We have come to the end of 2019! I had asked some of the prominent persons of the direct selling community to offer their perspectives on what they see coming in 2020.

“What will be the most important issue, whether it be an opportunity or a threat, in the direct selling industry that will need a closer focus Next Year?” was the question.

Last week’s article covered the first group of responses. You will now read the second group below. Feel free to add your own comments at the end of the text.

Brenton Kugler, Partner at Scheef & Stone, LLP

“MLM companies operating in the U.S. must take a fresh look at their compensation structures in the wake of heightened FTC scrutiny of MLM compensation plans and new criteria announced by the FTC for determining what is and is not a legally compliant compensation plan. Companies should review and update antiquated compensation plan terminology and concepts, and where necessary rewrite the compensation plan so that it is easy to understand (and conversely, is not capable of being misunderstood or misconstrued by a regulator). The FTC has promised further “aggressive” enforcement activity directed at MLM companies operating in the U.S. Companies should ensure that their compensation plans in structure, practice and terminology make it clear that compensation paid to program participants is primarily based on verifiable sales of products and services to non-participant consumers.”

Marie Lacroix, Executive Director of European Direct Selling Association (Seldia)

“It is clear by now that companies who miss the digitalization train will not survive in the coming years. Besides that, at least in the EU, there has been a great deal of attention afforded lately to the opportunities arising from flexible working conditions. In the context of a changing world of work where people stop working from 9 to 5 the same job all their lives, one of the strengths of our industry is salesforce training. In the near future, companies should focus on transferable soft skills, as well as a strict ethical framework benefitting both consumers and sellers”.

Sebastian J. Leonardi, President & Chief Business Strategist at DSXgroup

“For direct sales and social commerce companies, the current state of market transformation is a board level agenda item. An imminent threat facing traditional direct sales models is failure to recognize that transformation isn’t just here, it’s accelerating. Today, while some DS companies explore the impact of Gig Economy pressures, companies such as Uber (a favorite DS comparison) are expanding and multiplying opportunities for independents through Uber Works and other technology-driven growth initiatives. Simultaneously, retail brands are continuing their pursuit of omnichannel nirvana by honing personalization, strengthening emotional connections, and innovating fresh experiences- all designed to retain and capture new customers. Aside from simplifying compensation plans, refining messaging, and initiating compliance audits; what’s your strategy for driving customer acquisition, brand loyalty, and network growth in the retail transformation age?”

Alan Luce, Senior Managing Partner at Strategic Choice Partners

“The next five years will see direct selling become more retail-oriented with the focus on customer acquisition, customer retention and customer service. At the same time, direct selling sales force attraction will focus more than ever on having an attractive, competitive and compelling part-time income opportunity for people looking to earn $500 to $1,500 a month.”



Peter Maddox, President of Direct Sellers Association of Canada

“I believe that the most important issue for direct selling in 2020 is ensuring that our business practices continue to evolve – to a point where we can consider ourselves a positive role model to all industries. This doesn’t mean always agreeing with regulators, nor does it prevent us from fighting back when we are unfairly targeted. But it does mean working together through forums such as DSA Canada, questioning colleagues when we are not sure that their actions are best for the industry, and investing in compliance. In this changing landscape, DSA Canada membership provides excellent value. We act as our member’s extra set of eyes and ears, helping to protect their investments in this market.”

Nick Mallett, Director at Pan European Solutions

“Whatever the political, social or economic view one takes, surely our General Election creates certainty that BREXIT will happen, on 31 January 2020. BREXIT is still shrouded in uncertainty, as regards the timing and substance of the all-important trade deal, even down to whether there will be a “deal” or not. BREXIT does not raise any concern that the UK-origin law should be changed – quite the opposite, given the clamour for recovering sovereignty. EEC/EU-origin law was all implemented into UK law by UK legislation, so that will remain in force indefinitely. For the UK government to voluntarily change any law of relevance to the direct selling industry would damage the integrity of the single market, which would surely be unwise. So, the status quo is bound to prevail for quite some time, as there is no BREXIT-related need to change any law in this area.”

Gillian Stapleton, Executive Director of Australia Direct Selling Association

“In 2017, Direct Selling Australia celebrated its 50th anniversary with a conference theme of ‘Disrupt Yourself Before You Get Disrupted’. Two years on and shifts both domestic and global mean we can linger no longer. Right now, the media target our industry with relentless frequency, regulators have the channel on their radar and consumers seeking flexibly and remote working options have many choices. The industry must address education and training of the distributor, improved compliance and compensation and change the culture of recruiting. In Australia, DSA is focused on making the industry attractive once again, by sharing the realities of our best product – our people, always with the aim to enhance reputation and better protect and promote our members. When they succeed, we succeed. Disruption is here but now, like a Phoenix, the channel will gain new life that is stronger, that connects across cultures and celebrates another 50 years of growth.”

Kevin Thompson, Partner and Co-Founder of Thompson Burton

“2020 is going to be a challenging year in our sales channel. The negativity in mainstream media will continue to climb, making it more difficult for distributors in the field.  Then there’s the litigation between the FTC and Neora. The stakes are high and I expect there to be some consequences to come out of that case, for better or worse. There’s a stampede coming and the intelligent companies are going to find ways to ‘climb up a tree’ to avoid being crushed.”

Terrel Transtrum, President and Founder of ServiceQuest

“Direct selling works when companies understand that humans are hard-wired for connection, growth, and significance. Service is the key to helping people see their way to success, by clearing hurdles, lifting burdens, and building hope. More than ever before, 2020 is the year to focus on serving customers and reps. From cracking down on hold times or using social media as a contact center touch-point, to one-call problem resolution and amazing on-boarding, the prize will go to the business that understands who is king (the customer) and who is the heart of direct sales (the distributor).”

Daryl Wurzbacher, CEO of ByDesign Technologies

“We have a tremendous opportunity to elevate the credibility of direct selling with better reporting and tracking of retail sales to customers. Consumers around the world depend on the innovation our industry delivers, making retail sales the backbone of what we do. For companies that ship directly to customers, this is a given and easy to show; but for companies where there’s a “cash and carry” component, there needs to be a better solution. As an industry, we need an easy-to-use method to demonstrate objectively what we already know — that real customers are driving our sales.”

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This new article in “Wisdom in 100 Words” series on The World of Direct Selling covers “Expanding into New Countries”. While the potential of increasing the existing business is enormous with this move, the risk of damaging it is also there.

The question was as follows:

“What would be your best advice to a direct sales company to maximize the potential benefits of going international (or, to avoid serious risks)?”

Below, you will read comments from a group of persons of expertise form the industry.

Jeffrey Babener, Legal Counsel at Babener and Associates:

“With today’s technology, communication and logistics, U.S. companies are pressured, almost from day one, to expand internationally. The opportunity is so great that most leading companies ultimately post the vast majority of global sales beyond U.S. borders. Long story short: Don’t jeopardize this expansion by playing “fast and loose” or “on the quick”. If done incorrectly, the foreign market opportunity is tainted forever. Having assisted leading companies in expansion for over 30 years, our first “go to” are our counterpart professional colleagues in other countries, to address import, trademark, fulfillment, and distribution of product and service, regulatory and legal compliance with direct selling and consumer legislation, staffing and visas and addressing a big financial structuring picture, with our tax professional colleagues, for an international seamless sponsoring system. All of these professionals have been accustomed to working under our law firm supervision for decades.”

Jack Crowley, Owner of The Crowley Collaborative Group:

“Having launched direct selling businesses in over twenty countries, experience proves no one path ensures success or eliminates errors. Formerly, as a company executive and now as a consultant to the industry, I’ve used these “Rules of the Road” to eliminate numerous obstacles and generate sound, profitable international businesses: 1. Expand internationally for the right reasons. 2. International expansion is a “full” corporate commitment. 3. Commitment starts at the top. 4. An internal and external strategic analysis is essential. 5. Think globally… act locally. 6. Have realistic expectations. 7. Do the homework (Details, details, details). 8. Strive for transparency. 9. Utilize local resources. 10. Flexibility and creativity are essential. Each of these points has numerous subsets but used as a “road map” they do help companies avoid the pitfalls and enjoy the benefits of operating internationally.”

Jonathan Gilliam, CEO of Momentum Factor:

“Avoiding shortcuts in order to meet a new market demand is paramount. When a company is interested in a new market it’s usually because they’ve seen a spike in demand in those countries, either from its own network or perhaps a competitor’s network seeking to move over. It can be tempting to dive right in, damn the torpedoes. But a company will nearly always have new and interesting regulations and legal requirements to address, and it’s important to get them right from the start. From product registration, certifications and MLM-specific legal and compliance mandates, companies will find entering new markets much slower than they would like, especially when there are people on the ground ready to join and buy their products. I think too many companies chase revenue in new countries when demand presents itself, often to the peril of sustainability that they could have enjoyed otherwise.”

Dan Jensen, President of Dan Jensen Consulting:

“Direct selling offers huge opportunities as well as dangerous pitfalls when expanding internationally. Many find themselves in a “money pit” subsidizing poorly performing markets. Lessons learned in my 38 years in direct selling include: 1. Get it right in your home market first. 2. Focus on markets similar to your home market. Different countries and cultures require different approaches. 3. Don’t launch into a new market unless you have the right team of people. 4. Find the best experts to guide you. It won’t be what you know that causes you to fail in a new market. It will be what you don’t know. 5. Only allow competent and loyal leaders to start building in the new market. Amateurs’ downlines often feel abandoned and overwhelm the office staff with questions and complaints. 6. Go slow until you perfect your launch methodology. There are countless tales of tragedy where a company launched aggressively into multiple markets and failed in every one of them. 7. Plan to spend a lot more than you think you will. 8. Look for diamonds in your own backyard first – there’s massive opportunity where you already do business.”

Brent Kugler, Partner at Scheef & Stone, LLP:

“Do your homework and determine which countries are the best expansion possibilities for your company. Many companies have felt the pressure to rush into international markets and later paid a steep price for not fully researching and understanding the business environment and culture of the country they expanded into. Develop a tiered expansion strategy with the initial focus on markets that have the lowest barriers to entry. It is also critical to partner with local resources with experience in advising companies in this industry. What works in one country may not work in another. Preparation and patience are essential to execute a successful international expansion strategy.”

Alan Luce, Senior Managing Partner at Strategic Choice Partners:

“One significant risk for young companies is going international before they have fully developed their home market. We often see this in the US with young companies anxious to go into Canada or Mexico as soon as possible, often when they have just begun to penetrate the potential of the US market. For young US companies it takes a lot more management oversight, legal and regulatory investment and arranging distribution to go into Canada with its 33 million people than it does to get strong market penetration and growth in the state of California with 38 million people. Focus on getting your home market established and building up the staff and management experience that will be needed to go into a new international market. It may not be as satisfying for your ego, but it will be a lot more beneficial for your profit line.”

Nick Mallett, Director at Pan European Solutions:

“Get expert local advice from people who know the industry. Employ senior staff who have a background in the industry from the territory in question and listen carefully to what they say, especially when they disagree with you. By all means set KPIs (Key Performance Indicators) but do not try to micro-manage remotely.”

Bobbie Wasserman Managing Director of Wave2 Alliances: 

“Direct selling companies revel in their international accomplishments – they should.  Going international is exciting – yet at the same time, a complicated, cumbersome process. A key component of succeeding on an international playing field entails having a senior-level communications executive involved in the planning process – right from the start. This can ensure that communications strategies speak to the local sensibility while keeping corporate messaging intact and creating momentum within targeted audiences and the potential distributor base. The Country Communications and Corporate Integration Plan focuses on internal and external corporate needs. External areas can include social media platforms and messaging apps priorities; content development for education and online sharing; influencer and media/blogger outreach; and reputation management. Internally, the plan can revolve around processes that ensure a company remains unified with one corporate culture. Knowing what to say and when to say it is a key formula for maximizing benefit and minimizing risk.”

…

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As we come to the end of another year, I wanted to ask some of the prominent persons of the direct selling community what they see coming in 2017.

“What will be the most important issue, whether it be an opportunity or a threat, in the direct selling industry that will need a closer focus Next Year?” was the question.

You will read in this week’s article, their responses:

Oscar Cano Arias, Managing Director of Direct Selling Europe (DSE):

“Yet again, ethics will be a top issue in the year 2017. Due to the lack of serious and effective self-regulations in the US, the FTC is determined to react. In 2015, the FTC closes down Vemma accused of operating a pyramid scheme. Then, in July 2016,  it adopts a Resolution against Herbalife that could have not been tougher: “Herbalife is going to start operating legitimately, making only truthful claims”… “Herbalife will have to restructure its business so that participants are rewarded for what they sell”… “Herbalife will have to compensate consumers […] as a result of unfair and deceptive practices”. 2017 will see new FTC Guidelines for the US direct selling industry, likely to include main points of the Resolution against Herbalife. Direct Selling Europe (DSE) welcomes the FTC move and invites the FTC to publish its new Guidelines the earliest possible. In the meanwhile, DSE continues working with all stakeholders to make sure that the interests and image of the well reputed and sustainable companies are well preserved.”

Jeff Babener, Legal Counsel at Babener and Associates:

“The thrust of the message of the October 2016 presentation of the FTC Chairwoman, Edith Ramirez was “more FTC regulation is coming… live with it”. On notice going forward: The FTC would reject a legal standard accepted by courts for 40 years, The Amway Safeguards Rule, and proposes guidance to “upend and reject” decades of industry practices that recognize full credit for personal use by distributors, track qualification volume based on wholesale movement of product, allow for monthly sales volume activity qualification based on distributor purchase volume and encourage and reward autoship programs that deliver predictable volumes to distributors. A surprise: The 2016 Presidential election results may usher in an anti-regulatory climate. Sponsor of a bi-partisan anti-pyramid bill to codify recognition of personal use purchases and establish legitimacy standards acceptable to the direct selling industry, is Rep. Marcia Blackburn, member of the Trump transition team and potential Cabinet member. To its surprise, this may be the year of opportunity for the industry to seek refuge from over-regulation, with model legislation that has already been adopted as law in more than a dozen states.”

Jacques Cosnefroy, General Secretary of the France Direct Selling Association (FVD):

“In a world in constant transformation, where the cultural revolutions are exempted from principles of belongings of the majorities, where the faith in the other one has become a variable of adaptation, where the inherent values of our personal construction are no longer considered as sources of reference, where the fear of the next day is a component of the everyday life, where the transparency is not anymore an option, the direct selling industry creates for each and every one a solid bedrock for the future, which could be threatened by a lack of control of our communication. Communication has become an asset and a threat for our companies! An asset because it offers this incomparable universal dimension which connects the people, and a threat because if uncontrolled  it can convey unethical information that could severely damaged the image of the direct selling industry.”

Tamuna Gabilaia, Executive Director and Chief Operating Officer of The World Federation of Direct Selling Associations (WFDSA):

“2016 was a very exciting year for the industry. We saw sustained growth in all regions – global retail sales increased by 7.2% and the industry experienced 7.2% CAGR. We can see that people all over the world are increasingly interested in getting into business for themselves and we anticipate we will continue our growth pattern and will remain a vibrant industry bringing economic empowerment to people all around the globe. However, we still need to tell our story better. We need to align around messaging and a common narrative. There are widespread misperceptions and misunderstandings about direct selling. Explaining who we are and how our businesses work is an area we need to focus on. The WFDSA Messaging Guidebook developed under the WFDSA Advocacy Committee is a tool that will increase public understanding of direct selling and foster greater communication among member companies. Lastly, WFDSA World Congress XV “Rendezvous with the Future” which will be held in October 2017 will be an unforgettable event which will clearly demonstrate the key role our sector plays in the global economy.”

Brent Kugler, Partner at Scheef & Stone, LLP:

“The winds of change continue to grow stronger in the direct sales industry. Companies must be proactive in addressing changes that can now be seen as inevitable, if not mandatory, in light of recent FTC activity and comments from FTC Chairwoman Ramirez following FTC- Herbalife. The “wait and see what others do” approach is no longer a viable option in today’s regulatory climate. Companies must retool their compensation plans and reinvest in technology to track verifiable retail sales to non-distributor customers and calculate commissions and rank advancement based on those sales. Companies should also be wary of promoting “optional” high-priced enrollment bundles, as recent enforcement actions make clear that regulatory authorities are increasingly focused on the percentage of distributors who are unable to earn enough compensation to offset the cost of enrolling with a company.”

Alan Luce, Senior Managing Partner at Strategic Choice Partners:

“Rising to the challenge to provide world class access and service levels to end user customers and salesforce members will be the defining characteristic of successful direct selling companies in the future. Those companies that meet or exceed world class status in access and service will succeed. Those who do not raise their game will wither and fail as both customers and sales people choose to go elsewhere regardless of how good or unique their products and services may be.”

Nick Mallett, Director at Pan European Solutions:

“The Internet has reached the stage where established social media platforms are now less essential to new entrants to networking businesses. There will be increasing instances of ‘private’ networking portals, worldwide. These represent a competitive threat to established network marketing businesses. We see a serious risk from the spread of such platforms in the regulatory sense of their being somehow above the law, through operating in the ‘virtual world’. The viral spread of such businesses is such that they are subject to the laws of the many jurisdictions in which they operate. On the one hand, they may be able to carry on business in multiple jurisdictions despite being closed down in one or more where their operation contravenes local legislation; on the other, a regulatory challenge in one jurisdiction might just cause them to close down altogether. In the meantime, they may have given network marketing such a bad name – perhaps worldwide – that the various regulators introduce a more restrictive regime of control such as to restrict the previously legitimate activities of our established network business clients.  We must be vigilant on behalf of the legitimate industry.”

Katarina Molin, Executive Director of The European Direct Selling Association (Seldia):

“In 2017, we expect the positive growth for direct selling in the European region to continue, which shows that it continues to be a vibrant retail sector and enjoys high consumer trust. From a policy perspective, Seldia will continue its close dialogue with European policymakers on the EU consumer policy. It will be crucial to focus on the proper implementation and enforcement of existing EU legislation, an area that needs more attention in the future. Addressing issues such as non-tariff barriers as well as how to effectively put a stop to the practices of rogue traders must be prioritized. It is also time to step up our efforts to communicate better and more transparently on how the sector works, on what the channel is – and is not. We must also explain that it is not outdated channel of distribution, but on the contrary – very receptive to innovations and technological development. In terms of communication, it will be important to engage in a constructive discussion about segmentation of the people involved in direct selling, to keep a continued focus on ethics, and to collect independently verified data to share externally.”

Gillian Stapleton, Executive Director of the Australia Direct Selling Association (DSA):

“The Entrepreneurial Consumer is both an opportunity and threat. Great service has long defined direct-selling: establishing great rapport in-home, the personal delivery of products and follow up every season. Will that define the industry in the next 5 years? Direct-selling faces the biggest challenge in service it has ever experienced. Next day delivery, packaged in tissue paper, a hand -written note signed by the packer, establishes a good relationship for me with that company. An offer to exchange the goods or have three alternatives shipped at no cost to me and send back what I don’t want. That cements it. I am the Entrepreneurial Consumer and I could be your consultant. Will your company attract me?”

Bobbie Wasserman, Managing Director of Wave2 Alliances:  

“The FTC is now distinguishing between Distributors, personal consumption and customer purchases. Direct selling companies can harness this opportunity to engage and attract more customers – helping build each company’s credibility for its own brand and contribute to enhancing the industry’s credibility. Public relation campaigns focusing on executives’ leadership, premium products/services and entrepreneurial successes can provide a corporate narrative and business tools for Distributors. In the future, the industry can argue the semantics of purchase behavior via legal battles. However, now is the time to impact decisions being made in the ‘court of public opinion’ – those decisions are often made swiftly and without access to an appeal.”

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