Direct selling as a business model has been around for well over 100 years and things keep developing, but somewhere along the way many have lost their customer focus. From distributors having to tie up their own money and keep stock at home, to every consumer being a distributor. Many end up with unnecessary problems with marketing regulations when it's really just a matter of going back to basics.
In the late 1800s (1886) Avon Cosmetics was founded after book salesman David H. McConnell handed out free perfume samples to housewives to get through the door and show the books he wanted to sell. He saw the potential in the fact that 80% of all women at the time were at home and that they were keen to earn money of their own. He started Avon and let them become independent representatives and sell his products to their friends.
Carl F. Rehnborg started California Vitamins in 1934, selling food supplements, and changed the name to Nutrilite in 1939. 10 years later Jay Van Andel and Richard DeVos joined as independent distributors, but when the company ended up in a dispute with the U.S. Food and Drug Administration (FDA) over marketing regulations they started a company of their own, "The American Way" (Amway). The company was built on a multi level plan where you as an IBO (Independent Business Owner) got paid on several levels down in the organisation. You got the chance to help others who wanted to get started without them becoming your competitors. Quite simply, you got a percentage of the turnover of the products that left the warehouse when your new colleagues (salespeople) ordered products.
Since the middle of the 1900s many companies have been founded on similar principles, because the simplicity and the scalability make the business model hard to beat. A number of years later several companies moved from letting their direct sellers order in stock of products to only buying for themselves. Instead all customers (consumers) were registered as salespeople in the organisation, which meant nobody needed to keep stock any more.
The authorities have reacted to this model several times, since all the turnover is "internal" and no products are sold to customers who aren't part of the sales organisation, only to salespeople with a position in the network. Several companies have had to go through lengthy legal proceedings because of this. During its process Herbalife was fined 200 million dollars because it couldn't show that it had real customers buying products without receiving commission from the turnover of a network.
What we need to do as a profession is to go back to basics: the customers. More about that in the next post.
