Direct Selling and

Communities in
the Internet Age
Not to be distributed without permission.
Direct Selling and
Communities in the
Internet Age

AN EXTRACT FROM THE REPORT

Direct Selling and the Importance of Communities in
the Internet Age

CONNECT WITH US

© 2017 Euromonitor International

 Direct selling’s greatest strength is its ability to tap into the power of communities.
The internet is changing how everyone communicates. This has an impact on the
direct selling community. The most successful direct sellers will win by continuing
to set down stakes in the most relevant communities, but they will also use a smart
web presence to differentiate themselves from their competitors and bring direct
selling into the 21st century.

iv © Euromonitor International
 INTRODUCTION

Direct sellers’ futures are tied to that of

the communities they serve
Some think that despite globalisation, the internet is allowing humanity to become
more tribal once again, thanks to social networks and improved communication.
Direct sellers that succeed in the future will make use of these networks to supplement
their community-centric business model in a way that serves the goals of these groups.

There is a need to maintain a business

model that solves specific problems
Whether it is supplying rural communities with much needed retail outlets or helping
individuals with health issues, it is up to direct sellers to figure out which problems
they are best suited to solve and to provide adequate proof that they are the best
solution for an increasingly selective and well-informed populace. More competitive
product markets will put the onus on corporations to provide personalised and
consumer-friendly business plans.

Direct selling’s greatest strength is its

sales force, but products matter too
Distributors are key in direct selling. Getting trusted figures in communities to
embrace a direct selling platform can work wonders in building a customer base, but
this process is easier to initiate and sustain with value-added products. Success can
best be achieved by striking a balance between recruiting and product development.

© Euromonitor International 1
I nt ro d uc tio n

Embracing the internet will be a

competitive advantage
Many analysts believe that the future for direct selling will be challenging. This makes
sense, given weakness in developed markets and growing pressure from younger, more
sceptical shoppers. That being said, growth prospects for the industry are healthy
overall and the model is unlikely to go away anytime soon. The success of certain
brands, even in developed markets, indicates that smart use of the internet and
scientific backing for claims of efficacy can help propel a brand into the new zeitgeist,
where these factors maintain more importance than ever before.

2 © Euromonitor International
 THE EVOLUTION OF
DIRECT SELLING

The internet is not a harbinger of doom

for direct selling
Counter to the common retail refrain, direct selling is less under siege from the
internet than might be expected. The growth of the internet worldwide has not
stopped direct sellers yet, nor is it predicted to, as they find their strengths emanating
from the personable nature of their business model. Direct sellers may rely more
on nations where the internet is not as robust, which is bound to change, but their
continued success within specific communities, even in developed countries, suggests
future potential. If anything, it has been individualistic attitudes and negative
press that have hurt direct sellers more than the inevitable progress of technology.
Embracing technology is a way to meet these challenges head on and stand out from
the crowd, but first direct sellers will have to know exactly which crowd they are
looking to cater to.

Real Direct Selling Growth by Region: Historic vs. Forecast 2010–2020

10%

8%

6%
Sales CAGR
(constant )

4%

2%

0%

-2%

-4%
World Middle East Asia Pacific Latin Western North Eastern Australasia
and Africa America Europe America Europe
2010-2015 2015-2020

Source: Euromonitor International

© Euromonitor International RETAILING: DIRECT SELLING AND THE IMPORTANCE OF COMMUNITIES IN THE PASSPORT 1
INTERNET AGE

© Euromonitor International 3
T h e E volutio n o f D i r ect Sel l ing

For developing regions: Purchasing

power is as important as culture
Regional demand for direct selling is not, however, always a function of familial
obligation. Direct sellers should be smart enough to serve the needs of each
particular region.

When it comes to catering to developing Top Countries for Amway Oral Care Growth,
regions, it makes sense to consider what 2010–2015
shoppers need and what they can afford Absolute Growth 2010–2015
Country
compared to other countries. For many (US$ million) CAGR (%)
in these regions, it is access to basic China 21.2 3.3
goods that is still key, and this should Thailand 15.3 8.8
inform direct sellers’ merchandising India 11.7 11.3
strategies. Amway’s Glister brand of oral Vietnam 7.6 33.4
care products may struggle in developed Russia 5.4 2.7
markets, where the shelves overflow Sweden 2.5 49.5
with umpteen varieties of toothpaste Turkey 1.5 5.2
and buying habits are relatively set, Mexico 1.3 8.6
but the same cannot be said for every Venezuela 0.8 49.9
country. The table to the right indicates Ukraine 0.8 2.8
where this brand makes more sense Source: Euromonitor International
geographically.

It is important to remember that unmet demand is not just a function of economic

development. In many of these countries, for example, deodorants do not sell well,
as they are simply not seen as necessary.

For developed regions: Demand has

shifted with standards
Direct sellers have been wracked with woes in developed markets. A greater sense of
individualism, negative press and word-of-mouth, and a highly sophisticated retail
environment where competition evolves at a breakneck pace have caused some to
wonder if these markets are even worth pursing to the same degree, considering the
easier application of the model elsewhere.

4 © Euromonitor International
 T he E volution of Dire c t S e lli ng

Taking a closer look at market shares, though, shows that significant growth can still
be achieved if the right communities are targeted with the right products. A case in
point is Rodan + Fields, which has seen its popularity skyrocket thanks to its scientific
basis (its founders are dermatologists) and emphasis on result-based beauty solutions.
A clear purpose based on verifiable expertise has given the company leeway to charge
premium prices, which makes sense in markets where income inequality is increasing
and where direct selling already has a premium orientation.

Rodan + Fields US Sales 2010–2015

500

400

300
US$ million

200

100

0
2010 2011 2012 2013 2014 2015

Source: Euromonitor International

© Euromonitor International RETAILING: DIRECT SELLING AND THE IMPORTANCE OF COMMUNITIES IN THE PASSPORT 2
INTERNET AGE

© Euromonitor International 5
 COMMUNITIES OF INTEREST

Giving people the tools to get what they

want in today’s world
Business has the power to change lives, and direct selling more often than not seeks
to exploit this potential through its network-centric business model and emphasis on
health and beauty products. Few things are more aspirational than starting a business
or deciding to undertake a regimen to improve how you look and feel. Direct sellers
have made significant progress in the past by selling these very ideals. The prevalence
of underdeveloped retail markets and the growing global obsession with health make
direct selling alluring to those who are looking for economic power and those looking
to better themselves via self-improvement products.

PROSPERITY FOR SELF-IMPROVEMENT IN

Women Health

Under-developed Beauty
retail markets

Direct selling augments access within

underdeveloped markets
The route to market for an entrepreneur is very difficult in any country. It is particularly
difficult in countries with poor infrastructure and burdensome regulations. This sort of
institutional environment creates underdeveloped retail markets, which are measured
below using the share of grocery sales that still occur via traditional stores and markets.
There is a positive correlation between an underdeveloped retail market and the size
and growth of direct selling within that region.

6 © Euromonitor International
 Com m un ities of Inte rest

This analysis also holds true within individual countries, indicating the way in which
direct selling expands economic opportunity. Rural towns are more remote and
going to the market can be unduly expensive for occasional purchases. Direct selling
not only operates as a source of income for some individuals in these communities,
but as a source of everyday products for others. Direct selling helps sellers and
consumers achieve the higher quality of life they strive for when opportunities are
limited by geography.

Direct Selling Growth 2010–2015 and Share of Traditional Grocery by Region 2015

100%

Middle East and

Africa
Traditional grocery’s share of total grocery

75%

Asia Pacific
Latin
50% America
Eastern Europe
Australasia
25%

North Western Europe

America
0%
0% 2% 4% 6% 8% 10% 12%

2010-2015 direct selling CAGR

Source: Euromonitor International

© Euromonitor International RETAILING: DIRECT SELLING AND THE IMPORTANCE OF COMMUNITIES IN THE PASSPORT 3
INTERNET AGE

Becoming a part of current communities:

Real world examples
Creating a community is a very difficult and long-term process. More often than not,
it makes more sense to cater to current communities than to try and create your own.
Leveraging the strength of thriving communities gives direct sellers instant access to
already engaged consumers and plenty of word-of-mouth. Products and positioning
are integral to this approach of turning outsiders into insiders. This section will outline
how specific companies have made a name (and sales) for themselves by connecting
with the following communities: religious women, young adults and teens, fitness fans
and rural towns.

© Euromonitor International 7
 THE ULTIMATE ROLE
OF THE INTERNET

Will the strategies of the past continue

to work?
Concerns run rampant within the direct selling industry about the future of its
workforce. Many younger generations seem more interested in online shopping and
harbour scepticism of older brands and institutions. Direct sellers have been able
largely to ignore these worries, thanks to success in regions that are not quite as a
developed, but those nations will catch up sooner or later, and when they do, the
most successful direct sellers will have a plan for teaching the workforce of today
how to sell to the hyper-connected shoppers of tomorrow.

The future is here already

The internet age has clearly arrived. Internet retailing amounts to nearly US$1 trillion
in sales, and Amazon is now only second to Wal-Mart in the list of top global retailers.
Developing countries are quickly leapfrogging developed ones, thanks to the growth
of mobile internet networks. Already, over half of China’s US$293 billion internet
retailing sales originate from a mobile device. If the various non-commercial uses of
the internet are taken into account, its importance increases even more. Direct selling
will still draw strength from its personal sales model, but as an increasing share of
communities and consumers spend their time and money online, it is necessary direct
sellers to maintain a presence there as well.

Transitioning is never easy but always necessary

Blind adherence to the trends of the past, no matter how well intentioned, can limit
future development. The hesitance to move online for direct selling can partially be
traced to the fear of online stores cannibalising distributors’ sales and weakening the
personal relationships they have built within their community. It is hard to empower
anyone if what you sell and how you sell it is not appealing anymore. End consumer
demands are changing, even if the methods of salespeople are not. Companies that
thrive will be those that cater to these new demands. If legacy brands are too slow to
do so, then there is no shortage of competition which will spring up in their absence.

8 © Euromonitor International
 T he Ultim ate Role of th e Inte rnet

Local networks get wider with

social media
It is difficult to cater to communities when you do not know where they congregate.
Increasingly, this is online. Direct sellers have been slow with digital innovation, but
the popularity and fluidity of the internet provide perfect forums for discussion and
information distribution.

An example of successful use of the internet

is AUN socks, a direct seller of socks. Opening I skate to where the puck is going
up a store on WeChat and using the Renrews to be, not where it has been.
selling system allows its followers to sell its Wayne Gretzky
minimal but well-made SKUs to their friends,
and makes it easy to keep track of sales of
commissions.

Something as a simple as providing website templates in multiple languages gives

distributors the power to speak to their online communities on their terms. As of
September 2015, skin care seller Nerium has given sellers this option, with personal
websites now available in Spanish.

Recognising which trends of today will

drive commerce tomorrow
Knowing exactly what people will want in the future may be hard to predict, but
keeping tabs on the growing preferences of today can inform strategy. Here are three
of the top trends that impact internet sales.

Personalisation
Big data and the self-selecting nature of the internet will help move products that
appear personalised and meet individual needs. A real world example of personalisation
would be Trunk Club’s personal stylists, who get better at hand-picking items for their
clients as their relationship deepens. An example applied to direct selling can be found
at Herbalife, which already suggests various products based on favoured activities, but
a more robust recommendation engine that depends on user input (like data from a
Fitbit) would be more modern.

© Euromonitor International 9
T h e U lti m ate R o le o f th e Inter net

Convenience
Give shoppers options, because if you do not someone else will. More options means
more for current customers to buy and more to attract new ones. A convenience real
world example is in Amazon’s delivery capabilities, which give it the ability to stretch
or shrink wait times based on what the customer is willing to pay. An application of
convenience could be a system to search easily by distributor online and via mobile,
allowing shoppers to support their friend’s business even if they do not see them
often. This should be a comparable process across devices.

Engagement
The internet (mobile in particular) increasingly offers avenues for escape and
entertainment. Brands that make interaction fun benefit. Real world examples of
engagement are found in Western brands like Kate Spade and Burberry that market
themselves in China via quizzes and contests on WeChat. A direct selling
application would be using parties and in-person sales visits as photo-ops and
incentivising sharing them via social media, then allowing distributors to track their
own engagement and reward the most active participants within their communities.

10 © Euromonitor International
 CONCLUSION

As communities change, the best direct

sellers will change too
E-commerce will not be a harbinger, but a differentiator. The goals of the communities
outlined in this report are timeless. Improving lives and supporting friends and
family will never go out of fashion. This is why direct selling is predicted to continue
growing despite weakness in certain markets. However, the way these communities
are organising themselves is changing. Smart direct selling brands will make use of the
internet to support these changes, giving sellers the tools to harness the power of social
media and engage modern day shoppers on their terms.

The internet will put pressure on direct sellers by offering a wide array of information
on them (both good and bad) and by disseminating that information in an increasingly
accessible way. Direct sellers need to take an active part in conversations that occur
online and learn how to influence future shoppers’ attitudes and habits. This is even
more important in developing regions, where these habits are not yet fully-formed.
Communication strategies will become more varied as old and analogue methods such
as one-to-one interaction, party planning or community centres make way for the new
and digital, namely social media, mobile messaging and personal websites. Thus, social
media and online sales do not need to be an enemy for direct sellers—they should
be tools.

Winners will give their future customers

what they want
Direct selling will continue to grow. Despite criticisms, brands still manage to thrive
even in markets where fewer people find the model favourable. The model may be
too human ever to disappear entirely, but growth in an increasingly competitive retail
landscape will come from those who can combine the strengths of the past and future.

© Euromonitor International 11
C o n clu sio n

The future will only get more personalised, thanks to the gathering of individual data.
Direct sellers are not immune to this trend, and thus will be better served by knowing
precisely who they are selling to. The easiest way to accomplish this is to keep close
tabs on the interests of the communities they cater to.

Direct selling may be here to stay, but the customer of today is not. Figuring out how
to move from the past to the future is a difficult job. Some direct sellers may get by on
older models and loyal fans, but a growing workforce will need to get younger sellers
on board by communicating and transacting with them on their terms.

The future will also be more consumer-friendly. Increasing information and options
makes it easier for people to get what they want, when they want it. More competition
means that business will have a hard time sustaining themselves on presence alone.
Those that do not add distinct value to their customers’ lives will struggle.

12 © Euromonitor International
 HOW CAN EUROMONITOR
INTERNATIONAL HELP?

Euromonitor International is the world leader in strategic research for economic

and consumer markets. Comprehensive international coverage and leading
edge innovation make our products an essential resource for companies locally
and worldwide.

Our global market research database, Passport, provides statistics, analysis, reports,
surveys and breaking news on industries, countries and consumers worldwide.
Passport connects market research to your company goals and annual planning,
analysing market context, competitor insight and future trends impacting businesses
globally. And with 90% of our clients renewing every year, companies around the
world rely on Passport to develop and expand business operations, answer critical
tactical questions and influence strategic decision-making.

Purchase the full report of this strategy briefing or request a live demonstration to
discover more about the power of Passport.

© Euromonitor International 13