Business Model Fundamentals for the Direct Selling Industry

We all have witnessed the rapidly changing business environment. Specifically, the rise of the Gig Economy which brings with it competition for participation. The rise of Social Media Influencers and traditional businesses launching Affiliate Marketing models also creates consumer competition. Most of us are also scrambling to keep up with changing consumer shopping preferences, online marketplaces, social and community platforms, and all the technology and system requirements to play in this new game.

However, with that said, our industry is still one of the purest forms of commerce, still relevant and growing, with some basic business model fundamentals that have both evolved and withstood the tests of time.

 

The Art and Science Can Be Difficult for Outsiders to Understand

It wasn’t until I stepped out of the industry for a couple years to advise in the private equity space that I realized how complicated direct selling is to understand for those outside of the industry. When asked to explain how it works, I naturally started talking like they were one of my direct selling peers. As you can imagine, their eyes quickly began to roll!

Financially brilliant and grounded in data, many struggled with the concept of Art & Science. Motivating and incenting a volunteer work force (versus salaried employees), variable/multi-level compensation plans (versus fixed salaries), and building a fun and rewarding community (versus just do your job) were equally perplexing. One highlight, and most comical, was when a Senior Partner asked me to explain the purpose behind all those extravagant “rah-rah events” and how to justify the ROI. The Art, which is intuitive for many of us in the industry, is a difficult concept for many outside the industry.

Full transparency: I also struggled with the Art when entering the industry 18 years ago. In fact, I have seen multitudes of CPG (consumer packaged goods) and traditional business executives enter our industry only to fly out the revolving door never really figuring it out. My best advice? Get them out of the corporate office and into the field ASAP so they can witness the Art (and Heart!) of our business.

Make no mistake: Our industry needs the expertise and experience of these “outsiders” to help us evolve. We need to do everything we can to help them “get it.” At the same time, if the struggle to sync up with the spirit of what we do scares them away, we’re better off knowing that sooner rather than later.

 

6 Fundamental Elements that Direct Sellers Need to Attract and Retain Distributors

Early in my direct selling career, I was fortunate to help lead a global research study for a legacy leader in our industry. It specifically addressed why distributors join and stay with a direct selling company. The findings were fascinating, varied some by country, and permanently altered the way I looked at our industry. It provided a structured view, like a Business Model, that all could understand, and more importantly could guide strategy, business planning, and investment needs. Much of it was intuitive to industry veterans, but it was a life-saver for this new executive. Since, I have seen other studies within the industry that touched on similar findings.

Over the years, I have combined these findings along with new learning to build a model that frames out a successful direct selling business. Needless to say, I eventually used this model to better explain direct selling to the private equity community.  Jeff Dahl, international expansion expert with Strategic Choice Partners (and part of our fractional services), created a model of 6 fundamental elements that direct sellers need to attract and retain distributors and lays these out in his guest article on The World of Direct Selling News titled, “The Table Stakes for Success as a Direct Selling Company” Be sure to read the full article. The first one is “Flexible Income Opportunity” …