Opportunities and obstacles are the name of the game as companies compete and e-commerce explodes
By: David Rauf
“If I’m a traditional manufacturer of consumer packaged goods and always sold in retail stores, but now because retail stores are closed revenue is cut, I had better be looking at every single channel and opportunity to keep my product in front of consumers.”
—Kerry Tassopoulos, founding member,
The Tassopoulos Law Firm PLLC
There are companies right now doing the type of accelerated growth they have not seen before.”
—Mike Sheffield, CEO, Sheffield Group
When the coronavirus outbreak started spreading across the globe earlier this year, executives at The Body Shop, a U.K.-based skin and beauty product retailer, had some decisions to make.
Most of the company’s 3,000 brick-and-mortar stores around the world had to close at some point because of COVID-19. That included all of its retail locations in North America, which were shuttered in mid-March, and some didn’t reopen until September. While retail business suffered, The Body Shop’s direct selling business—limited to the U.K. and Australia—flourished. Direct sales in its home market jumped by 80 percent this year, while its business in Australia is up 60 percent.
Once a staple in the domestic direct selling channel, the skin and beauty product retailer ended the business model in the U.S. more than a decade ago.
But for the past three years, ever since being acquired by Natura & Co. from L’Oréal, The Body Shop had been plotting to jump back into the direct selling business in the United States.
The pandemic forced the company to speed up those plans.
“With the onset of COVID and retail getting shut down pretty much overnight and the monumental shift to online purchasing, the decision was made to accelerate the launch,” says Michelle Jones, head of The Body Shop At Home North America, the company’s direct selling arm. “The fact that we were able to move so quickly and get an army of lovers of our brand on board so quickly, meant we were able to close a little bit of the gap with our retailers closing.”
The Body Shop fast-tracked its re-entrance into the U.S. direct selling channel over the summer to help curtail revenue losses from temporary retail store closures. So far, it’s paid off, says Jones.
“We are four months in and have 6,500 consultants and $5 million in net sales for North America. For a startup, that’s pretty good,” she says. “We’re on track with budgeted ambitions. We haven’t done any advertising at all. Everything has been organic growth, and I anticipate we’ll see the same momentum of growth over the next few months.”
Jones says the company was able to move so quickly because of a global direct selling team that was already in place. Distributors in the U.K. and Australia leveraged connections in the U.S. to jumpstart the business in North America, she says.
“We didn’t do any grassroots efforts here in the U.S. No advertising. It was all through international sponsoring,” Jones says. “We never would have had the early success if we didn’t have those two markets rallying and tapping into connections in the U.S.”
Pandemic as a Positive
The Body Shop is one example of a company looking toward the direct selling channel—or, in this case, jumping back into it—during the pandemic. The better part of 2020 has become a period marked by global business upheaval in which a company’s ability to shift to an online-only sales model has been imperative for survival.
For direct selling, the channel’s transition so far appears to be strong, with revenue increases reported by companies selling cleaning products as well as health and wellness supplements.
Surveys from the Direct Selling Association also indicate the same. More than 60 percent of respondents in a late August survey said U.S. revenue had been impacted in a positive manner due to the pandemic, while 35 percent said COVID-19 had a negative impact on sales domestically. In terms of global revenue, 57 percent of respondents said the coronavirus had a positive impact, while 31 percent reported it as hurting sales.
Consultants who work with direct selling companies say they’ve noticed an uptick in interest this year in companies wanting to join the channel, as brick-and-mortar businesses suffer and alternative distribution avenues to sell products are sought.
Kerry Tassopoulos, a former vice president for government relations and compliance at Mary Kay who now consults with direct selling companies, says the channel was positioned for success when the pandemic forced a shift to online sales. Many companies had already invested in sound IT infrastructure to facilitate work-from-home scenarios, he says. Plus, he adds that people are now realizing the barriers to entry in direct selling are just not there.
“With the number of people in every age group being furloughed or laid off or economically displaced, they are realizing the barriers to entry are virtually nonexistent with a $50 sign-up fee for a kit,” says Tassopoulos. He adds: “If a company comes to me and their brick-and-mortar traditional method of selling products is disrupted, and they don’t all want to go to Amazon or to other larger conglomerates, they have the ability to take a product, an idea, and build it the way they want to do.”
The success that direct selling companies have had during the pandemic, Tassopoulos says, has led to an increase in clients asking for advice about getting into direct sales.
“If I’m a traditional manufacturer of consumer packaged goods and always sold in retail stores, but now because retail stores are closed revenue is cut, I had better be looking at every single channel and opportunity to keep my product in front of consumers,” he says. “What I’m telling them is ‘if you don’t look at this and evaluate it when you’re looking at ways to get products on the market, then you are leaving money on the table.’ If they’re wise and smart, they will look at direct selling as perhaps the most attractive way to get their products to market.”
Mike Sheffield, CEO of the Sheffield Group, a consulting firm that helps companies launch in the direct selling channel, says business is booming. “We are buried,” Sheffield says. “We are probably having our best year.”
The vast majority of companies working with Sheffield’s group of consultants are startups, he says, and need help navigating business basics. But some are not new companies at all.
In other cases, Sheffield says, there are “million-dollar companies saying ‘we’re not growing, and we’re looking at these other companies that are more direct to consumers. How do we do that?’ ”
Startups want to get in on the action, and legacy direct sellers are asking “how do we compete in today’s world?” and “how do we compete against the Amazon effect?”
Then, Sheffield says, there’s a third type of client he’s seeing a lot of: companies that relied, in the past, strictly on retail or selling through a third-party such as Amazon. During the pandemic, the number of established companies looking to set up a new distribution channel through direct sales has ballooned, he says.
“All their business is dying. Companies who don’t make this transition will become dinosaurs. They all know they have to somehow get to the customer online,” Sheffield says. “They may seek Amazon first but then figure out the piece of profit they get out of it is so small and the competition is so high. The smart ones are saying ‘how do we have our own internal Amazon?”
Sheffield says direct sellers are leveraging technology like never before, hosting training, conferences, and parties online, and those doing it well are “blowing out the roofs” with sales.
“There are companies right now having the type of accelerated growth they have not seen before,” he says.
Delays, Delays, Delays
It hasn’t been boomtime for every company or product. In some cases, the pandemic has set back plans for aspiring direct sellers and products.
Sue Bradley, president of Esprita, a nutritional supplement company, says the firm has been stuck in prelaunch activity for “quite a while” because of the coronavirus—“longer than I’d hoped.”
The pandemic, she says, has been a mix of good and bad for the company.
“It hasn’t been a boom for us because we weren’t ready to boom. In March, we had to stop and rethink and learn how to manage this,” Bradley says. “Looking back at the past 8 months, it’s been a good thing to help us streamline communication and customer programs. It’s been a good thing now looking back. Back in March or April, I wouldn’t have said that.”
While prelaunch extends for the time being, the company is focused on attracting and retaining customers and generating buzz to build up its base of distributors. Bradley says the company is projecting a strong fourth quarter.
“What it did was shift us to an online approach, which has been good. It fits where we want the culture of the company to be,” she says. “With the way our industry was already changing, the way in which we’ve been able to shift and pivot during the time of COVID, that has been positive. It’s been an interesting period for sure.”
Pre-pandemic, Bradley was already managing a remote team. She’s based in Phoenix and has teammates across the country and in Canada.
“It was already Zoom on a daily basis, multiple times before COVID,” she says. “We were looking into moving into physical space earlier this year, and I’m really happy we didn’t. We didn’t have to worry about shutting down an office and were able to move into this pretty seamlessly.”
Along with building a customer base, Esprita is currently working on amassing a distributor base from scratch.
Bradley says the company is building its fleet of distributors to meet a target size “to really have a community to feel confident for a formal launch.”
In the meantime, Esprita is “functioning as if we’ve launched,” she says, by focusing on social media growth, party planning online and virtual meetings.
Likewise, Jim Jones, an entrepreneur, has faced challenges too, in the form of delays in trying to get his product into the direct selling pipeline. Jones is long familiar with the channel: Back in the 1990s he created a hand-held computerized system that allowed distributors to process and transmit orders through a phone.
Avon bought the idea and became the first in the channel to use the tech tool. Jones’s gadget—later dubbed as Avon’s Personal Order Entry Terminal (POET)—would go on to win a DSA Industry Innovation Award in 1992.
Nowadays, Jones is working to launch a non-alcohol hand sanitizer called SEAL-D, and he’s targeting direct sales as a main avenue for distribution. Jones developed a prototype about eight years ago but had been unable to sell the product because a compound used in the sanitizer wasn’t sanctioned by the Food and Drug Administration.
Jones says the FDA last year opened up sales for hand sanitizers that use the compound, and the plan was to roll it out in January.
“Then COVID hit, and I couldn’t get any bottles,” he says. “Everything I had hoped to do was put on hold.”
Jones is still optimistic. While he isn’t looking to launch a direct selling company, he’s trying to get his product picked up for distribution through several companies in the channel. Already well acquainted with the space, Jones says the product he’s developed is a perfect match for the direct selling base.
“If it goes into the MLM industry it bypasses the traditional routes of retail and Amazon, and it gets directly into the profile of the moms, women and sellers in the MLM industry,” he says. “I want to bring it into direct selling so it can get to families. My product fits the direct seller profile exactly: moms who not only have children but aging parents.”
Jones says there’s been a huge shift in the mindset of those in the direct selling channel over the past three decades. Now, companies are taking full advantage of technology to pursue sales, and the channel as a whole has to come to terms with the digital age. COVID-19, he says, “has forced much more business into the channel that direct selling pioneered.”
But decades ago when the internet was still evolving into a commercial and public utility, the channel as a whole wasn’t as widely accepting. In those days, the “DSA (Direct Selling Association) and others worried that an online sales revolution was going to hurt them,” he says.
“In their view as insiders, they thought the direct selling model was incompatible with online sales. They spent years thinking about this,” Jones says, noting there was a committee created to look into whether online sales would help or hurt the channel.
“You didn’t have Amazon at the time, and as you move through the decades, there was some negative impact. But I think direct selling has done a remarkable job of taking advantage of the opportunity.”
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