In some circumstances it might be prudent to, as Lewis Carroll says, not go back to yesterday. There is power—and comfort, perhaps—in solely focusing on the here and now. Of maybe allowing fleeting thoughts toward the future, but certainly not spending time dwelling on the past. It goes beyond Carroll’s assertion that we were different people then; that we had changed. In this circumstance, it simply reflects the fact that 2020 was a year most people would like to forget.
It’s hard to celebrate what an important year it was for direct selling when considering the pain experienced by so many Americans. Business closings and lost jobs. Social unrest brought on by racial inequality. The loss of the hundreds of thousands of lives to COVID-19. That’s not to say that direct selling companies did not struggle in 2020. Many did. But what came of the collective struggle was, in the eyes of many, a much stronger channel. Company executives lifted each other up, offering guidance and encouragement on the transformation needed to stay in business. Corporate leaders helped their fields engage with customers in new ways. And the business model itself proved once again that during tough economic times, it is resilient and enduring.
What changes us ultimately moves us forward. The global pandemic forced the acceleration of new technology that created new online celebrations for direct sellers and met customers where they were in the new normal. The call for racial equality and social justice was answered by renewed efforts for inclusive diversity in the workplace. And polarization of politics was a stark reminder that to survive, in both business and life, cooperation is key. How direct sellers conduct business, engage with customers, and treat each other moving forward will long have the echoes of 2020.
The COVID-19 Pandemic
In January 2020, the US direct selling channel was coming off a year in which sales had slightly declined—$35.2 billion from $35.4 billion in 2018. Leaders were focused on increased competition from the gig economy and online retail technology disrupters.
Just two months later, they were strategizing how to keep their businesses going. The coronavirus was a full-blown pandemic. Hundreds of thousands of people were affected. Hospitals were overwhelmed, schools were closed, and non-essential businesses shut down. In March and April more than 22 million Americans lost their jobs.
John Agwunobi, the former Assistant Secretary of Health for the US Department of Health and Human Services was less than ninety days into his new role as CEO of Herbalife Nutrition when he joined with other direct selling CEOs to discuss the state of the channel. Reiterating Nu Skin President Ryan Napierski’s belief that the channel was stronger together, Agwunobi added, “I think this idea is a driving force behind what makes our channel such a catalyst for positive change. The significant events that surround us today present an opportunity to learn.”
Direct selling leaders had multiple opportunities to learn last year—from communicating with remote employees and field leaders, to reimagining conventions and meetings in virtual formats, to investing in the digital transformations of their businesses. Technology and economic experts believe that the future came upon us two to three years earlier than expected, accelerated by the pandemic. But direct selling was ready.
However, the pandemic was not the only crisis the country faced in 2020.
Racial Inequality and Social Unrest
By May 2020, the first wave of the pandemic had peaked and was slowing, and businesses were settling into the new norm. Then, on May 25, George Floyd, a forty-six-year-old African-American, was killed by a White police officer during an arrest in Minneapolis. His death—coupled with the earlier deaths of Ahmaud Arbery and Breonna Taylor, both African-Americans—led to nationwide demonstrations and protests of racism and police brutality.
Direct selling companies in the US and abroad issued statements in the days following Floyd’s death. On June 3, Amway CEO Milind Pant sent a public message to the extended Amway family in support of Black Lives Matter.
“Events in recent weeks have brought to light deep scars within society and, for many, our society isn’t working. We must seek to understand and act to do our part . . . We stand behind the black community and their call for equal justice. . . . There is great power in all of us working together to end racism. We vow to be part of the solution. We will hold ourselves accountable to these words. We will help change the future.”
Avon Products Inc. and its parent company, Natura&Co, also released statements calling for equality and justice: “We strongly believe in the value of life, the idea that all are interconnected, and as society we can and should be agents of change. . . .We stand by basic human rights and more than ever all humankind believing that all forms of racism and discrimination must end.”
The direct selling channel has always been a vehicle for people from all walks of life to be business owners. There are no barriers—not age, religion, race, or ethnicity. All people are welcome. But, considering the social and racial injustice of the past year, are direct selling companies doing enough?
Forward-looking companies, many of which have diverse executive teams and boards already in place, are thinking about what more they can do to engender true equality within their organizations. The bigger question is: What more can a company do once they’ve successfully seated a diverse table?"
—Asma Ishaq, CEO, Modere
Following the protests, Asma Ishaq, CEO of Modere, made donations to organizations on the Black Lives Matter movement’s front lines. She also created inclusion and equity councils at her company, but believes that, looking toward the future, more is needed.
“Forward-looking companies, many of which have diverse executive teams and boards already in place, are thinking about what more they can do to engender true equality within their organizations,” said Ishaq. “The bigger question is: What more can a company do once they’ve successfully seated a diverse table? I know this type of introspection may feel uncomfortably frank, but what is most important right now is to confront the reality of inequality in our culture so we can take an authentic and honest approach to finding solutions. We must accept and embrace that we are not perfect in order to begin making real progress toward change.”
SeneGence Founder and CEO Joni Rogers-Kante is also the founder of the company’s non-profit, The Make Sense Foundation®. During its twenty-one-year history dedicated to empowering women, SeneGence has continuously worked to make strides to support women of all races, colors, ethnicities, and backgrounds. Moving into 2021, Rogers-Kante has established the SeneGence Leadership Diversity Development Program to evaluate and discover innovative new systems.
“We are doing business in many different countries and our company took a global position. In this time of tremendous need and change, we are ‘all hands on deck’ to identify opportunities to support our distributors and their communities,” explained Rogers-Kante. “I am very hopeful of the human spirit. It’s times like these when we see the best in others through their helping hands, selflessness, and generosities—putting aside gains for profit for the betterment of their neighbor.”
The Make Sense Foundation offers annual $10,000 scholarship awards for outstanding female youth who are college-bound. “Supporting the educational goals of deserving young women allows us to give back and support future success,” said Rogers-Kante. Additionally in 2020, MSF provided charitable contributions to three organizations that support the movement focused on making progress to eliminate discrimination and toward equality and inclusion for all people.
USANA CEO Kevin Guest understands “not doing enough.” When he did not release a statement quickly enough, he received messages that he was being complicit. But as a global company, USANA was not only focused on what was happening in the US, but also in the company’s markets around the world. To make a statement or address the social unrest happening in the US, Guest also had to think globally.
“We were pressured by many of our distributors, as well as some activist shareholders, to make a formal statement and put a stake in the ground,” he said. “I was very reluctant to do that because I don’t have the same experiences that others might have in some of the larger cities around the world with racism and other things that are happening. But I decided that I would make a formal public statement on behalf of the company, which I did.”
Guest shot a short video that was sent through USANA’s social media channels, and the company published a written statement to shareholders and to distributors.
“When you say something and make a stand, then that’s not enough right now,” said Guest. “What action are you going to take? For us, we chose to double down on our foundation and to give added resources to help hungry children in these cities where there is unrest. So we are bringing relief and support, but we are doing it within the mission and vision of our company.”
One CEO watching all that was happening from afar was Magnus Brannstrom. The CEO of Oriflame Cosmetics said during a panel discussion with fellow direct selling CEOs that there are so many things leaders can do to make sure everyone feels appreciated and respected.
“The essence of direct selling is that every person, wherever you are, whatever your beliefs are, can make it here [in direct selling], he said. “I think that is something that speaks in favor of our business. But some people mentioned that when we present our people, who do we present? Are we representing only a certain type of people? When we communicate about certain offers, are we making sure those offers are equally perceived for everybody? Are we making sure that when we have our conferences or meetings that are following the western calendar of events, that we also recognize others’ holidays?”
Roger Barnett, CEO of Shaklee Corporation and Chairman of the WFDSA, believes this is the time for leaders to listen, learn, and lead. The listening part is the reason why people were protesting, he says. “I think in the past, there have been other manifestations of it, and I’m not sure all of us have listened. The reality is there is persistent racial discrimination in this country. There is persistent systemic inequality.”
Barnett shared facts supporting his belief: eight out of ten Black Americans with a college degree feel that had been discriminated against in the past. They are earning 25 percent less than their White counterparts. They are 75 percent less likely to own their homes. When looking at health inequalities, Black Americans are more than twice as likely to die of COVID-19 than White Americans.
“The question is, what do we do?” asked Barnett. “We have an opportunity in our channel to educate people, to have conversations, to lead. We have spending power. So I asked the people in our company, How much of our spending dollars do we spend every year on Black-owned businesses in the United States? We didn’t know that answer. We are going to know that answer.”
There are two ways to lead: one is out of fear, and one is out of what you believe is right.”
—Roger Barnett, CEO, Shaklee Corporation
Barnett also pointed out the messaging used in company marketing materials. How many Black faces are part of it? How does a company promote Black distributors? And what do leaders do in terms of addressing the fundamental health and income inequalities?
“I think at the end of the day, it’s a question of leading,” Barnett said. “I believe that leading is not only the right thing to do, but it is good for business at the same time. Right now you see business executives for the first time weighing in on these issues en mass. I am excited about that because I believe business is an incredibly important factor for change.”
A Divided America
By November 2020, the divide in the US was fully evident. As the election neared, diverse groups of American citizens made their presences known; after the election, the polarization of political parties pulled the country apart even further.
Direct selling is a microcosm of the US; there is a broad and diverse constituency of varying views. The challenge for CEOs is in choosing whether to please the largest number of that constituency, or going down a path that, as a CEO, you feel is in the best interest of the company.
“There are two ways to lead: one is out of fear, and one is out of what you believe is right,” said Barnett. “In many instances in the past, it has been more fear of constraint. You don’t want to say the wrong thing. You don’t want to offend somebody. But I would like to encourage all my peers and the people watching this channel, that I think the world has evolved. If you do not lead from where the place of righteousness is, you’re not going to lead many people in the future. I think that people are looking for business leaders to take a stance on certain social issues. And I think equality is one of them.”
Barnett believes that Shaklee, which was the first company to offset its carbon emissions, can attribute a billion dollars of incremental revenue over the years to greater loyalty among distributors because its leaders took a values-based stand on the environment. Leaders who are open, transparent, and make progress with a legitimate and authentic path and journey, will find it is good for business. Those who do not will lose future customers and distributors.
“I am incredibly bullish on what our future is as an industry because I think humans crave connection and community,” said Barnett. “We are here to try to encourage and inspire others to invest their time and energy with us. I do not see any reason why our channel doesn’t thrive during this period. Those who embrace change and just go full forward and reimagine how things can work in a digital and physical way will be the winners.”
For Kevin Guest, the future of the channel closely mirrors the future of the country: leaders must come together in a spirit of cooperation for the good of the channel, for the good of the nation.
“I think the future of our channel involves coming up with ways to have cooperative strategic relationships with companies with which we have confidence, and to pool our resources to be stronger in a global marketplace that is going to have strength. Strength will equal survival,” Guest said. “Even though we are a billion-dollar company, I think we need to find partner companies to form strategic relationships, leveraging each other’s assets and core competencies to be stronger in a more difficult society. The future is not what has been in the past.”
We can’t go back to yesterday. The world was a different place then.
21 Effects of 2020 We’ll Carry into 2021
1) Working Remotely. When COVID-19 first hit, many businesses were forced to close their doors. Millions of employees lost their jobs. For those who could telework, working remotely became the new normal. Employers initially feared that productivity levels would drop, but multiple studies over the following months showed that efficiency was not deterred by the shift. Direct selling companies such as Young Living were among companies that allowed employees to work from home for the remainder of 2020. Global Workplace Analytics predicts that by the end of 2021, approximately 25–30 percent of the workforce will be working from home multiple days a week.
For direct sellers, working from home has always been the norm. While traditional methods of selling—person-to-person and party plan—have been adapted, the shift to online selling has proven to be successful in most cases.
2) The Women’s Recession. Women, particularly Black and Latina women, have suffered most in the job market over the last year. According to the US Bureau of Labor Statistics’ final job report for 2020, women lost more than 5 million jobs since the start of the pandemic. The unemployment rate for women overall is 6.3 percent; 8.4 percent of Black women are unemployed, and 9.1 percent of Latina women are without jobs.
eIn December, women lost 156,000 jobs while men gained 16,000; hence, of the 140,000 jobs lost last month, women accounted for 100 percent of the losses. A National Women’s Law Center analysis showed that among unemployed women, 40 percent have been out of work for six months or longer. What are the reasons for the recession? One is the low demand for jobs in which women have been, historically, highly represented, such as in restaurants, retail, and hospitality. The other is many women had to drop out of the job market to care for their children.
3) The Impact of Quarantine. The idea of working from home was appealing to most people at first. But as the days and weeks dragged on and workers continued to be confined at home, the psychological impact of sequestration started to become evident. Stress, anxiety, depression, and feelings of isolation began to grip many Americans. Direct selling executives realized what was happening to employees and stepped in to help. Research led by Boston University and conducted during lockdowns in March and April found that nearly 28 percent of respondents reported depression symptoms in comparison to 8.5 percent before the pandemic. Women were more likely to be depressed than men (10.1% to 6.9%). Respondents with lower incomes were 2.4 times more likely to report depression. As employers became aware of COVID-19 stressors, they responded with physical and mental health assistance. Some direct sellers, for instance, held virtual gym classes or provided online resources with homework to help stressed-out moms.
4) The Popularity of Zoom. Zoom has been in use since 2011, but since the COVID-19 pandemic, it has turned record profits. A staple of business meetings, it is as popular for families unable to get together in-person to meet online. Its free conference calling is a major selling point. According to DSA’s 2021 Digital Transformation Report, Zoom is the most popular virtual events platform of direct selling companies. Eighty-two percent of respondents cited it as their business meeting choice. The next closest, at 32 percent, was a group of platforms that included Facebook Live, Bizzabo, and Vimeo.
5) Virtual Conferences. When the COVID-19 pandemic forced health officials to limit the number of people for in-person gatherings, many direct selling companies had to quickly pivot to reimagine upcoming conventions, meetings, and other events. What came from the shift to digital was, in some cases, substantial cost savings, even though some companies did send considerable amounts to fully embrace the new digital world. However, the greatest outcome was the dramatic increase in attendance. With so many people working from home, audiences grew, leading to new online celebrations and entertainment. However, while virtual meetings were overwhelmingly successful, they did lack one important factor: human connection. And it is that connection that will create a hybrid of virtual and in-person meetings in the coming year and beyond.
6) New Guidance on Earnings Claims. In July, the BBB National Programs’ Direct Selling Self-Regulatory Council (DSSRC), in partnership with DSA, released new Guidance on Earnings Claims. The new guidance defined and identified earnings claims to ensure all representations made by direct selling companies or members of their salesforce comply with legal and self-regulatory standards. The guidance is the most comprehensive ever released for direct selling companies. The new guidance went into effect on August 1, 2020.
7) Increased Compliance Monitoring. DSA and regulatory authorities have cautioned against claims made related to COVID-19 and earnings potential. Sixteen direct selling companies received warning letters from the FTC for stating products could cure or mitigate the effects of illness. The FTC also flagged claims of unrealistic earnings that could be expected during economic hardship. Companies should continue enhancing their compliance programs to monitor and take swift action to remove exaggerated earnings or product claims.
8) Wellness Products. Although the top-selling category nationally and globally for consecutive years, wellness products became even more popular during the pandemic as Americans focused their attention to healthy living. According to Lane Research, “Direct sellers that we follow will be advantaged by the fact that each company offers wellness products during a global health care crisis and an income opportunity during a period of sharply rising unemployment, all the while in a shifting business environment that is bringing to the forefront into the mainstream economy the work-from-home model, which is right in the sweet spot of direct selling.”
9) Direct Selling vs. Gig Work. Analysis from Lane Research concluded that the emergence of the gig economy was a key driver behind the flattening of direct selling growth rates in the US over the past decade. Lane also concluded the direct selling model has an edge in the new normal business environment.
“The COVID-19 outbreak brought to bear two additional advantages for many of direct sellers vis-a-vis gig players that are unique to the pandemic: 1) its direct-to-consumer business model where products are shipped directly to the end customer without physical social interaction and 2) the fact that many of the larger direct sellers have nutritional product offerings, demand for which have only escalated with the global health care crisis. Meanwhile the larger gig economy players have been hit hard by social distancing guidelines. Ride-share concepts Uber and Lyft announced large COVID-19 related layoffs in May and the property-share concepts Airbnb and Vrbo have been decimated by cancellations and as customers also fume about refund policies. . . . This, in our view, confirms our thesis that direct selling as a business model is an advantaged one in this new COVID normal business environment.”
10) Customer Centric Focus. Businesses are rethinking their approaches to doing business, paying as much attention to what customers do not like as what they do like. In designing customer-centric experiences, direct sellers are proactively managing preferred customer programs to retain their most loyal customers and using customer journey mapping to improve the customer experience. Other best practices include implementing expanded and integrated CRM capabilities to proactively measure and manage the customer experience, and leveraging AI and machine learning to generate personalized recommendations to make customer ordering easier and to accelerate business results.
11) Increase in Retail Sales. This might be surprising to some, but despite the pandemic, the retail industry saw an increase in sales in 2020. According to the National Retail Federation, retail sales were up 6.6 percent for the first eleven months of the year over the same period in 2019, and the holiday season was tracking to surpass the five-year average growth rate of 3.5 percent. Despite the pandemic, retail sales increased, driven by the growth of e-commerce, the fastest-growing sector.
12) Rise of E-commerce. E-commerce sales were so massive in 2020 some experts estimate the amount—projected to be well over $800 billion—accelerated the shift away from physical stores by three to five years. This shift was brought on, of course, by the COVID-19 pandemic. Expectations are that e-commerce will experience growth of more than 40 percent in 2020. Direct selling companies experienced record-setting quarters because of online sales. For instance, in a November earnings release, Nu Skin Enterprises CEO Ritch Wood noted the success of e-commerce investments: “We are benefitting from the current environment where more individuals are working from home and shopping online. Currently, approximately, 90 percent of Nu Skin revenue is coming from digital transactions,” Wood said.
13) Digital Transformation a Top Priority. According to DSA’s 2021 Digital Transformation Survey, 43 percent of DSA members considered digital transformation a significant priority and 41 percent deemed it a mission critical priority. In addition, companies generating more than $250 million in sales annually devoted a significant share—13.2 percent—of their overall budgets to technology development compared to DSA member average spend of 8.0 percent. Of the study respondents, 89 percent have already integrated such tools within their systems or are actively doing so.
14) Personalized Shopping Experiences. A 2020 report from Forrester found that personalized customer service “delivers quantifiable results in terms of decreased costs, more productive human agents, and improved customer experience outcome”—as well as proven impact to top-line revenue. Chatbots, or personalized assistants, have been available for a while now, but there were some growing pains—mostly on the part of consumers—when first introduced. With smarter artificial intelligence now available, chatbots are more popular—and will be key in helping businesses identify the best customers. Some direct sellers currently use chatbots; those who do not should seriously consider them to for a hassle-free customer experience.
15) Consumer Delivery Expectations. The creativity of retailers was clearly exhibited when non-essential businesses were forced to close due to the spread of the pandemic. They developed alternate forms of delivering products to consumers, including curbside pickup, and buying online and picking up in-store. In 2021 consumers will expect the same services made available during the pandemic to still be accessible. Those changing consumer expectations should serve notice to direct sellers, too, that expediency in getting products to customers is key.
16) The Evolution of Brick-and-Mortar. The past year showed that while mega-malls may be passé, brick-and-mortar stores are here to stay. They offer an experience that cannot be replicated online, as evidenced by the rush to stores after prolonged lockdowns. However, to be successful in the future, they must evolve to meet ongoing safety requirements and the behavior of younger generations. Consumers will expect stores to meet public health needs like social distancing, as well as offer contactless check-out, to keep them safe when they do venture inside the doors. As for younger consumers, research conducted by the National Retail Federation found that Gen Z likes in-store shopping, but not the stores of older generations. For brick-and-mortar stores to stay relevant with that cohort, they must evolve to a multichannel approach that speaks to Gen Z’s love of social activity and desire to shop with their mobile apps.
17) Direct Sellers’ COVID-19 Response. It would require far too many pages to show the outpouring of love and support by direct selling executives, employees, and salesforces toward their communities and nations during the pandemic. From halting their production lines to make hand sanitizer for hospitals and front-line workers, to offering monetary and product donations to organizations, to substantially expanding the support of the philanthropic arms of their companies, direct sellers moved quickly and deliberately when the calls for help went out. US companies with a global footprint made sure to provide support in the countries where they have a presence. Though often unnoticed by the public, the generosity of direct selling companies shone bright through the crisis.
18) Support of Local Businesses. During the pandemic, many businesses had to come up with alternative forms of delivery, such as curbside pickup, or be forced to shut down completely. To help save their local shops and restaurants, communities banded together to offer their support by ordering more take-out, making monetary donations, or calling attention to businesses through social media. By July, a Groupon-commissioned survey conducted by OnePoll found that 75 percent of consumers planned to support local merchants during the pandemic. That included supporting direct sellers.
19) Supply Shortages. As concerns about the spread of coronavirus in the US first took hold and stay-at-home orders were issued, Americans began to stock up on items such as cleaning supplies, toilet paper, and paper products, as well as meats, dairy, and other foods. The shortages led to rationing measures at many major retailers and were indicative of the struggles experienced by direct sellers. In a January 2021 DSA QuickPulse survey, 72 percent of respondents indicated global supply chain issues were impacting business. About three-fourths of companies (74%) cited issues with product/component/raw material production delays in the US, 59 percent reported transportation delays in the US to distributors or customers, and 47 percent cited out-of-stock inventory due to high demand caused by the pandemic.
20) Preservation of Direct Sellers’ Independent Contractor Status. DSA will continue supporting actions that would clearly define direct sellers as independent contractors. The gig economy’s reliance on individuals working as independent contractors has resulted in more conversations around the issue. The Association will work to ensure any efforts to compromise direct sellers’ independent contractor status are resolved. With a Democratic administration now in place, in Washington, DC, the Association will build relationships with newly elected and appointed officials to help them understand the importance of direct sellers in this conversation.
21) Continued Relevancy of Direct Selling. In its annual Growth & Outlook Report, DSA reported 2019 sales of $35.2 billion in the US, a slight decline from $35.4 billion in 2018. There were 6.8 million direct sellers in 2019, a 9.9 percent year-over-year increase. Of those sellers, 87 percent, or 5.9 million, were part-time. Health and wellness products once again led all product categories in terms of size and growth. Person-to-person was the most popular form of engaging with customers.
Globally, 2019 net sales declined 4.3 percent according to the World Federation of Direct Selling Associations (WFDSA). Worldwide sales were $180.5 billion, with a global salesforce of 119.9 million. However, sales rose 1.4 when excluding China, which was put under a 100-Day Review by the government related to nutritional supplement industry.