By Peter Maddox, DSA Canada President
First published by The World of Direct Selling, June 15, 2020
These are tough times in business, particularly in retail. You only have to look at the number of lay-offs, store closures and bailout discussions to realize that we are in uncharted waters. Across North America, there are daily discussions of famous brand names who will either not exist in the future or will be around in a very different format.
Through all of this upheaval, many direct selling businesses are surviving and thriving, and traditional retail is taking notice. We are already seeing big brands like PepsiCo and Kraft Heinz, jewellery brands like Michael Hill, and even Canada Goose, going direct to consumer in their recovery plans, utilizing aspects of the direct selling model to sell their products. We can anticipate that in the not-too-distant future, we may even see famous retailers fully moving into the direct selling space.
This is a great credit to the direct selling industry, both the direct selling companies, as well as the supplier ecosystem that supports them. Operating in an area with less indoctrinated tradition has allowed for both a culture of innovation and the ability to turn on a dime. There’s also not the same fear of the unknown that many large, bureaucratic, traditional retailers have.
Two questions arise from this momentum: What things do direct sellers do particularly well; and what lessons can bricks-and-mortar retailers learn from our channel?
The entire direct selling business model is based on personal relationships. Both customers and sellers are found via people’s network of friends, family and colleagues. These types of business relationships create incredible stickiness – consumers love to support their own community and are more likely to continue buying daily needs and larger purchases from someone they know.
Traditional retailers are eternally searching for this kind of connection, via loyalty cards, referral programs and special buying events. The challenge for them is to continue to grow these connections. In a recent KPMG report, Redefining Customer Loyalty: Beyond the Points, 57% of Canadian’s agreed that a “strong personal connection with the company” helps to ensure their loyalty to a specific retailer. However, historically retailers have struggled to build longer-term relationships and engagement with their customers to keep them coming back.
Being nimble and finding a niche is what successful direct selling businesses do so well. In recent years, this has been driven significantly by a move to innovative technology solutions, such as personalized websites, gamified apps, virtual communities and instant commission payment. The statement that “if you can’t do it with your thumb while scrolling on your smartphone, it is too complicated” is becoming ever truer.
In 2018, approximately 84% of Canadian internet users shopped online, according to data from Statistics Canada, and the pandemic has led to even larger increases in online shopping. As retail is forced to focus on both online business and more efficient instore experiences, they must similarly look to evolve quickly and provide owners, franchisees, staff and customers with innovative tools to support transactions.
Imagine having a sales outlet in every community across the country. While that is virtually impossible for traditional retailers, it is exactly what direct selling allows – passionate independent sellers promoting the business anywhere there is a potential market. While these independent minds sometimes create their own challenges, they are the single greatest resource direct selling has.
With over 91% of Canadians using the internet and 75% of those interacting on social networks, bricks-and-mortar retailers are looking to a variety of methods, including social media influencers, localized distribution facilities and online communities, to try to replicate this reach.
Working from home? Not such a big deal for the direct selling industry, where working remotely or supporting others that do is part of the DNA.
Activating a flash sales promotion? Easier to do by changing digital assets than updating a whole store and window displays.
While traditional retailers will always require sales staff in-store and need to have physical signage at the point of purchase, the challenge for them is to build flexibility and, via technology and other tools, diversify how they communicate and sell.
Finally, direct sellers have a history of working collectively as an industry to overcome challenges. Whether this stems from an “us-against-them” mindset or simply due to the strong relationships across the industry, it continues to support growth and relevancy.
For Mary Kay, a long-standing and active Direct Sellers Association of Canada member, “The core of who we are as an organization is the willingness to help one another. Over the last several years, we’ve been working collectively with other direct sellers on Canadian tax and trade issues, to ensure that we are all are supported equally across the country,” says Lynda Rose, General Manager for Mary Kay Cosmetics in Canada.
In a time of massive upheaval, other sales channels could learn from this and gain benefit from similar shared action.
While direct selling continues to face challenges, many of the industry’s strategic pillars, as well as business decisions that have been made in recent years, have created an ability to withstand the pandemic impacts better than most.
Traditional retail is taking notice and it is apparent that many brick-and-mortar companies will try to replicate elements of the direct selling business model. We may also see an influx of big-name products and retailers enter the direct selling space, creating major omni-channel competition. Investments by cosmetics giants such as Groupe Rocher and LG Household & Health Care are illustrations of this movement.
Direct sellers should embrace this evolution. A mainstreaming of our business channel strategies will be positive in the eyes of consumers, consultants, government and regulators. For forward-thinking direct sellers, this will provide the ability to touch more lives and enable continued growth.