia, India, Nigeria, Ghana and Kenya are confident consumers who plan to buy more, save more and invest in education, according to research from Standard Chartered, a London-based international bank.

These emerging consumers have a wide range of incomes and a wide range of desires to follow, including such things as an appetite to travel and willingness to invest in a new car, and some can even consider buying luxury goods. In less developed markets, currency fluctuations and commodity prices impact the consumer spend. Wells Fargo’s Irwin says, “The problem in core countries is that so much of the family budget goes to food, so if those prices fluctuate that squeezes the budget for other things.”

Whereas an American will generally buy shampoo no matter what, in countries like India it may not be a regular purchase. To get around this hard economic truth, companies like Hindustan Unilever Limited offer single-use package sizes for the price of a rupee or two (2-4 US cents). “It takes creative marketing and strategies to really access these markets,” Irwin says.

Another example: In China, direct selling successfully advances the development of consumers’ personal-care habits in low-tier cities and stimulates their willingness to spend more on premium products. Consumers in fourth-tier cities spend an average of 220 yuan (about US$38) each year per capita at cosmetics stores, whereas in the direct selling channel, consumers spend 540 yuan (about US$88) each year. Mary Kay’s Zhou says, “This fully demonstrates the consumption potential of third-tier and below cities.”


The new middle class in Indonesia, India, Nigeria, Ghana and Kenya are confident consumers who plan to buy more, save more and invest in education, according to research from Standard Chartered.


As emerging market consumers flex their collective spending muscles, a preference for local or domestically based brands is becoming evident. In the past 20 years, multinational brands dominated consumer brand preferences. As locally based companies achieve scale and develop their own brand strength, they are beginning to compete with multinationals. Irwin says, “Consumers are more open to buying local brands to support local businesses and show their pride in the local market.”

In China, where consumers have long aspired to acquire products with names like Gucci, Nike and other big Western brands, local brands are gaining market share as they fill a niche in the middle ground between the luxury and inexpensive brands. China-based Belle International is one of them. The company makes mid-range women’s shoes and is like the Nine West of China, according to Irwin.

In India, the domestic Godrej Consumer Products now claims more than $1 billion in revenue, taking a stab at the more established Hindustan Unilever. “They are getting to scale, and they are creating disruptions,” says Irwin. This bodes well for direct sellers, who build their business on micro-local enterprises and interpersonal connections.

EMPOWERING ENTREPRENEURS

At the heart of direct selling is the ability to offer people the chance to feel empowered, to take control of their lives and to add value to society. This fuels entrepreneurship, self-employment and microenterprises. Research shows that such ventures strengthen a country’s economy.

Alan Finkelstein Shapiro, a researcher at the Universidad de los Andes in Colombia, finds that “economies with larger self- employment shares exhibit faster recoveries following a negative economy-wide productivity shock.”

The entrepreneurial aspects of direct selling empower women and can be attractive to those under age 35 who more often want to be their own boss while also helping others. Sandra Whittle, Managing Director for Partylite U.K. & Ireland, says a favorite quote she shares with those new to direct selling is, “If at first you do succeed—try to cover your amazement.”

Whittle says consultants must be willing to put in the work because experience cannot be bought, and it is particularly important to earn the respect of colleagues and of the field.

Just as important is harnessing the excitement of those who want to be sales leaders, says Andrea Slater, with Avon U.K. “We need to ensure that we capture that enthusiasm within a specific timeframe,” she says. “Then, we need to fan the flames and keep them motivated, engaged and rewarded.”

Mary Kay’s Zhou says that in countries like China, business startups and entrepreneurship are becoming easier to navigate on the policy front, as well as becoming more accepted forms of livelihood for the younger generation. He continues, “Direct selling can help them to fulfill their dream of initiating businesses, and to gain earning opportunities and freedom with the thinking approach and behavioral model of their own characteristics, which constitutes a career development mode catering to the ideal of modern youths.”

For women, in particular, direct selling is an opportunity to contribute money to the household and develop a degree of independence. This is especially true in rural areas and farming communities. Irwin cites Hindustan Unilever Limited as an example. The Mumbai, India-based consumer goods firm employs 65,000 women through its Shakti direct selling initiative. These women sell products in their villages, giving Hindustan Unilever and the women themselves a huge economic opportunity they wouldn’t have otherwise.


Alan Finkelstein Shapiro, a researcher at the Universidad de los Andes in Colombia, finds that “economies with larger self-employment shares exhibit faster recoveries following a negative economy-wide productivity shock.”


THE YOUNGER GENERATION

As an industry, direct selling companies recognize the importance of recruiting young people under age 35 to become consultants as well as consumers of its products. Doing this means using a technology-rich approach and being socially responsible, says Amway’s Arismendi.

In Latin America, direct selling is equipping consultants with social media tools that enhance day-to-day communications. Amway is aggressive in studying tools that promote the use of technology in the field. “This will not replace the personal touch, but it will complement it,” Arismendi says. “Direct communication and social networking can be much more effective than conventional sales and retail.”

SPOTLIGHT ON REGIONAL MARKETS

UNITED STATES

The No. 1 market for direct selling saw 2013 retail sales of $32.7 billion, up 3.3 percent from 2012. Between 2010 and 2013, the compound annual growth rate was 4.6 percent in the country. The U.S. accounts for 18 percent of worldwide direct selling sales, generating about $1 for every $6 retail dollars globally.

The U.S. salesforce also grew 5.7 percent, to 16.8 million people, which is a record high. The most prevalent sales method is face-to-face, with 70 percent of consultants using this avenue, according to the U.S. DSA.

The product groups with the strongest percent of market share are wellness and services, making up 28.5 percent and 22.9 percent of sales, respectively. New segments are also using direct selling, such as energy, says U.S. DSA President Joseph Mariano. “Direct selling is a smart, go-to-market strategy for many products, especially those that benefit from explanation or demonstration. In the case of utilities, most Americans aren’t used to having a choice in their provider, so they benefit from guidance to make an informed decision.”


“Direct selling is a smart, go-to-market strategy for many products, especially those that benefit from explanation or demonstration.”
—Joseph Mariano, President, U.S. DSA


CHINA

Given current rates of growth, China will most likely surpass the U.S. in market size for direct selling, becoming the industry’s No. 1 market. Its 2013 retail sales were $27.3 billion, up an astounding 41 percent from 2012. China also enjoys the industry’s highest cumulative growth rate at 23.3 percent.

“With the acceleration of the global economic integration progress, China promises tremendous market potential as the second largest economy worldwide today,” says Mary Kay’s Zhou. U.S. direct selling giants Amway, Mary Kay and Nu Skin are among the largest companies operating in China. Several domestic Chinese direct selling enterprises also are a noticeable force. Competition across the country is moderate, with 44 licensed enterprises.

Cosmetics consumption keeps growing at an average annual growth rate of 15 percent, despite an overall economic slowdown. China trailed only the U.S. and Japan in consumer cosmetics spending in 2012. Women play a key role in those numbers and are increasingly active in economic consumerism. “As the number of employed women increases and their status in social and economic development rises steadily, their role in consumption is also becoming more prominent,” Zhou says.

Chinese women now control 60 percent of domestic consumption and make 77.5 percent of household purchase decisions. This far exceeds the purchasing power of men and children.

As China grows and becomes a more relevant market, the WFDSA’s Carlucci believes that the industry must put more energy into “understanding how we communicate and maintain the fundamentals of the industry” in a way that can be understood regardless of the country.


“…The recent statement from Esther McVey, Minister for Employment, saying, ‘Being your own boss is as impressive as a degree,’ appears to give more credibility to self-employment than ever before.”
—Lynda Mills, Director General, U.K. DSA


EUROPE

Direct selling continues to grow at a steady pace in Europe. Retail sales topped $31.6 billion in 2013, and 12.7 million people work as independent consultants across Western, Central and Eastern Europe. “Europeans have embraced the entrepreneurial spirit and increasingly recognize direct selling as an appealing (and sometimes preferable) alternative to a traditional job,” says Marinda Chaplin, Vice President at SUCCESS Partners Europe.

As recovery continues from the economic recession, the U.K. is seeing more encouraging trends, especially in the area of self-employment. Lynda Mills, Director General of the U.K. DSA, shares that recent information from the Office for National Statistics reveals self-employment is at its highest level in 40 years with 4.5 million people. “This, coupled with the recent statement from Esther McVey, Minister for Employment, saying, ‘Being your own boss is as impressive as a degree,’ appears to give more credibility to self-employment than ever before,” Mills says.

Mills reports that during the recent recessionary years, direct selling in the U.K. has seen year-on-year growth in a variety of demographics, and some direct sales companies are enjoying double-digit growth. With young people being notoriously risk adverse, direct selling is an ideal option for people in many age ranges and from varied backgrounds.

“We have seen more young people between 18 and 25 working in direct selling with 29 percent (75,000) of U.K. direct sellers under age 25,” Mills says. On average, 38 percent of direct sellers are over age 50, representing a rise of more than 32,000 people since 2011.

Direct selling is also increasingly appealing to a multi-cultural audience. In a recent survey of its members, the U.K. DSA discovered that 30 percent of direct sellers (120,000 people) in the U.K. are non-British. DSA member companies attribute this to a rise in interest of people from places like Asia and Eastern Europe, according to Mills.

People in the U.K. are turning to direct selling as a real alternative to traditional employment, with 68,000 direct sellers (17 percent) working full-time hours (more than 30 hours a week). This is up 20,000 from 12 percent in 2011. “Direct selling here in the U.K. really has entered the mainstream,” Mills says.

One factor in the sustainability of the industry is the increasingly digital nature of the world economy. Technology enhances the core aspect of direct selling. Embracing the digital age can ignite new growth in mature markets like the United Kingdom, which enjoys a 10.4 percent three-year compound annual growth rate and reported $3.3 billion in 2013 retail sales.

Germany posted a three-year CAGR of 5.8 percent. The direct selling model enjoys a positive image in the country, says Guido Amendt, Mary Kay Germany’s Director of Marketing. He adds that a sustainable increase in purchasing power per capita offers opportunities for consumers to buy high-quality products through direct selling.

In France, direct selling continues to grow regardless of the economic climate. When it comes to increasingly competitive markets such as cosmetics and jewelry, direct selling leverages innovation as a growth solution, says Jean-Laurent Rodriguez, Director of Communication and Training for the Federation de la Vente Directe, France’s DSA. In 2013, France recorded sales of $5.3 billion. The country’s cumulative annual growth rate between 2010 and 2013 was 3.4 percent.

Continued expansion in the industry is driven by several factors. France is enjoying a growing number of new companies with new brands and new products, such as textiles, shoes, home decoration, gastronomy and health care, Rodriguez says. These companies are international and national industrial groups, medium-sized companies and startup firms. Agreements between the Federation de la Vente Directe and government ministries (higher education, national defense and public institutions) ensure that direct selling is a viable option.

AFRICA

The WFDSA’s Carlucci sees Africa as an interesting continent right now for direct selling although, currently, the only DSA exists in South Africa. South Africa’s 2013 retail sales were $720 million, and its three-year cumulative growth rate is 6.8 percent. “Direct selling is very relevant here because it is a way to be an entrepreneur, and other retail channels are not developed,” Carlucci says.

Multinational companies are taking interest in the continent, says Wells Fargo’s Irwin. That’s because it is a huge market. Irwin cites Nigeria as an example. The country is home to 180 million people and just 10 supermarkets. “The rest are local markets and product distribution via trusted networks,” Irwin says.

LATIN AMERICA

Central and South America are comprised of fast-growing countries known for their entrepreneurship culture. Ernst & Young, in its G20 Entrepreneurship Barometer 2013, ranks Argentina, Brazil and Mexico as some of the best world economies for entrepreneurs. The same can be said for the region’s direct selling prospects. The industry is well established in Latin America, where customers like to buy from people they know. Additionally, it is a market with potential because retail is not well developed in many regions.

Latin America’s direct selling billion-dollar markets are:

  • Brazil, $14.2 billion
  • Mexico, $8.1 billion
  • Colombia, $3.3 billion
  • Argentina, $1.9 billion
  • Peru, $1.9 billion
  • Venezuela, $1.4 billion

In Latin America, the “family factor” is very important and makes direct selling attractive as a self-employment option. Unlike in the U.S., children look to go to college close to home and remain with their families. Many career decisions center on one’s family, which makes direct selling attractive as a source of income in addition to traditional employment.


“Direct selling is an opportunity to work but remain close to the family and to have additional income for the needs of the family. So this makes a difference. There is flexibility and management of their own time.”
— Miguel Francisco Arismendi, Director General for the Andean area (of South America), Amway


“Direct selling is an opportunity to work but remain close to the family and to have additional income for the needs of the family,” Arismendi says. “So this makes a difference. There is flexibility and management of their own time.”

Direct selling is also becoming a full-time work option, says Pio del Castillo, Mary Kay’s Manager of Corporate Communications. Brazil ranks No. 5 among the industry’s billion-dollar markets. Direct selling retail growth in the country is related to the economic recuperation of international markets, del Castillo says. The country posted year-over-year retail sales growth of 7.2 percent, making for a three-year CAGR of 8.6 percent. The number of sellers grew as well, reaching 1.3 percent, to 4.5 million.

Brazil also boasts a diverse market with access to information. One important factor boosting direct selling in the region includes traditional retailers such as O Boticario adding direct selling to their marketing efforts. Del Castillo says, “The Brazilian economy grew only 2.3 percent in 2012, but Brazil still remains one of the most important players in the direct sales market.”

 

TECHNOLOGY, DATA WILL FUEL FUTURE GROWTH

Technology in all its forms is an essential ingredient to the future growth of direct selling, according to industry executives and economists. “The Internet and digital technologies, mobile devices, social media and access to more robust data will allow direct selling companies to dramatically increase the level of service they offer to their salesforce and customer base,” says Alessandro Carlucci, CEO of Natura Cosméticos and Chairman of the WFDSA.

“We will be able to (and some companies now can) know who the final customer is, what their preference is, who the distributors are and how can we help them with good CRM systems and analytics,” Carlucci says.

Better information lets consultants individualize their service and marketing approach for each customer. Instead of a mass-appeal catalog, direct sellers could offer targeted online videos in an effort to deliver the right thing for the right customer. “We can skip the segmentation phase and leap frog from a mass approach to an individual approach, thanks to technology,” Carlucci says. “To me this is a revolution.”

The ability to harness technology’s benefits leverages relationships, according to Carlucci, who adds, “These efforts should also boost direct sales in mature markets because it will present newly available services.” The consumer’s direct selling buying experience could be even better than the Internet because of the product and experience support the personal connection offers.
 
The importance of the Internet, data and mobile Internet to emerging markets cannot be overstated, according to Derrick Irwin, Portfolio Manager for the Wells Fargo Advantage Emerging Markets Equity Fund. He says, “In many places it provides the only access to media and outside data that many people have.”

Consumer company models being developed in India, China and Brazil show a massive portion of advertising spend being allocated for mobile campaigns. And the marketing method is about to explode. Smart phones and 3G networks are established in China and are just beginning to take off in Brazil and India. In Africa, says Irwin, “there is no other way to talk to people. You can go to these countries where there are the poorest of the poor, and they are using mobile phones in ways that are so creative.”

In China, mobile technology is opening new markets and acting as a catalyst for the development of logistics networks into the far corners of the country’s low-tier cities, according to Leo Zhou, Deputy Director of Media Affairs at Mary Kay China. He says, “Consumers are becoming increasingly smart and are unprecedentedly connected with multiple media, being surrounded by a diversified web of information.”

The proliferation of information across the Internet, as well as easy access to it, makes it simple for any consumer to get the information and products they need and want. The rapid expansion of China’s e-commerce network into low-tier cities caught the attention of logistics companies, who brought their services to the same areas. According to Zhou, this increases product delivery speed and lowers operational costs.

All of these technology changes amount to a modernizing of the direct selling industry in the digital age. Companies should be looking at how much they are investing now to leverage the relationships they have and how they understand consumer behavior. “There are a lot of good questions we should be able to answer, and this is the time,” Carlucci says. “In 10 to 15 years we will live in a very different world. We need to take advantage of the technological opportunities now.”

Stella & Dot Foundation Now Partnering with Every Mother Counts

This week, social seller Stella & Dot re-launched its Stella & Dot Foundation in partnership with Every Mother Counts, a campaign dedicated to making pregnancy and childbirth safe for every mother. The foundation was created in 2010 to further the fashion and accessories brand’s mission of helping women style their own lives.

“We are committed to making a difference in women’s lives,” Stella & Dot Founder Jessica Herrin shared in a statement. “It’s important for us to extend that mission to impact the lives of women and their families, at home and around the world through the Stella & Dot Foundation.”

Every Mother Counts currently operates in Indonesia, Haiti, Uganda, Malawi and the United States. The organization was founded by Christy Turlington Burns, a model, entrepreneur and activist named one of Time‘s 100 Most Influential People of 2014. Burns directed the documentary No Woman, No Cry to raise awareness of the women dying—287,000 every year—due to largely avoidable complications during pregnancy.

“Every Mother Counts is excited to partner with Stella & Dot’s mission-driven community to help us achieve our goal to make pregnancy and childbirth safe for every mother,” said Burns. “We know we can’t do this work alone and are always reassured that there are others who want to contribute in meaningful ways.”

To kick off the new partnership, all net proceeds of the Stella & Dot Foundation’s new Enlighten Bracelet will benefit Every Mother Counts. At Every Mother Counts, 100 percent of every donation goes to programs supporting its mission around the world.

Viridian Energy: Energized by Global Vision

by Barbara Seale

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Viridian

Company Profile

Founded: 2009
Headquarters: Stamford, Connecticut
Executives: Michael Fallquist, Founder and CEO; Meredith Berkich, President
Products: Environmentally responsible electricity, natural gas and solar power


It may not be easy being green, but Viridian Energy has turned greenness into a multimillion-dollar direct selling powerhouse with a global vision: to create a path to a more sustainable future.

Many companies, both within and outside of direct selling, have sustainability initiatives, but at Viridian, it’s the whole ballgame. Not only does every product—electricity, natural gas and solar energy systems—promote environmentalism and sustainability, but the company even extends its vision through philanthropic projects and incentive trips where top earners celebrate success and also help create green energy solutions at their destinations.

Michael Fallquist
Michael Fallquist
Meredith BerkichMeredith Berkich

The company is the creation of Michael Fallquist, its founder and CEO. As a native of the Pacific Northwest, Fallquist had “green” in his DNA. His professional background was in the energy industry. When he decided to develop his own company, he knew it had to reflect his passion for environmentalism, sustainability and reducing the world’s carbon footprint. Green energy was his only acceptable choice.

But how do you market it? Retail energy is commonly sold directly to the consumer through advertising, telemarketing, direct marketing or door-to-door sales. But Fallquist knew he had to answer the consumer question, “Why use green energy?” He also knew that, as energy deregulation progressed, he wanted the consumer’s choice of product to be based on more than just price. Direct selling filled both of those needs. Viridian associates could explain deregulation as well as the benefits of exercising their personal energy choice to make a collective impact. In direct selling—as a result of associates’ personal relationships—customers tend to be more loyal, or stickier, than those of companies that compete solely on price.

So in 2009 Fallquist launched Viridian Energy, and the business immediately exploded. By its second full year in business, Viridian had broken into the Direct Selling News Global 100, and in 2013 it reached No. 45, with revenues of $267 million and 22,065 active Viridian associates in nine states. Last year alone the company’s green products reduced carbon emissions by more than 2 billion pounds. That number equates to recycling more than 7 billion soda cans, 15 billion two-liter plastic bottles or 164,000 Sunday editions of The New York Times. Those numbers have continued to grow. In the first quarter of 2014, Viridian enrolled more than 50,000 customers and 5,000 associates.


Last year alone, Viridian’s green products reduced carbon emissions by more than 2 billion pounds. That number equates to recycling more than 7 billion soda cans, 15 billion two-liter plastic bottles or 164,000 Sunday editions ofThe New York Times.


Sustainable Planet, Sustainable Business

Seven in Seven

When an energy company’s goal is to help create a more sustainable world, which requires a thoughtful approach to everything it does, the slogan “think globally, act locally” takes on new meaning. That’s exactly what’s happening at Viridian Energy.

Although it currently offers green energy in just nine states and the District of Columbia, Viridian plans for its sustainability efforts to reach around the globe through its 7 Continents in 7 Years program. Each year, Viridian will research and execute a sustainability project internationally that it believes will have a significant positive influence on the global community. The effort got underway almost as soon as the company did.

Each year since 2010, executives and top sales leaders along with their guests have traveled to points around the world to complete a sustainability project while they celebrated sales success. In Brazil they planted trees and worked on reforestation efforts. Then the sustainability initiative took them to Ghana, where they brought light, by way of solar panels, to villages that never before had electricity. Later they journeyed to Indonesia to reforest the previously cleared land and to bring fresh water and solar power to local communities. This year their destination was Fiji, where they completed solar installation and reforestation projects.

Mindful that sustainability starts at home, they also “act locally” through numerous projects in their northeastern U.S. markets. The company hosts at least one local event each month in its active states and markets and hosts as many as 30 during April each year for Earth Month.

On a number of occasions Viridian has partnered with NYC CoolRoofs, a group that brings together volunteers to paint New York City residential roofs with a white reflective coating that not only cuts cooling costs and energy use, but also prolongs the life of the roof itself.

A project at the nonprofit Silver Lake Nature Center in Pennsylvania included constructing an Earthship, an off-the-grid education center built from recycled materials, utilizing cutting-edge, sustainable designs such as solar thermal heating and cooling, onsite renewable energy generation and water-recycling systems.

Viridian also planted a monarch butterfly garden in New Jersey. Every year, monarch butterflies migrate as many as 3,000 miles to their “winter homes” in California or Mexico. The food they eat before and during their migration south must power them through the long journey and sustain them throughout the cold months. Viridian volunteers planted the special garden at the Manalapan Township Recreation Center in New Jersey, filled with the kinds of flowers monarchs crave. What was once lawn is now a beautiful butterfly habitat for visitors to learn from and enjoy.

A sustainability project in Southington, Connecticut, helped restock drinking water supplies in the Quinnipiac River Watershed. Fresh water is becoming increasingly limited due to pollution and overuse, but rain gardens help keep fresh, clean rainwater out of the sewer system, replenish groundwater and protect waterways from pollutants.

Viridian also responded when Hurricane Sandy wreaked devastation on the East Coast in 2012. The company’s associates traveled from as far away as Illinois to New Jersey, Staten Island and the Rockaways with their work gloves and tools to help clean up the storm’s damage and deliver critical supplies to families.

Whether the project is in one of its energy markets or on another continent, it reflects Viridian’s commitment to the environment. Viridian President Meredith Berkich explains: “Our approach is holistic. Can we make a real and lasting impact on the world? We think we must. We believe that this change is so much about who we are that we provide ways for associates to take part in it.” She adds, “The very core of who we are is making a difference in the world. Through these projects, people experience something they would never have been able to experience otherwise.”

Electricity, natural gas and solar energy are three environmentally responsible products Viridian offers. The company’s electricity products—Everyday Green® and Pure Green™—are already both backed by a high percentage of green energy, through the purchase of Renewable Energy Certificates (RECs). Everyday Green supplies electricity that is 50 percent renewable, in addition to the renewable portfolio standards set by most deregulated markets, and Pure Green is sourced 100 percent from wind power. Viridian’s Simply Right™ natural gas products offer consumers and businesses a thoughtful and practical way to address the biggest concerns related to natural gas, and the company mitigates customers’ emissions through carbon offset purchases. Customers may choose from Simply Right natural gas, which is 25 percent offset, or Simply Right 100, which is 100 percent offset. Viridian also contributes to a research fund to support more responsible extraction of natural gas.

But today’s energy products, as green and sustainable as they are, are expected to pale in comparison to energy’s new kid on the block: solar. Not only does it offer consumers—even those outside the sunshine belt—a money-saving, sustainable energy choice, but it also offers a great long-term solution for Viridian’s goal of longevity. Viridian Energy President Meredith Berkich explains why.

“When we looked at the solar energy market and how fast it was growing, we knew we had to get in on that,” she says. “Solar is growing wildly, and it’s an important method for how fast we can impact the world. Back in 2008, one solar energy system was being installed every 80 minutes. In 2013, one was being installed every four minutes. By 2016, it will be one every 80 seconds. If we had ignored the trend, continuing to offer only electricity and natural gas, our business would have gradually begun to diminish over time as consumers became their own generators. When we talk about being part of local change, we must constantly evolve to be relevant and provide value.”

To be part of that change, last year Viridian Energy partnered with SolarCity—the country’s No. 1 full-service solar provider—to offer solar energy systems to its customers and another valuable product to its associates. When a Viridian associate sells a solar energy system, several important things happen. First, SolarCity takes care of everything from permits to panels. All the customer has to do is soak up the sun and enjoy locked-in lower rates. Second, Viridian Energy gains a long-term customer. Third, the cleanest, most sustainable energy currently available goes into use. And finally, the Viridian associate earns a 20-year residual income on the solar energy system.


“[Viridian’s business opportunity is] about three helps: You’re helping your wallet, helping your friends with their business and helping the environment.” —Meredith Berkich, President


That type of innovation is just one of the things that attract Viridian Energy associates to the company. Another compelling magnet is that no inventory is required. For customers, changing energy companies is simply a matter of paying the utility bill they already pay.

“It’s about three helps: You’re helping your wallet, helping your friends with their business and helping the environment,” Berkich explains. “Associates like it because it’s all benefit-driven to their warm market, but definitely they appreciate the green component. This group seems to be very motivated by significance and community. They get to make a difference and be a part of something bigger than themselves. There’s something so appealing about that.”


President Meredith Berkich helps with beach cleanup in Fiji.

President Meredith Berkich helps with beach cleanup in Fiji.


Predictable Income

While Berkich doesn’t call the energy business recession-proof, she does note that it suffers far less during tough economic times than a company that offers more optional consumable goods. For a company launched during a recession, that’s a big plus.

“I used to be in a nutraceutical company, and during economic downturns we watched autoships plummet,” she recalls. “People assessed their tight budgets and asked themselves what they could cut. But during the recession, people continued to use electricity and natural gas. Maybe they were more careful about turning their lights off, but no one stopped paying their energy bills. Even before people pay the mortgage and car payment, they’ll keep the heat on. That will never go away. It was a perfect time to start out as a network marketing company in the energy space.”

While the consistent demand for energy can create predictable income for Viridian associates, they have to learn some of the variables of the industry. Energy is deregulated on a state-by-state basis, and each state has the ability to implement different regulatory components. It is critical to Viridian’s success that its associates are informed on the local guidelines and requirements so that the company maintains a constant culture of compliance. Viridian ensures that its associates can discuss deregulation confidently with their prospective customers by requiring each new associate to complete training on energy deregulation and regulatory issues before they can enroll a single customer. They complete the training online in their back office in about 45 minutes. Then they are certified to represent Viridian to their family, friends and warm market. Additional training, updated monthly, is available in their back office on everything from market conditions and products to the future of the industry. They also receive Success on Demand, instant online access to a library of personal development content, at no additional charge. Education and compensation seems to pay off as the average Viridian associate enrolls 15 customers.

Founder and CEO Michael Fallquist participates in Fiji’s reforestation efforts.Founder and CEO Michael Fallquist participates in Fiji’s reforestation efforts.


“We consider associates our business partners,” Berkich says. “We’re asking them to invest their most precious resources: their time, their credibility, their talents, their name and their relationships. Money can’t buy those things. In honoring that relationship, we feel a responsibility to be transparent. We view them as investors, and that’s how we talk to them in all of our communication touch points.”

Passion Payoff

When Berkich discusses Viridian’s future, she looks beyond the company itself to all the ways it can improve the planet. One of them is the influence Viridian can have on other energy companies. It substantially exceeds regulatory requirements for the renewable energy sources for its products and takes transparency to unprecedented levels through its detailed annual accountability report.

“People ask us, ‘Aren’t you concerned about putting the whole business model and the method of operation in print?’ ” she says. “But the reality is that our devotion and commitment to responsible energy solutions isn’t only about Viridian making a difference. It’s also about other industry leaders being inspired and changing their business practices. We’re about global change and collective impact. We want to inspire our competitors to do what we do. It’s the only way we’ll get the ripple effect that will change the world.”


Creating Scale


Viridian President Meredith Berkich states it plainly: To be a sustainable energy company, scale matters immensely.

To create that scale, in 2012 Viridian Energy Founder Michael Fallquist established Crius Energy, which encompasses a family of brands that already serves more than 600,000 residential and commercial energy customers in 19 states and the District of Columbia, with plans to continue expanding its geographic reach. The company was listed on the Toronto Stock Exchange in 2012. The largest member of the Crius family—currently more than half of it—is Viridian Energy.

Like Viridian, the other companies under the Crius umbrella share the goal of making the world a better place to live. They are committed to being socially and environmentally responsible by supporting local communities and improving the planet. Crius headquarters are in a 23,000-square-foot, Energy Star-certified workspace in Stamford, Connecticut.

The Road to $1 Billion

by J.M. Emmert

DSN Cover, April 2014

When Inc. magazine named Ambit Energy America’s fastest-growing private company in 2010, the then 4-year-old company’s annual revenue already had reached $325 million, making it one of the 40 largest direct selling companies in the world.

A year after the Inc. article appeared, the revenue number had doubled to $664 million. And 24 months later, Ambit did what very few direct selling companies have been able to do: break the billion-dollar barrier.

Hitting $1 billion in revenue is a milestone for any business, and to do so in seven years puts Ambit’s growth on a trajectory in line with some of the most recognizable brands of the past few decades: Apple (six years), Facebook (six years), Amazon (four years), eBay (seven years) and Google (five years).

Technology certainly helped. Co-Founders Jere Thompson Jr. and Chris Chambless have pointed to the company’s data processing technology as a key factor in Ambit’s rapid expansion. And Ambit, like all modern direct sales companies, leverages the connectivity afforded by the Internet as well as social media platforms in its sales strategies.

Yet despite the ubiquitous nature of technology, the billion-dollar milestone remains elusive for many direct sellers. In order to better understand what it takes to break through that barrier, we decided to study some of the members of direct selling’s Billion Dollar Club: six from the United States—Ambit, Amway, Avon, Herbalife, Mary Kay and Nu Skin, as well as Germany’s Vorwerk, Brazil’s Natura and Peru’s Belcorp.

What is it that makes them billion-dollar companies? What do they have that other companies are still trying to learn and to possess? In our review, we identified four key drivers behind the members of the Billion Dollar Club.


Growth Comparison ($0-$1 Billion)


1. They were founded by outstanding leaders.

Which one would you invite to dinner: the visionary, the revolutionary, the dream-builder, the groundbreaker, the risk-taker, the mover, the shaker or the history-maker? In the Billion Dollar Club, you’ll find them all sitting at the table.

Take Amway’s Jay Van Andel and Rich DeVos, for example. Van Andel was a firm believer in and fierce advocate for free enterprise, and DeVos was among the first proponents of teaching distributors to start with believing in themselves.

“We were just two guys from Ada, Michigan, USA, who wanted to have a business of our own,” DeVos says on the company’s website. “We were two kids (it still feels like that sometimes) who were hungry for success and who wanted to give others the chance to be in business for themselves, too.”

The current generation at Amway is building upon that foundation. Co-CEOs Steve Van Andel and Doug DeVos have led the company to record sales growth marked by continued global expansion to more than 100 countries and territories.

Avon offers a similar lesson in the power of strong foundational leadership. As a salesman in the 19th century, David McConnell was far ahead of his time in recognizing that women could be successful sales professionals. Beginning in 1886 with Mrs. P.F.E. Albee, he tapped the power of a female salesforce to go door-to-door extolling the virtues of products from the California Perfume Company, the forerunner of Avon. By 1920, he had built a $1 million business, which adjusted for inflation would be nearly $12 million now.

Today, CEO Sheri McCoy, whom Fortune magazine ranks as among the 50 most powerful women in business, exemplifies McConnell’s vision of building the company for women. She joined the Avon team in April 2012, bringing with her 30 years of experience with Johnson & Johnson, and now leads a $10 billion business with more than 6 million independent sales representatives.

2. They offer distinctive, high-quality products or services.

Having bold, visionary leaders is critical to building a billion-dollar company. So, too, is creating products that bring true value to the marketplace. The club members reviewed here have done just that.

The United States has the largest cosmetics industry in the world, with estimated revenue of nearly $55 billion. Amway, Avon, Mary Kay and Nu Skin are all able to thrive because they continue to be at the forefront of scientific research, developing new products designed to enhance the lives of customers.

Nu Skin, for example, spent more than $46 million on research from 2011 to 2013 and has made several key acquisitions that brought new technology into the company. Its Pharmanex health supplements product line comes from the acquisition of Simi Valley, Calif.-based Generation Health Holdings Inc. in 1998. Since then, Nu Skin has gone on to purchase substantially all of the assets of Madison, Wis.-based LifeGen Technologies LLC in 2011 and Malvern, Pa.-based Nox Technologies Inc. in 2012, which added more anti-aging technology to the Nu Skin portfolio.

Avon significantly upped its research and development game in 2002, announcing plans for a state-of-the-art R&D center and a $100 million increase in research spending from 2002 to 2005. The company has continued that commitment, spending $67.2 million on research and development in 2013 and launching more than a dozen new products.

Unlike its personal consumer product peers, Ambit is using direct sales to introduce customers to a relatively new product category: energy. Deregulation in many utility markets is giving consumers a choice when it comes to purchasing their retail electric and gas services.

Since its launch in Texas in 2006, Ambit has used direct selling to spread the word. Co-Founder Jere Thompson Jr.’s mother and father were the company’s first customers, and received the first bill. Today, Ambit has more than 1 million active customers.

3. They target growing markets.

In order to hit the $1 billion mark, choosing where to sell can be just as critical as choosing what to sell. Of the nine companies in our report, six of them have a presence in more than 35 markets around the globe. Only Belcorp (16), Natura (seven) and Ambit (one) have managed to make the Billion Dollar Club with less.

According to a September 2013 DSN report, advanced markets—the United States, Japan, Korea, France, Germany, the U.K., Taiwan, Italy, Canada and Australia—accounted for $89 billion in retail sales in 2012. Emerging markets such as China, Brazil, Mexico, Malaysia, Russia, Colombia, Thailand, Venezuela, Argentina, Peru, Indonesia, India and the Philippines accounted for $65 billion. Those markets, however, are home to 85 percent of the world’s population; gaining a foothold there now establishes a foundation for future growth.

Take Brazil, for example. Natura has established itself as the biggest cosmetics company in its home country. The No. 2 cosmetics name in Brazil? That was U.S.-based Avon, which counts Brazil as one of its largest markets and where it keeps some research and development operations.

4. They invest in their people.

In the end, while leadership can create a desired path, quality products can help establish a business, and new markets can help bring a company’s story to a worldwide audience, it all comes down to the people who say yes to the opportunity to represent the brand.

The nine companies in this report have more than 20 million salespeople combined across the globe. Those salespeople are of every age and ethnicity, with diverse educational backgrounds and diverse reasons for wanting to be an entrepreneur. In fact, according to the U.S. Direct Selling Association, most people who join direct selling come for one of five things: supplemental income, recognition, rewards, social connections or product discounts.

Six of the nine companies currently have more than 1 million salespeople who, for the most part, are compensated on a multi-level structure. The most-frequently used sales method is person-to-person, which accounted for 80 percent of sales in 2012. Vorwerk, Mary Kay and Belcorp employ the party plan method as well.

The founders and leaders of the Billion Dollar Club companies recognize and value the diversity among their salesforces. Family men like Belcorp’s Eduardo Belmont and the brothers Carl and Adolf Vorwerk have shown that fostering a culture of love and respect brings in the greatest returns on investment. Motivators like Herbalife’s Mark Hughes and Natura’s Luis Seabra set out to help people change themselves so they could, in turn, change more lives for the better. And Nu Skin’s Blake Roney, Sandie Tillotson and Steve Lund are among the many philanthropists in direct selling who have reached out a helping hand to those in need.

A key to becoming a billion-dollar company is to have people talking about it. So whether the talk comes from the standpoint of a 150-year-old legacy or a new, spirited startup that has re-energized the industry, happy salespeople translates to happy customers; and happy customers is always a winning formula.


Tupperware Ranks among Fortune’s ‘Most Admired Companies’

For the seventh consecutive year, Tupperware Brands Corp. has been recognized on Fortune’s annual list of the World’s Most Admired Companies. The 68-year-old brand’s corporate reputation ranks second in the Home Equipment and Furnishings category.

Within the category, Tupperware leads its competitors in global competitiveness and ranks second in innovation, social responsibility and quality of products/services. Those attributes align with the company’s key business priorities, notes Tupperware Chairman and CEO Rick Goings.

The rapidly changing face of the Tupperware consumer reflects the extent of the company’s global competitiveness. In the fourth quarter, emerging markets accounted for 60 percent of sales, and Goings projects that figure will grow to at least 80 percent by 2019. For 2013, the company posted strong growth in Indonesia (33 percent); South Africa (28 percent); Turkey (24 percent) and China (20 percent).

A recent infographic from Tupperware showcases the impact of its direct selling opportunity in Indonesia, its fastest-growing market. Tupperware surveyed women who have spent at least three years in the company’s salesforce, and their responses provide insight into the increased skills, self-confidence and financial security that have resulted from their experiences with the company.

Read more on Tupperware’s global recognition.

The Great Potential: Unlocking the Power of Emerging Markets

by Beth Douglass Silcox

 

Click here to order the September 2013 issue in which this article appeared or click here to download it to your mobile device.

DSN September 2013
Editor’s Note:

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.


An industry that generates $166.9 billion annually wields exceptional power, especially when 89.7 million global citizens are the core of its strength. Regardless where in the world they call home—advanced or emerging markets—tenacious entrepreneurs use the direct selling business model to increase their incomes, enhance their own socioeconomic status and collectively improve local, regional and national economies.

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.

Unlocking The Great Potential

Chart1To unlock these emerging markets it is necessary to understand the compelling reasons direct selling is flourishing.

“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.”

Embracing The Great Potential

Click to Enlarge“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.”

The Great Bounce-Back Potential

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.”
—Jeffrey Dahl


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.”

Billion Dollar Markets

Click to enlarge

1. United States—$31.6 Billion

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


2. Japan—$22.7 Billion

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.

3. China—$20.0 Billion

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.

Click to enlarge

4. Brazil—$14.6 Billion

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.

5. Korea—$13.3 Billion

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.

6. Mexico—$7.3 Billion

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.

7. France—$4.9 Billion

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.

8. Malaysia—$4.7 Billion

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).

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9. Russia—$4.3 Billion

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.

10. Germany—$3.8 Billion

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).

11. United Kingdom—$3.2 Billion

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.

12. Colombia—$3.0 Billion

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.

13. Taiwan—$3.0 Billion

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.

14. Italy—$3.0 Billion

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.

15. Thailand—$2.9 Billion

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).

16. Venezuela—$2.3 Billion

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.

17. Canada—$2.2 Billion

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.

18. Argentina—$1.7 Billion

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.

19. Australia—$1.5 Billion

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.

20. Peru—$1.4 Billion

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.

21. Indonesia—$1.1 Billion

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.

22. India—$1.1 Billion

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.

23. Philippines—$1.0 Billion

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.



Regional Profiles

Asia Pacific

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

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.”

Europe

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.