From the FTC: On March 25th, Acting Federal Trade Commission Chairwoman Rebecca Kelly Slaughter announced the creation of a new rulemaking group within the FTC’s Office of the General Counsel. The new structure will allow the FTC to take a strategic and harmonized approach to rulemaking across its different authorities and mission areas. With this new group in place, the FTC is poised to strengthen existing rules and to undertake new rulemakings to prohibit unfair or deceptive practices and unfair methods of competition. Especially given the risk that the Supreme Court substantially curtails the FTC’s ability to seek consumer redress under section 13(b), rulemaking is a critical part of the FTC’s toolbox to stop widespread consumer harm and to promote robust competition.
2020 changed the way that customers shop. From buying in bulk to online shopping, COVID-19-related shifts in buying behavior translated into an additional $41.54 billion in digital revenue for November and December of 2020. As more customers turn to online shopping, many new users are experiencing false declines. Merchants are losing millions in missed revenue and loss of customer trust. Fraud prevention systems flag purchases as suspicious — false positives —- because the systems don’t recognize this new customer behavior. Businesses that would never turn away 40% of customers in a face-to-face setting are doing just that through e-commerce.
With twice the number of people shopping from home, new shoppers are five to seven times more likely to have their purchases declined than returning customers. These new shoppers are being denied the opportunity to become a customer. And with that false decline, shoppers are turning to competitor brands to complete the shopping experience. Customers do not like the hassle of card declines, especially if they do not know the reason, and will often find a comparable product on another site where the order is approved. 40% of those declined on the first visit will not try again on that merchant’s site.
What can be done to improve approval rates? The answer is to understand the main reasons ecommerce customers are lost. First, the fraud prevention tools may not have enough data to identify the customer, resulting in a decline. That data includes in-store behavior and purchase history, returns, coupons, loyalty programs and, finally, history with other e-commerce sites. Second, obstacles in the purchasing process, such as requiring more information than is required, may make the shopper feel nervous and lead to cart abandonment.
Sharing Services Global Corp. (SHRG) has rebranded its direct selling division, Elevacity, as The Happy Co., a seller of nootropic coffee products. The newly titled brand also received a $30 million investment increase from its largest shareholder, Document Security Systems Inc. and has obtained its direct seller’s license in South Korea, as part of its Asia Expansion Plan. In addition, SHRG plans to launch a travel company to add to its direct selling arsenal and announced Jonathan McKillip as president of this subsidiary focused on providing exclusive benefits and first-class discount travel opportunities to its brand partners and customers.
RBC Life Sciences, an Irving, Texas-based nutritional and wellness direct selling company, has been referred to the Federal Trade Commision (FTC) by the Direct Selling Self-Regulatory Council (DSSRC). The DSSRC cited earnings and health-related, product performance claims made by salesforce members, including COVID-19 claims, as well as unrealistic earnings claims. The DSSRC also noted that RBC Life Sciences falsely represented Better Business Bureau accreditation and Direct Selling Association membership. The DSSRC finalized its referral after RBC Life Sciences failed to respond to its initial inquiry from December 2020.
The U.K.’s regulator of advertising, the Advertising Standards Authority (ASA), has banned three influencer Instagram ads that utilize digital beauty filters. The action was in response to the #filterdrop campaign drawing attention to deceptive use of skin filters in marketing campaigns. In its ruling against Skinny Tan and Tanologist Tan, the ASA stated that the use of filters is not inherently problematic, but warned advertisers not to mislead customers through exaggeration.
After becoming a premier partner of the National Park Foundation’s Resilience and Sustainability program in October 2020 with a $1 million donation, the Tupperware Brands Charitable Foundation, the non-profit division of Tupperware Brands, announced a plan to install water bottle refill stations in national parks, diverting 10 million single-use plastic bottles from landfills. The Foundation will also enhance park infrastructure and education to encourage composting and recycling inside the parks and will support increased park capacity.
Signifying the end of the Carl Icahn era, Herbalife announced three additions to its board; Sophie L’Hélias, founder and president of LeaderXXchange and lead independent director of French luxury-good company Kering SA; Kevin M. Jones, CEO of Rackspace Technology Inc.; and Don Mulligan, former CFO of General Mills, Inc. Two current board members, Michael Montelongo and Margarita Paláu-Hernández, will resign their seats in April at the 2021 Shareholders Meeting, bringing the new board member count to nine. Herbalife also made news by appointing its first ever chief digital officer, Joe Miranda, who will be tasked with facilitating digital transformation and innovation for the global nutrition company . Miranda was previously the chief digital officer for Thomson Reuters. “The creation of this new position will allow the company to deliver exceptional digital experiences for our distributors, customers and employees,” said Frank Lamberti, executive vice president distributor and customer experience of Herbalife Nutrition.
WorldVentures was granted a Temporary Restraining Order (TRO) against its former president Eddie Head on Feb. 26. WorldVentures maintains that Head, who left the company in late 2020, violated a non-compete by joining Seacret Direct LLC. to build its travel program. Head is not prohibited from working for Seacret. However, the TRO prohibits Head from participating in multi-level-marketing-based travel businesses. In a March 9 statement, Seacret Direct countered, “We are stunned over WorldVentures’ continuing and blatant mischaracterization of the relationship between our two companies, and we will forcefully and definitively defend ourselves and our integrity, largely through timely and appropriate disclosure to the court of documents and communications made and signed by WorldVentures and its management.”
The world’s largest direct selling company, Amway, announced it is cutting 900 jobs—representing about 6 percent of its workforce. Most of the cuts will be workers at its Ada Township headquarters in Michigan. Amway CEO Milind Pant specified the company’s increasing investment in its wellness portfolio and improvements in digital capabilities as the catalyst for the “voluntary separation plan.”
SSN eager to support growth and transformation of the channel through informed analysis of important issues
A year ago this week, our country and our business channel were coming to grips with the reality of a nationwide shutdown and the gradual realization of the immense challenges that lay ahead—challenges confronting every level of our existence, from very personal distress to the greater societal difficulties materializing around us.
On a larger scale, the problems faced by individual companies coalesced into industry-wide disruptions for virtually every type of business across the world.
Direct sellers met this chaos head-on and persevered, arguably, better than most. Now, as the country gradually opens up again, the businesses of this sector return their full attention to the host of other challenges that lie ahead.
If this issue of SSN has a common theme, it is these unrelenting challenges that face our channel and the ingenuity and flexibility born from them, as you will read about in our second feature, as well as in Quick Takes.
In our cover story, we chronicle the journey of startup energy direct seller Griddy and the turmoil that can result when mother nature and wholesale pricing collide.
In our first feature, we detail the successes reported by several publicly-held direct sellers in their recent earnings calls.
I also encourage you to check out Risk Roundup, where the DSA’s Brian Bennett explains the PRO Act, and the threats this legislation poses to the channel.
Finally, I invite you to read our Special Report for a deep dive into one of the greatest challenges currently facing direct sellers: the self-described “anti-MLM” movement.
The past several months have seen a spike in media attention on this disparate but single-minded group, and we were eager to investigate further their habits on social media platforms, their success at engaging followers, and their weapons of choice for attacking network marketing.
American inventor, engineer and businessman Charles Kettering once said, “A problem well stated is a problem half solved.”
By confronting this year’s diverse set of challenges directly and with clarity, I know that direct sellers will continue to strengthen their business models and discover new paths to success, and I hope that SSN can be a resource toward that end.
I thank you for your support of the paper and our mission to inform and educate.