The World of Direct Selling

With the advance of social media, many people tend to freely say things on the Internet that they would not say in the “offline” world. And too many people can easily “hear” these.

This time the question to a group of experts from the industry was: “In your opinion, is negative online reputation a potential threat for the direct selling companies and if yes, how to cope with that threat?”

Let’s see what some of the wise persons have to say on this…

Jeffrey Babener, Legal Counsel at Babener and Associates

“The Internet is a global public square and social networks and blogs are its town bulletin boards, offering great opportunities for marketing and productive communication… even honest disagreement. Direct selling companies can offer distributors guidelines for online etiquette and enforce those guidelines through their distributor policies. Our law firm frequently drafts guidelines and protocols. Companies can even sue non-distributors for libel when identity is clear. Anonymous posts of disparagement, rumor and defamation, however, are a real challenge, as posts on the Internet are ‘forever’. Here, companies must use search engine optimization to drive their positive message to the top of search engines, and negative posts to page two, and lower, of search inquiries.”

Mari Daly, Head of Marketing at Nikken Europe

“Social media is an essential part of our businesses although one that is still to be fully discovered. Many today use social media actively and successfully but you do need a consistent strategy for your activities. Like a fire, social media can create energy and heat for the business when well-managed, yet it can be completely unpredictable and even damaging if left unchecked. While people are more quick to comment online and say things they might not say offline, it is more rare to see extremely negative comments. Developing an open communication is essential and it starts from delivering on our promises to our customers. It can drive business improvement and excellence if done correctly.”

Cindy Droog,  Global Public Relations Lead at Amway

“A negative online reputation is a threat for any industry because it’s a reflection of people’s unfiltered impressions and experiences. Yet it’s changing our culture in ways that are positive, including supporting overall transparency and helping us police those whose behaviors are unethical or irresponsible. We should embrace this is an opportunity to boldly, unapologetically tell our industry’s story: That we reward individuals for their efforts; provide valuable training and personal development; help people take back their time and their lives; and make communities better. Driving positive conversation isn’t the only tactic we should use, but it’s a great place to start. The effects will be cumulative, lasting, effective, and offer an authentic, balancing viewpoint.”

Jennifer Fong, Social Media Consultant and Speaker at Jen Fong Media and Social Media Associate at Luce & Associates

“A negative online reputation is of course a threat, one that many direct selling companies pay dearly for as they hire SEO experts to clean up a mess. When the source of negativity is the salesforce, the solution is clear policies, training, and a password-protected area like a forum where grievances can be aired out of the public eye. When it’s customers, the path is harder. One solution is providing excellent corporate customer service (and training the salesforce to do the same), along with a monitoring program so that you can respond online and make things right when necessary. You can’t control what people say about your company online, but you can make sure your side is heard in the right places, and do good, ethical business always.”

Jonathan Gilliam, President of Momentum Factor

“Our clients tell us they see immediate upticks in enrollments when move negative online links off their page, which tells us this problem directly affects company growth. Our industry is more vulnerable to negative online search results than almost any other type of business – a nasty blog or forum can easily kill any motivation to join. The only real way to deal with the problem is hire a reputation firm, like ours. Ignoring it is the worst thing you can you, and trying to do it on the cheap is ineffective at best. And a word to the wise: SEO firms usually know nothing about ‘reputation repair’. It’s not the same.”

Tim Haran, Senior Manager of Social Media at USANA

“Online reputation management is extremely important, especially in an age where information – text, photos, videos, can be shared and re-shared many times over with a few clicks. The conversation, whether it’s positive, negative, or neutral, is taking place online and it’s important for companies to be active participants in these conversations. I would argue negative information isn’t the greatest threat – it’s the way companies handle such information that could have a greater impact on reputation. Pay attention to the conversation, respond where appropriate, and don’t delete. Educate your independent distributors to avoid online shouting matches, which only increase the content’s relevance.”

Joe Quilter, Principal Consultant at PSP Group

“First and foremost we should remember it is a ‘conversation’ type medium. With conversations, we tend to be more relaxed and this is where many people have fallen foul. For the direct selling industry this issue is increased many times, as how can member organisations control what is said about their products by affiliated independent businesses? I would say with difficulty. The answer is to ensure each member organisation have a social network policy that each new direct seller signs up to. The sector could also look at having a short eLearning programme which each distributor could view and have this tracked in a management system as proof of compliance. The other is to encourage our communities to use less chaotic and controlled environments such as closed forums, blogs and community websites. We could also consider internal closed social media websites for our own sector.”

Your turn:
What do you think about the importance of online reputation? Is this an area where there is a significant potential threat if not managed well?  What would you suggest to turn this into an opportunity?

The first quarter of 2012 closed with mixed results from the Big-6. We hear cheers from three of these six companies but the situation is different in the remaining three.

The champion in growth rate is Herbalife with 21% revenue increase from last year’s same period. Nu Skin follows Herbalife with 17%. Natura ranks 3rd place with 11% growth. Tupperware and Oriflame came with figures that were almost in line with last year. And Avon reported a revenue decrease of 2%.

Avon

Yes, Avon’s total revenue decreased 2% in the first quarter. Total units sold declined by 1% and active representatives were down 2%.

Avon’s core US business which excludes Silpada was down 2%, as average order growth, which benefited from product portfolio enhancements was offset by a decline in active representatives. Silpada sales declined 17% due to declines in both active representatives and average order.

Avon’s biggest headache is probably in Brazil where sales was down 4% last quarter. The company has been facing for some time distribution problems and fierce competition from local rivals. There is similar trouble in Russia, which once looked like a dream market. Avon’s sales in Russia was down 1% too, but the company enjoyed an increase in active representatives in Russia.

Kimberly Ross, Avon’s Executive Vice President and Chief Financial Officer said, “While our first-quarter operating performance remained challenged, we are making progress toward addressing some of our operational and cost-cutting opportunities.”

Herbalife

While commenting on the results, CEO Michael O. Johnson was once again happy with the geographical distribution of growth. He said, “Our business momentum has continued into 2012, with strong sales performance from each of our six regions.” The highest growth came from Asia-Pacific region (38%),but Herbalife also succeeded in achieving a volume increase of 23% in North Ameica, a region where quite a few direct selling companies are having difficulties in growing. Another interesting area is definitely, Russia. Compared to the first quarter 2011, this quarter’s volume was up 26% together with a 43% increase in new distributors.

Herbalife uses the name “daily consumption” to refer to distributor business methods that allows for frequent customer interaction and focuses on creating long-life consumers. Herbalife sees this one of the key drivers of its growth. Today, company estimates that more than 1/3 of its volume is coming through daily consumption.

It is interesting to note here that Herbalife announces it will begin testing a “maximum volume point limit” for first-time orders this year. The test will place a cap on first orders from new distributors. Herbalife expects limiting first orders will help the new distributors develop solid foundations for success, taking the extra time to understand the company, the products and the business before making any larger financial commitments.

Natura 

Natura net sales rose 11% percent to 1.28 billion Reais, from 1.15 billion Reais a year earlier.

The company sales went back to a double digit percentage growth after slowing down to an average 9% in 2011, less than half of the 21% growth achieved in 2010.

The number of Natura’s direct sellers grew by 17% to 1.43 million.

Nu Skin

Nu Skin holds the second place in the growth race. The company’s revenue increase was 17% in the first quarter.

In North Asia, Nu Skin’s highest-volume producing region, the growth was 2%. In China on the other hand, the company enjoyed a 35% sales increase, together with a 25% increase in active distributors. In South Asia/Pacific, the growth was 55%, in Americas 19% (14% in US) and in Europe 4%. Apparently, Europe continues to be an insigificant region for Nu Skin. Only 9% of Nu Skin’s volume was generated in Europe last quarter and 2 points down from what it was (11%) in the same period last year.

“Following a record year, we continued to generate great momentum in the first quarter as a result of the positive response to our ageLOC product launches and healthy trends in each of our regions,” said Truman Hunt, president and chief executive officer.

Oriflame

Oriflame’s sales were flat at €395.7m compared to €396.8m in the same period last year. The company’s closing sales force decreased by 6% to 3.6 million consultants. Unit sales were also down by 5%.

Oriflame’s problem-region CIS and Baltics remained to be as such with a negative growth for the fourth consecutive quarter. Euro sales decreased by 2% and closing sales force was down by 13% compared to last year. The company comments on this region, “The market dynamics remain challenging, and the actions addressing recruitment, reactivation and activation of Oriflame Consultants continue.”

“I am pleased with the first quarter results, despite the lower average sales force, primarily coming from the setback in recruitment during the end of the third quarter 2011. Our efforts to return to growth and improve profitability have led to promising results on sales, productivity and margins – however, market dynamics remain challenging.” said, CEO Magnus Brannstrom.

Tupperware

Tupperware reported first quarter 2012 sales up slightly as compared to first quarter of 2011.

Rick Goings, Chairman and CEO, commented, “I am pleased with our first quarter results including that we were able to beat the high end of our first quarter guidance range. Our emerging markets, that generated 59% of sales in the quarter, were up 4% and drove our overall increase as our established markets were down 3%.”

Tupperware had 6% sales decrease in Europe and 3% in North America (Beauty’s decrease is 13%). South America posted 24% and Asia-Pacific 11% increases.

Most of the time, it is not that easy to have an in-depth understanding of a trend if one is a part of it. I believe this is the case with most of the people in the direct selling industry these days. On the other hand, the transformation the industry is passing through is huge. I am talking about the digitalization of direct selling.

Visualize for a second, a newcomer to the industry… S/he easily registers to the company through its web site, reviews the digital catalogue, orders the initial set of products, pays for them, and tracks the parcel… all through the same web site. After forming his/her downline, s/he monitors team members’ performances and sends them reminders, organizes conference calls when necessary. In today’s world, all direct selling company web sites have become “B2BC” online shopping sites. Oriflame has recently announced it received 80% of its orders through the Internet in 2011 worldwide. This ratio is 94% in Amway’s case in Turkey!

The things direct sellers can do on the Internet is definitely not limited to shopping and downline management. They can also promote their businesses through the social media platforms like Facebook, Google+,Twitter, LinkedIn and Pinterest. Plus, they can organize webinars for their groups or attend to those organized by their companies, through their notebooks, tablets or smart phones.

In short, direct selling is being digitalized at an amazing pace. I am not saying the face-to-face “real world” activities are losing importance. They are not! But  today, the way we do our business has had a new and very strong additional dimension. While we only had the “offline world” before, now we have both offline and onine worlds. That is having (at least) twice as much power on hands.

Hannah Parish was among the first direct sellers who realized this power. She realized and utilized it to make her lifetime dream of going to the Sundance Film Festival come true. This happened in 2009 and was found so interesting that it appeared on the New York Times! You can read the whole story here. Now, there are millions of direct sellers who are using online tools very successfully alongside the offline ones.

Today, it is not possible to think of setting up direct selling operation without providing e-shopping facilities to its members or social media platfoms to communicate with them. So, this is a huge transformation and it impacts two fields simultaneously: Direct selling industry being the first field, e-commerce the second.

That’s why I am saying, “What will enhance the growths of e-commerce and direct selling is the integration of the two.”