the business model of the 21st century
Updated: Jun 18, 2018
Six years ago, I started some serious research.
My background was in journalism! One of the things that struck me was that this industry had been quietly growing, at about 7% per year over the previous 5 or so years and I hadn’t even heard about it.
Over the last six years I have dived into the industry, meeting many of its top leaders around the world and have friends in all the major companies operating in the UK.
Direct selling enables companies to distribute their products or services through a network of independent distributors rather than going through the more expensive retail and advertising model.
People recommend Hotels on TripAdvisor, and books (and everything else) on Amazon and you largely make your buying decisions based on these recommendations. Traditionally you've never received a financial benefit for recommending products but now you may have noticed many big brands give rewards for recommending their products or services to your friends.
Direct Sales, or Network Marketing, is simply designed around providing a structured income to the the company's brand advocates. Where traditional companies spend on advertising and the distribution chain, direct sales companies pay distributor commissions for marketing and ship directly to customers. It’s a proven business model that has been doing well for more than 50 years.
From the early years of Avon and Tupperware there are now new network marketing companies appearing almost every week.
Old timers in the industry love to tell you how, when they started, finding new customers who might be interested in trying and distributing products was time consuming and expensive. Communication was restricted to a close group of friends or via telephone calls, faxes, followed by VHS videos and brochures sent through the post.
Twenty years ago, these direct sales pioneers could not have imagined that…
Instead of going through random names in telephone directories, they could meet and see thousands of new people each day, with not a penny spent on phone or postage.
Instead of faxes or phone calls they would be able to instantly message their new friend, even have a face to face video conversation, for free.
And if their new friend was interested in the products or business, they could instantly connect them to a YouTube video or web site to find out more, again for free.
Then, if these new friends wanted to try the products or open a wholesale account, they could open an account on-line and order the products within minutes.
The Internet and Social media has been a dream come true for Direct Sales. What took weeks can now be done in minutes.
And this dramatic change has taken hold in just the few years that I have been studying this industry.
The industry turnover of £2 billion per year in the UK five years ago, has grown to £2.64 billion. Last year it grew by almost 12% and 650,000 people are now involved in direct sales. This includes many people who simply have an account to purchase products at wholesale prices and a few who have developed large networks with sizable incomes.
Again, five years ago the majority of people in direct sales were older but now the biggest growth is among 18-25 year olds who were brought up on the internet and Social Media. Overall, between the different companies, about 77% of these are women.
Direct Sales is a home or even mobile phone based business and so has become a popular way for young moms (or dads) to stay at home with their kids and create a business that they can fit into their lifestyle. Many now are giving up work to have kids and never returning.
The Gig economy is here to stay.