The year 2020 was a “year like no other” for the network marketing industry, the hurdles and challenges it faced is immeasurable. In fact, all the industries despite their area of interest severed consequences mainly because of the pandemic starting in the first quarter to the last. Individual direct selling models like network marketing, party plan, social selling, and social entrepreneurship suffered a major setback. The industry is all about interpersonal relationships extended, to build successful business and career by sharing quality products and services with the loved ones, this pandemic drastically slashed down the scene. EpixelEpixel MLM Software provides technology solutions to help MLM and direct selling companies to digitally transform into a customer-centric organization. sensed the depth of the scene and have compiled this article after an extensive research for direct selling companies to retrospect the industry in 2020.
New statistics gathered by SCORE highlights a dramatic shift in the shopping behavior during the pandemic. The interesting study heard 53% saying that their shopping choices are permanently modified and 73% affirmed that they tried new shopping patterns attributed mainly to the confusions created by the pandemic. The study delivers a prognosis for direct selling companies to rethink and reinvent strategies that suits the scene.
*Source: SCORE Report
“This research shows that shoppers are increasingly moving online and using their dollars to support brands that reflect their personal values, and impact their local community,” says Bridget Weston, Chief Executive Officer of SCORE.
The industry was regulated by authorities compelling the network marketing companies to make changes in their compensation plan and adopting customer-centric, product-focused business models. The growth of the gig economy, changes in shopping preferences, innovative technologies, and marketing strategies all swirled the industry, and to top it all the pandemic set in. However, the counter cyclical nature of the industry helped it to neutralize the drastic economic fluctuations and recessions. In the second quarter, the momentum shifted and COVID-19 became an accelerant for the business strategists.
The organizations saw themselves involved in training and sales programs for their distributors. Switching to the online sphere of business through Zoom, Google Meet, etc. meant so much of a shift for a socially interactive business model as direct selling. Despite the pandemic slowdowns, the consumer favorability towards direct selling however remained steady. We present a SWOT analysis of the direct selling industry with the challenges met and major contributions made in the backdrop of pandemic affecting the global direct selling industry in general.
Commission Payout in MLM Industry in 2020 (34.65%)
Companies that did well in 2020 - Stats and facts
Among the top 100 MLM companies, Amway secures the top position followed by Herbalife, Avon, Vorwerk, and Infinitus in the top 5. In spite of the challenges and obstructions faced in the industry many direct selling companies innovated far and wide to sustain and succeed amidst the pandemic.
New personalities and personal achievements
The year witnessed an upsurge in individual talents rising to the top positions irrespective of the shadow cast by the pandemic. Their contributions and dedication to the industry endowed them with professional achievements making it an eventful year for aspiring individuals.
- Connie Tang joins Ruby Ribbon’s board of directors making it a perfect combination as both Tang’s and the organization’s mission aligns to mentoring and empowering women.
- Karen McElhatton enters Avon as the Chief Technology Officer with a view to accelerating digital transformation for the benefit of its employees, distributors, and consumers with “a personalized, high-touch, high-tech experience”.
- Jessica Reimer-Arias, USANA Executive Director of Marketing and Social Media, was honored as the Top Women in PR by PRNEWS for her contributions inside and outside the organization.
- Jonathan So and Carlito Macadangdang, JC founders, recognized as Entrepreneurs of the Year in the 2020 Asia Leaders Awards. They were honored for their employee support and product innovations in lieu of the pandemic.
- Sharron Walsh was promoted as the CEO of Isagenix International to oversee the business operations and the brand evolution of “Isagenix 2.0”.
- Roger Barnett, Shaklee Chairman and CEO, was announced as WFDSA Chairman to serve through October 2023. He assumed the position from Magnus Brannstrom, CEO and president of Oriflame.
- Don and Nancy Wilson were honored by Juuva for exceeding a lifetime earning of $55 million in their network marketing career as distributors.
- Travis Garza joined Plexus Worldwide as President of Sales and Marketing with his 20-year long and fruitful career in sales and marketing.
- Murray Smith was appointed as President of Europe, Eurasia, and the Middle East by doTERRA in regard to his service excellence in the company since 2014.
Innovations are game-changers irrespective of the areas they evolve from. Change in idea innovates anything that it holds and gives a new color to stand out in the increasingly competitive world. Direct selling industry is nothing short of competition and that’s exactly why the network marketing companies introduce innovative products every year to make their mark.
Damsel in Defense’s award-winning ‘Protected Pepper with Shield Technology’ was announced as the innovative product of the year in DSA U.S. Awards 2020. This self defense product sends out alerts to specified contacts once the user uses this product in a state of emergency through a company-created shield community.
Avon has announced plans to launch a new range of skin care products, Adapt, to support women with hormonal problems in their menopause. The new range is expected to hit the market this year.
Tupperware received a U.S. patent for their unique design of PONDS (Passive Orbital Nutrient Delivery System) that helped NASA’s ‘Veggie’ on the International Space System supporting Astronaut diets.
Hurdles industry faced
Network marketing industry had to go through numerous impediments before and through the pandemic. Pyramid schemes were there way before the onset of COVID-19 and the pandemic became fuel for hucksters making fake health claims targeting the fears of the society leaving the industry on the watch out. FTC had to police the industry strictly to protect consumers from falling prey. In addition to this, the industry also witnessed the withdrawal of companies from the network marketing model, shutting down of operations, and employee slash downs. It was quite a hard time!
The scam outbreak and preventive measures
Along with the outbreak of the pandemic, the industry saw major scam outbreaks. When the ‘Health and Wellness’ industry reaped the benefits of the pandemic, it also contributed to its share of scams. In the first 9 months of 2020, FTC saw complaints outlining $150 million in losses by the consumers. While preventive measures were taken by regulatory agencies around the world, direct selling companies also did their bit to educate their distributors not to go off the way for selling company products. Industry recognized it as a collective responsibility and a commitment to the society.
Number of Reports
*Representation is based on reports submitted directly to the FTC from January 2018 through September 2020. Source: FTC
- FTC acted swiftly on the pyramid schemes and 2020 witnessed the shutting down of “Success By Health”, an instant coffee pyramid.
- FTC together with SEC and its other partnering agencies launched Operation Income Illusion that targeted pyramid schemes and fraudulent investment programs that trapped consumers into huge financial loss. FTC also sends out online handouts ensuring consumer protection, which is its primary goal.
- FTC reports a five-fold increase in MLM and pyramid-related scam complaints in the second quarter of 2020 through social media alone. The below graph includes scams that happened in social media online shopping, romance scams, and supposed economic relief or income opportunities including MLM and Pyramid-related scams.
*Figures are based on frauds reported directly to the FTC indicating monetary loss through social media contacts. Source: FTC
- Negligence on the part of individuals or companies also caused illegitimate companies to spring back into action. Qualpay’s neglect of MOBE’s history resulted in a huge financial loss and ended in strict regulatory restrictions.
- Direct selling is a business that has to be dealt with carefully else it might get lost in the legal web. The organizations took legal support from law firms and other regulatory bodies and updated themselves on the region-specific legal statutes.
The industry went virtual on its mainstream events this year taking into consideration the preventive and safety measures of the prevailing times. The industry witnessed several events across the globe conducted by direct selling companies, associations, and other related bodies. The online events still saw the right amount of crowd contributing to its success.
- DSA ran a series of events under the banner ‘DSA Engage 2020’ aimed at improving the direct selling experiences of millions of individuals around the globe. DSA also hosted tax, legal and regulatory seminars, and educational webinars. 2020 DSA Award ceremonies of various DSA member countries were conducted virtually around the globe this year.
- The Jeunesse EXPO 2020 Vision was hosted virtually by Jeunesse breaking the world-record with live streaming in 20 languages. The event featured more than 60 corporate, field and expert speakers with total views of 65,693 from 106 countries. It created master classes and interactive games with insights delivered by leading industry experts.
- doTerra celebrated its annual global convention with over 81,000 people from 133 countries. Pursue 2020 doTERRA Global Connection delivered educational content with presentations from experts in the fields of science, quality, research, medicine, supply chain, and philanthropic work.
New industry guidelines and legal updates
Regulatory bodies and other responsible organizations have been keeping an eye on the industry activities to ensure that the companies follow strict ethical and regulatory standards. Organizations like DSA also contribute to the upliftment of welfare standards of the direct selling industry through various programs and initiatives.
- DSA in October 2020 filed comments with the U.S. Department of Labor on a Notice of Proposed Rulemaking (NPRM). This proposed to define direct selling employees under the Fair Labor Standards Act (FLSA) as Independent Contractors.
- The U.S. Department of Labor announced its final rule under the Fair Labor Standard Act (FLSA) on Independent Contractor Status. It reinforces a 5-factor analysis of workers to be classified as an Independent Contractor by the employer.
- Direct Selling Self-Regulatory Council (DSSRC) issued new guidance on earning claims for the direct selling industry to ensure that the direct selling companies and the members of its salesforce comply with legal and self-regulatory standards.
- Direct Selling Caucus sent a letter to leadership House and Senate requesting consideration in tax and other benefits for direct selling individuals in battling the negative impact of the pandemic.
- DSA stated that the ‘Coronavirus Aid, Relief, and Economic Security (CARES) Act’ to a certain extent could help millions of direct sellers bypass the challenges caused by the pandemic in their direct selling careers. DSA summary outlined the key provisions direct sellers could benefit from the new Act.
Success is not limited to sales or revenue. It is built around an organization’s strategy to develop and flourish amidst the competition and a never-ending run for sustenance. Direct selling companies ran a series of events and programs to help their community feel connected and together during the pandemic. Training programs, online webinars, donations, etc. paved the way for new recognitions and opportunities in their community and their industry at large.
- Direct Selling News initiated the Customer Centric Recognition (CCR) program to honor companies who follow a sustainable and customer-centric approach. While DSN concentrates on building a customer-centric future for the industry, companies can benefit from the recognition as a third-party validation to their stable and sustainable business model.
- Alliance In Motion (AIM Global) launched a series of training programs across its 8 branches for its distributors in Nigeria. The event hosted distributors from all over the country seeking product training, motivation, and guidance. It was led by prominent figures in the industry.
- ByDzyne launched its AI-powered online marketing platform in April this year. This multi-vertical approach together with Artificial Intelligence is expected to help and optimize the efforts of the organization’s marketers working from home.
- Beyond launched a new webinar and CoinZoom platform for ongoing education and one-on-one meeting scheduler for its members.
- Codebreaker Technologies announced a new Chrome extension for its groundbreaking AI personality coding technology which will enable subscribers to use Codebreaker AI to identify the B.A.N.K. personality type of anyone on LinkedIn with one click helping them in classifying prospects.
- Cloud 9 Life launched ‘Fuel Your Fearless’, an 8-week gut health challenge for their executives and customers to improve their overall health, to transform into a healthier version of themselves.
- Lyconet revolutionized its business model with redesigned programs, features, and services together with myWorld Benefit Store. The myWorld Benefit Store is designed to provide an incredible shopping experience for its marketers and their customers.
- Velovita announced the industry's first double pay program. Their unique social selling platform pays its customers a 20% referral bonus on each customer order for life and also allows their purchases to count towards their weekly commissions. Affiliates interested in their product but not recruiting can still earn a residual income through product sales with zero investment. It also took the industry by surprise with its $5 flat-rate shipping to their members in any of their global markets.
- Juuva launched a breakthrough program called ‘Never Again Club’ to motivate direct sellers who have quit direct selling to re-enter the market and with more benefits.
CSR and sustainability commitments - Industry’s commitment to the world
Being pioneers in the industry also expect individuals or organizations to be committed to the society they live in. Corporate Social Responsibility rests on the pillars of community, society and planet. As a responsible organization thriving inside a society, it is expected to maintain sincerity and responsibility while making its goals work and in the long term sustainability of ethics, resources, and the market. Direct Selling companies stood with their Corporate Social Responsibility this year stronger than ever in the height of the pandemic.
- NuSkin’s sustainability commitments earned it an honor in DSA U.S. Awards 2020 for its vision to improve the environmental impact score of its products and for the planet to ‘build a global network of zero-waste facilities’. The company saved at least 16.5 tons of paper and 21 tons of plastic during 2020.
- Tupperware Brand was recognized as one of America’s most responsible companies 2021 by Newsweek together with Statista for positively impacting the communities. In their list of 399 companies Tupperware was ranked #200 and 18th in the Consumer Goods category in recognition for its commitment to people, the planet, and environmentally responsible products.
- Rodan + Fields expanded its recycling program partnering with Terracycle with a commitment to make 75 percent of all packaging refillable, reusable or recyclable by 2025.
- MONAT Global donated 100% of every sale, contributing to more than $250,000, from their limited-edition sets to veteran and first responder non-profit organizations in the United States, Canada, the UK, Ireland and Poland.
- Jeunesse’s nonprofit foundation, Jeunesse Kids, donated $300,000 to food bank organizations to address the hunger crisis caused by the pandemic.
- Ambit Energy, through its non-profit organization Ambit Cares, donated $180,000 to ‘Feeding America’, the nation’s largest organization dedicated to fighting domestic hunger. It had also donated $50, 000 earlier in September.
What 2021 looks like for the NWM industry - The inference
Industry experts presume that ‘customer-centricity’ will be the focus point that will increase the chances of direct selling organizations to meet their challenges in the upcoming year. This year will obviously be a reaping in the whirlwind but by making appropriate changes in strategies and in the general outlook towards their community they could very well reap the benefits. Empowering representatives by helping them with ample tools and techniques to reach their customers and analyzing their approach will help organizations realize the customer experience gap. Building on it by knowing customer interests and values will aid companies in supporting their distributors in customer acquisition and create long term relationships.
Roger Barnett, WFDSA Chairman, expects that customer-centricity will keep reshaping the industry in 2021. In his industry address, after assuming the post of WFDSA Chairman he said, “This is the right moment to Reimagine, Reinvent, and Redefine the role and contribution of direct selling for the next decade and elevate the reputation of our industry and expand our impact.”
He further explains what he means by “Reimagine, Reinvent, and Redefine”:
– Reimagine what direct selling means in the digital world, to provide even greater connection and support to millions around the world.
– Reinvent who is a direct seller and how we compensate them, so we can expand the number of people we impact in the future, and be even more inclusive than today.
– Redefine the image of direct selling by quantifying our impact on creating a diverse, powerful, inclusive economy for all.
With a new normal in place, home-based businesses will have constant growth and the traditional face-to-face method of direct selling will resume its place together with new standards of virtual parties and social selling. Direct selling companies will need to focus their time and energy on meeting compliance standards set by the regulatory bodies with restructured compensation plans and other legal industry guidelines. In 2020, many companies saw elevated growth in sales online and that will remain intact in the coming year too, or rather an increase in the scenario.
Source: SCORE survey
Medifast on behalf of OPTAVIA surveyed 14,14 U.S. adults on the health routines in 2020 and that is expected in 2021. The numbers are quite interesting for the health and wellness industry. More than half of Americans ages 18-34 agree that the pandemic has changed the way they are thinking about (54%) and prioritizing (55%) their health and wellbeing for 2021. Nearly all (96%) respondents who made positive health-related changes amid the pandemic reported that they plan to continue embracing healthy habits in 2021.
Remember: the top reasons people leave are poor communication poor training unmet expectations, and poor support. Actively solve these problems and you'll keep your reps happy. After all, just a 1-5% increase your profits by 10-25% to secure your best year yet!
– Terrel Transtrum President and Founder of ServiceQuest
Everything that drives creativity and innovation in the modern world takes the company of technology. Researchers believe that technology innovations such as cloud computing, artificial intelligence, online payments, workflow automation, data accessibility, and social media will have a great impact on people’s attitude towards individual brands. It will be a tremendous factor in building brand identity and loyalty in the market.
The economy and the industry has suffered serious setbacks last year and the restoration will happen with companies employing the most modern technologies of artificial intelligence and business intelligence to stay ahead in the race. Worldpay FIS 2020 Global Payments Report predicts that digital or mobile wallet transactions will be over 52% of all transactions globally by 2023. This trend will set a new record in our industry too with companies moving from checks to tech to attract, retain, and motivate their consumers and distributors.
Drawing things to a close, we have to note that the industry needs an accelerating change at the organization level and at the individual level. Customer-centricity, technology innovations, and regulatory standards will be the soul and focus of the direct selling industry with more weightage given to the needs and expectations of distributors and consumers. When things go online the idea delivered might not be conveyed appropriately compared to that of direct face-to-face interactions. Biased knowledge and right knowledge is completely different. What the companies need to strive to achieve is the deliverance of the right knowledge through effective research methodologies to get things straight to your community. Stick to the regulatory commissions and stay cautious with frauds taking a toll on your business. Hoping for a better year and a ‘future to strive for’ let's look forward to a more beneficial and rewarding 2021.
Disclaimer: Epixel does not promote or support any of the above companies, their products or services. The facts published here are represented as reported in the direct selling industry. The facts don't reflect our priorities.
Source: businessforhome.org, dsa.org, directsellingnews.com, wfdsa.org