CHAPTER 7

Opportunities and Challenges in Direct Selling

Victoria L. Crittenden and William F. Crittenden

“Simply put, people have always ‘sold’ things to one another” (Day 2014, 60), and, as described in Chapter 2, direct selling has long been a means for individuals to build businesses through selling. Historically, direct selling companies have leveraged an independent salesforce, bypassing much of the traditional marketing-related costs (e.g., advertising) and averting the endless competitive battle for shelf space. However, as described in Chapters 3, 4, and 5, direct selling companies face tremendous opportunities and challenges, both of which are influenced by a variety of environmental forces and stakeholder interests. Direct selling organizations that have an employee and distributor culture ready to adapt to these externalities are positioned for future success.

According to Warford (2021), the direct selling channel demonstrates considerable flexibility to sustain income for entrepreneurs. To reflect systematically on the opportunities and challenges in maintaining this flexibility and entrepreneurial spirit, the approach adopted initially in this chapter follows the PESTEL analysis of macroenvironmental influences followed by a stakeholder impact analysis. Following this, four executives in the direct selling marketplace were engaged to discuss issues they see as opportunities and challenges.

Environmental Influences—PESTEL

Used by strategic management practitioners and scholars, PESTEL (Political, Economic, Social, Technological, Ecological, and Legal) analysis is a simple and effective tool to identify key external, macroenvironmental forces that affect an organization. As seen in Figure 7.1, these are the forces that create opportunities and challenges for a direct selling organization. These external forces will evolve and new issues will emerge over time. The framework allows direct selling managers to structure important issues and to consider the impact and probability of the occurrence of various externalities in the direct selling marketplace. Importantly, individual company managers can add company-specific issues to the framework. Although it is unlikely one could readily forecast Black Swan events, such as the COVID-19 pandemic, agile direct selling organizations enhance their ability to respond via an awareness supported by close relationships with suppliers, employees, independent distributors, customers, and regulators. Taleb (2012) would likely refer to direct selling companies that can take the challenges in the macroenvironment and benefit from them as opportunities as “antifragile” companies. It is important for direct selling companies to identify the external factors that will be influential to success and to exploit those factors opportunistically.

Figure 7.1 Macro-Environmental Forces—PESTEL

A sample PESTEL analysis for a direct selling company is offered in Table 7.1. This overall picture of the forces in the direct selling environment leads to several general outcomes. Although the direct selling marketplace continues to face new obstacles in this ever-evolving economy, the sector has an overall positive growth trend that will only be strengthened as it turns these challenges into opportunities for advancement.

From a political standpoint, there has been an increasing wariness of globalism around the world, as seen with the United Kingdom leaving the European Union (following Brexit), the ongoing trade wars between the United States and China, and the threat of other countries utilizing tariffs as a possible means of foreign policy. This global unease has the potential to inhibit direct selling companies from entering into new international markets. However, for companies already firmly in place across the globe, this should have a small impact since the direct selling marketplace tends to be highly resilient once it has taken root and adapted to the nuances of that international market. At the same time, the United States–Mexico– Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA), will likely have positive effects on trade and economic growth in North America.

The U.S. economy is doing reasonably well and growing steadily. Although this is favorable to the direct selling sector (and business in general), some warn that the economy is more fragile than it appears and that financial issues may lie ahead for all businesses. Nevertheless, consumer spending and retail sales have been continuing to grow in the United States, which greatly benefits direct selling companies. More specifically, there is evidence that direct selling is somewhat recession resistant since it has experienced growth in two of the three most recent recessions (Gamse 2020). Global expansion, as discussed in Chapter 5, has proven to be an important opportunity for many direct selling companies, with Asia/Pacific country markets, for example, providing approximately 44 percent of global direct selling revenue (World Federation of Direct Selling Associations 2020).

In terms of social demographics and values, many opportunities exist that facilitate the growth and advancement of direct selling companies. In particular, the rising popularity of the gig economy, as discussed in Chapter 6, and the growing entrepreneurial spirit all over the world, as noted in Chapter 1, offers many new avenues for the direct selling salesforce. Additionally, there is more emphasis on social causes, where consumers want to buy ethical products and employees/independent distributors want to do meaningful work and be part of a community. This presents an opportunity for the direct selling companies to differentiate themselves and use the personal touch to attract both customers and distributors alike.

Table 7.1 PESTEL analysis

	Specific itemized issues	Trend Ongoing/Stable	Impact Negative/Positive Low/Mod/High	Probability Low/Mod/High or 0–100%
Political	•   Increasing wariness of globalism around the world (as seen with the U.S.–China trade war) decreases appeal of international markets	•   Stable	•   Moderate to low negative	•   Moderate to high
	•   U.S.–Mexico–Canada Agreement (USMCA) increases trade in North America	•   Ongoing	•   Moderate positive	•   Moderate to high
	•   New trade agreements to come between the UK and EU (following Brexit) will likely hurt the UK economy	•   Ongoing	•   Moderate to low negative	•   Moderate to high
Economic	•   U.S. economy steadily growing, which benefits businesses	•   Stable	•   Moderate to high positive	•   Moderate
	•   Consumer spending and retail sales continually increasing, which is favorable to direct selling	•   Stable	•   Moderate to high positive	•   Moderate
Social	•   Increasing popularity of the gig economy entrepreneurship can add greatly to the direct selling workforce	•   Stable	•   Moderate to high positive	•   Moderate to high
	•   More emphasis on products and employment that are enriched by social causes	•   Ongoing	•   Moderate positive	•   Low to moderate
	•   A focus on company culture	•   Ongoing	•   High	•   Moderate to high
Technological	•   Advanced technologies have led to the rise of e-commerce giants (e.g., Amazon, eBay)	•   Ongoing	•   Moderate to high negative	•   High
	•   Growing importance of science and research to create and improve upon high-quality products	•   Ongoing	•   Moderate to low negative	•   Moderate
Ecological	•   Growing concern about environmental impacts of business (chemical-use, waste, pollution, reusable/biodegradable, etc.)	•   Ongoing	•   Moderate to low negative	•   Moderate
	•   Consumers increasingly wanting all natural or organic ingredients in their products	•   Ongoing	•   Moderate to low negative	•   Moderate
Legal	•   Scrutiny with regards to worker classification and compensation	•   Ongoing	•   Moderate to high negative	•   High
	•   Increased scrutiny over compliance and accurate representation of product that could result in lawsuits	•   Ongoing	•   Moderate to high negative	•   High
	•   Higher regulatory standards for direct selling companies, especially in international markets, can hurt business	•   Ongoing	•   Moderate to high negative	•   Moderate

The advancement of technologies has clearly challenged the typical direct selling model, as seen with the rise of e-commerce giants such as Amazon and eBay. However, if direct selling companies continue to adapt and utilize technology in a way that complements their natural business strategies, these businesses can improve significantly. Opportunities for technology integration in direct selling include: e-commerce and online shopping to sell products, data analytics to improve product development and marketing, mobile-friendly apps and websites to improve communication with customers and distributors, virtual assistance programs to enhance customer service capabilities, social media branding to increase brand and product awareness, improved manufacturing processes, and distributor training simulations (to name a few). Additionally, technology is useful to enhance research and development of high-quality products to improve the capabilities of products to meet the needs of consumers. As suggested by Ferrell and Ferrell (2012), it is important to pair the right technological platform with the right stakeholder, as will be discussed in the next section.

Increasingly, people are more and more concerned about the environment and the health impact of products. Thus, direct selling companies are challenged to source more natural and organic ingredients, eliminate chemical and biohazardous waste, create innovative packaging that is reusable/biodegradable, and, in general, reduce their carbon footprint. While this will take time, research, and resources for companies to master, doing so can be a high value-add point of differentiation that attracts customers and distributors while also affecting the environment positively.

Lastly, as with all companies, the direct selling marketplace is closely impacted by the legal frameworks regulating how business should be conducted. In general, businesses are facing increased regulation from both the public and the government to ensure they are not violating compliance standards or misrepresenting their products. Any company that breaches these rules of conduct can face hefty fines and even civil suits. Furthermore, direct selling companies tend to face even higher levels of scrutiny from governments due to fears of pyramid schemes. Currently, as will be described in the stakeholder analysis, there is intense scrutiny regarding the gig economy and employee compensation, which directly affects direct selling companies. Direct seller’s leadership in self-regulation can help avoid cumbersome constraints often imposed by government legal regulations.¹

Stakeholder Impact Analysis

Knowing who the stakeholders are in the direct selling marketplace and understanding what these stakeholders expect from direct selling companies is critical to success, and direct selling companies are responsible to a wide variety of stakeholders (Freeman 1984). Stakeholder theory is grounded on the normative assumption that “all persons or groups with legitimate interests participating in an enterprise do so to obtain benefits and that there is no prima facie priority of one set of interests and benefits over another” (Mitchell, Agile, and Wood 1997, 68). An individual or group is considered a stakeholder when any one of the following three characteristics applies:

Table 7.2 provides a stakeholder impact analysis for direct selling companies. Stakeholders identified for this analysis were: Management, Customers, Employees, Independent Distributors, Investors and Shareholders, Members of the Supply Chain, Government, and Societies and Communities. According to Crittenden, Crittenden, Ferrell, Ferrell, and Pinney (2011), stakeholders are embedded directly or indirectly in interconnected networks of relationships, with the diversity of concerns having to align for the well-being of the organization. Thus, actions that affect one direct selling stakeholder are likely to reverberate with other stakeholders.

Table 7.2 Stakeholder impact analysis

Who are our stakeholders? (Material impact on us or us on them)	What economic, legal, ethical and philanthropic responsibilities do we have to our stakeholders?	What are their interests?	What opportunities and threats do our stakeholders represent?	What steps should we take to address our stakeholder’s concerns?
Management	•   Ensure that management is well compensated and equipped to handle leading the company and making major business decisions	•   High financial compensation, respected status, and stability that comes from managing a successful company	•   Management determines the long-term direction and strategy of the company so it’s important that they’re able to make shrewd and creative business decisions that lead to long-term growth and profitability	•   Utilize technology and business analytics to better streamline management’s responsibilities and also to help them understand the company’s current performance, future trends, and problem solving •   Better compensation plan for effective and higher-performing members of management
Customers	•   Ensure that customers have a high-quality product that properly addresses their needs	•   High-quality, effective products •   Meaningful, convenient buying experience	•   Opportunity to create a loyal base of customers that then go on to further promote the brand and possibly become independent distributors •   Opportunity to have direct feedback from consumers on business functions so that the company can then improve in regard to product development, buying experience, marketing, and so on.	•   Increased branding with a focus on providing information that is more valuable to customers (advice, product news and offerings, compelling story telling, answer questions, etc.) •   Utilize technology and social media to create unique buying experiences (e-commerce, suggested products, mobile-friendly apps, easy to navigate websites, etc.) •   Focus on more science and research to develop improved products that properly meet people’s wellness and health need (de-stress, sleep, focus, etc.)
Employees	•   Provide them with a good working environment along with pay and benefits	•   Stable job •   Livable wages and good benefits •   Meaningful work	•   Opportunity to create a highly skilled (long-term) workforce that’s very passionate and knowledgeable about the company	•   Keep them informed of business decisions (especially those regarding product development, branding, and selling strategies) •   Provide good compensation and benefits
Independent distributors	•   Have clear outlines of their responsibilities and compensation as sellers for the company	•   Maintain independent contractor status •   Flexible source of income •   Feel like a fairly treated and valued part of the company workforce	•   Increasing number of individuals with an entrepreneurial spirit and desire for flexible income sources that could be interested in becoming sellers •   They are the primary point of contact between the business and the customers, which means the quality of their personalized service and product expertise are instrumental to branding and raising revenue	•   Improve the recruitment and training process so that sellers feel well-prepared to represent the business •   Enhance seller performance by revamping compensation/incentive programs and by looking into performance appraisal and retraining programs •   Help them use their own technology and social media platforms to improve their selling performance
Investors and shareholders	•   Important to keep them informed of the company’s financial position and also want to give them the highest return on investment possible	•   Essentially concerned with continued growth and profitability	•   High concern with profitability might attract investors that buy and then sell quickly at the “peak,” leaving companies searching for capital in the long term •   In general, though there has been increased investment interest in DS companies so this presents a valuable opportunity to get more funding and more expertise	•   Continued transparency of financial records and statements •   Improving business and thus profits (e.g., better supply chain management, offshoring peripheral tasks to better focus on marketing and selling, utilizing technology, etc.) •   Consider expansion into new markets (domestic or international) as a strategic way to gain revenue from previously untapped customers
Members of the supply chain (raw ingredients, transportation, etc.)	•   Have fair contracts with other businesses in the supply chain that lays out clear expectations of their responsibilities and our compensation in return	•   Desire to have a stable partner that they can rely on to provide an avenue for business	•   Smooth and effective supply chain management has the ability to reduce costs and improve the overall functioning of the business (no inventory shortages, on-time delivery, etc.)	•   Utilize technology to better streamline/automate supply chain management •   Consider outsourcing more peripheral business functions so that primary focus of company can be on marketing and selling the products
Government	•   Be in compliance with any laws and regulations set forth by the government concerning how the business should be run	•   Collect taxes from companies •   Regulate businesses to make sure they’re run in an ethical way and offer valid products •   Protect consumer interests	•   Direct selling companies often face higher levels of regulation (especially in international markets) due to a fear that they are/may become fraudulent pyramid schemes •   Due to growing ecological concerns, governments may implement stricter environmental standards (regarding waste, pollution, etc.) •   Particularly, the FDA will likely scrutinize more closely any cosmetic and wellness companies selling products that claim health benefits	•   Management should have a clear understanding of all the laws that affect their business (taxes, environments, worker conditions, product quality, marketing claims, etc.) •   Management also must make employees and distributors adequately aware of government regulations and train accordingly
Societies and communities (especially those within which independent distributors and/or consumers are based)	•   Have a positive impact on the communities they interact with	•   Well-developed businesses that provide products of value to consumers •   Businesses that strengthen the community economically, socially, and environmentally	•   Business and communities form a virtuous cycle, where firms can help improve the lives of their employees and customers and in turn stronger communities help businesses	•   Companies should seek to empower more people through gainful work opportunities •   Businesses also should consider giving back to communities through philanthropic measures and social programs

As one example of the intertwining nature of stakeholders in the direct selling arena, the gig economy, as discussed in Chapter 6, has become an important topic of public interest and scrutiny. Noting that not all independent work is the same, protecting the independent worker status for all direct sellers is something for which the Direct Selling Association (DSA) has engaged considerably with the U.S. government. As described in previous chapters, the DSA is the national trade association for companies that market products and services directly to consumers through an independent sales force. In 2019, 125 people representing 19-member companies of the DSA met with members of the U.S. Congress to emphasize the importance of protecting independent workers. The following statement by Joseph Mariano, president and chief executive officer of the DSA, clearly depicts the interconnected network of stakeholders (DSN Staff 2019):

After the tumultuous year of 2020 with social distancing as the new normal, Luce (2020) had optics on the independent distributor stakeholder in relation to the company’s (e.g., management’s) ability to drive technology as a force for change. Loss of jobs meant more people at home, yet the desire for income and virtual selling opportunities set the stage for a safe, work-from-home opportunity to become an independent distributor. “Going virtual” meant the need to improve digital tools for everything from online training, online parties, and virtual conferences (Gamse 2020). While no one predicted the events of 2020 (e.g., pandemic and social unrest), it is no surprise that Duncan (2019) had already acknowledged, “Overall, it’s clear that direct selling is a digital marketing industry.” With that came the focus on building, training, and utilizing advances in technology—a variable that affected numerous stakeholders.

As evidenced in Table 7.2, macroenvironmental factors within the PESTEL analysis have the potential to impact a variety of stakeholders in the direct selling community. The PESTEL and stakeholder analyses were conducted via an outsider-looking-in methodological approach utilizing secondary data. Now, we turn to an insider perspective on opportunities and challenges in the direct selling marketplace.

A View From the Top

According to a recent report by the Direct Selling Association (2020), “the global recession and drastic shifts in consumer behavior brought on by COVID-19 accelerated several existing trends and created both new challenges and new opportunities.” To gain an insider perspective on opportunities and challenges in direct selling, in-depth, semistructured interviews were conducted with four key executives who have diverse experiences in the direct selling marketplace.

The interviewees included:

According to these direct selling experts, three major forces comprise the opportunities and challenges in direct selling: social trends, technology, and the legal environment. The Direct Selling Association (2020) identified three key consumer trends driving direct selling growth (i.e., changing shopping behavior, focus on health, and interest in supplemental income) that fall into the social trends and technology challenges and opportunities areas identified by the four experts. Hester (2020, 122) referred to the “tragedy of the commons,” where a few companies engaging in harmful practices have damaged the reputation of the direct selling marketplace as a whole. Thus, the legal (regulatory) environment was noted as a challenge that also presented an opportunity for direct selling companies.

Social—It’s the People

Modere’s business model relies on the opportunities afforded by social interactions, and Asma Ishaq said this is because “people make purchasing decisions based on their trust in other people.” Building on this influenced-based marketing approach, Modere relies on the authenticity of its microinfluencers to lead with the company’s products in their social marketing. Leading with strong, scientifically substantiated products ensures that the company’s social marketers are building a foundation of trust within a highly segmented customer base where customer data are leveraged to create value for the customers, independent distributors, and company.

When asked what gets her excited about direct selling, Angela Chrysler (Team National) spoke about the social aspects of direct selling:

This trust in people is what Chrysler sees as the “truly endless” opportunity available in direct selling.

Al DiLeonardo (Vector Marketing) spoke about social issues, encapsulated as culture, when talking about the company’s customers and the people within the company. In DiLeonardo’s words, “the company culture is the soul of the company.” As a direct seller, CUTCO/Vector had long held to the belief that customers needed to touch the product in the buying process and that sales training needed to be in person. Keeping abreast of societal changes, however, the company had begun investing heavily in a technological infrastructure. This investment paid off when the pandemic hit in 2020. The company was able to shift rapidly due to both sales training and product demonstrations being conducted virtually. These shifts resulted in significant recruiting increases, with male recruits increasing by 18 percent and female recruits increasing by 79 percent.

The importance of people came through loud and clear in discussions with these executives. From a stakeholder perspective, customers, employees, and distributors are the social and cultural backbone of direct selling companies, and the opportunities afforded when great people combine with great products create a strong economic space worldwide. Equally clear were the opportunities generated by the intertwining of people and technology—where high-touch embraces high-tech (Ferrell and Ferrell 2012) and the digitalization of the direct selling business model (Crittenden, Crittenden, and Crittenden 2019).

Technology—We Have the Tools

DiLeonardo was exuberant about the opportunities available with technology. “What is amazing about our business is how it has transformed because of technology. We have sales representatives who have never touched the product, selling to customers who have never touched the product. We have had a virtual interview, a virtual demo, and a virtual office, but our virtual operations never caught on until it had to in 2020. It was great that we had the programs that we were able to take off the shelf and expand them as needed. Technology has caused us not to have boundaries—our sales reps are selling to more customers and our Vector leadership team is more readily available in terms of jumping into meetings and attending virtual conferences across the USA, for example. Basically, we can impact so many more people.” Vector Marketing Corporation had the tools readily available and the quick pivot in 2020 to virtual is something that has changed the company forever.

The endless possibilities for building a community with technology is something for which Chrysler was also excited. To Chrysler, “direct selling companies have some of the best people and best products, with wonderful opportunities for supplemental income.” While she sees technology as enabling direct selling companies to engage in online retailing, the difference to her is that direct selling can help her build a stronger sense of community within the Team National family. Chrysler provided examples of being able to be in different states all on the same day, helping to build a community via technological affordances.

With approximately 85 percent of its sales direct-to-consumer, Ishaq noted that technology as a sales platform has always been critical to Modere. Additionally, with the company’s reliance on its product advocates (influencers), the company is heavily digitized. Looking ahead, changes in technology and technological opportunities will continue to be a driving force within Modere’s business model.

While technology has long been an opportunity for growth in direct selling companies, it was never more evident than in 2020 when both internal and external technological platforms paved the way for continued success. However, technology has also brought challenges to direct selling companies. For Vector Marketing, leadership was giving thought on how to keep the Vector culture alive at a time when there were managers and sales reps who only knew Vector via Zoom and who had never visited the factory or met the leadership team face-to-face. In DiLeonardo’s words: “Every company has a soul, and the soul of our company includes developing the skills of college students. How do you deliver the soul of the company through Zoom? How do we make sure our new people get the opportunity to experience the Vector culture and feel a part of the Vector family?”

Additionally, for the direct selling marketplace in general, technology has enabled community hate sites to thrive. Researchers have examined negative electronic word-of-mouth (eWOM) within the context of community and brand hate websites, social networking groups, and opposition blogs (Kucuk 2015), and the phenomenon of anticommunities is expanding quickly as is the number of consumers engaging in online hate behavior (Dessart, Veloutsou, and Morgan-Thomas 2020). Unfortunately, direct selling has not been immune to hate communities, with stories told online that are often misleading or incomplete.

Unfortunately, it is not only the haters who make technology a challenge for direct selling companies as it can also be the lovers of direct selling. As discussed next, the legal (regulatory) environment can pose a challenge for direct sellers in terms of technology use. Having an independent salesforce blurs the lines in terms of posts on personal social networking sites that run contrary to guidelines set for the direct selling marketplace.

Legal—Self-Regulation Protects the Business Model

Chapters 3 and 4 covered the topics of compensation, ethics, and compliance, all of which coalesced within the legal/regulatory environment among the direct selling executives interviewed. On the one hand, the legal/regulatory environment in which direct selling firms operate is challenging to navigate; on the other hand, regulations can help protect the direct selling business model and the companies that do engage in self-regulation. Chrysler and DiLeonardo both articulated this tension.

For Chrysler, “What keeps me up at night on any given day is the regulatory environment. The reason is not that I do not want to follow best practices nor is it that I do not agree with the recommendations made. There are two reasons that keep me up at night. One, the grayness of the regulatory environment—I want to do what is right, I want to lead that way, and I want my field to know what to do. But, the regulations are not always black and white and that makes it difficult to be a leader. Two, there is the nature of having an independent sales force. Every day, I put my trust in other individuals to not only make sales, but to make sales correctly and follow the regulatory standards. And, on any given day, I am not sure they are going to do that. I have to just put my faith in them and give them the right information and the right tools to make that happen.”

For DiLeonardo, the three constant challenges in the regulatory environment for all direct selling companies are the independent contractor status, product claims, and income claims. With regard to independent contractor status, DiLeonardo said, “We see attempts to legislate companies like Uber where drivers have to become Uber employees and that could lead to independent contractor challenges in direct selling.” In terms of product claims, direct selling companies have to be very careful about what is attributed to the product’s capabilities (e.g., eliminating wrinkles, reducing health risks, etc.). This is true for all consumer goods companies, but direct selling companies are hit especially hard because of the inherent lack of control over independent contractors. Income claims are another challenge DiLeonardo identified in direct selling. Interestingly, this challenge brings together the social and technology factors that have provided so many opportunities for direct sellers.

DiLeonardo offered an example of social and technology leading to a regulatory challenge. “For example, we go on one of our reward trips and the sales rep posts on his or her personal social media something like—‘Thank you, Vector, for making this great trip to Paris possible. I love our company!’ Or, sometimes, sales reps even post pictures of their bonus checks on their own social media accounts. Really, they are just so happy and want to let their family and friends know they are doing well. Unfortunately, those personal posts can be viewed as income claims and perceived by regulators as the company trying to recruit others, even though it is on a personal social media page and not a corporate-controlled communication.” Thus, the uncontrolled communications made possible by successful, independent salespeople and social media create regulatory challenges for the company.

While Ishaq said that it was hard to control independent contractors, she viewed the regulatory environment as a major opportunity for the direct sellers to protect the business model. In particular, membership in the DSA keeps ethical direct selling companies from being “lumped in” with companies that are not adhering to high standards (DiLeonardo referred to this as the rogue startups that give direct selling a bad name). The vetting process to become a member company of the DSA is rigorous, and Ishaq is pleased with the latest addition to the oversight offered by the DSA with the Direct Selling Self-Regulatory Council (DSSRC) that launched in January 2019 as a partnership between the DSA and the Council for Better Business Bureaus.²

Social, Technology, and Legal—What Happens When It All Comes Together?

To wrap up this chapter on the opportunities and challenges in direct selling, Gordon Hester, author of Positioned Right—The Forces Shaping the Future of Direct Selling and Network Marketing (Hester 2020), offered his perspective on the three challenges and opportunities identified by the company Presidents/CEOs. Hester, who has worked in direct selling for many years as an entrepreneur, in management positions, and as a consultant, summarized his thoughts on the three opportunities and challenges as, “I think our industry has an educational gap.”

Looking at the social perspective from the views of the field and the customer, Hester says that distributors do not understand compliance, which makes it difficult for them to follow best practices. However, he says, “they are craving to understand compliance because they do not want to do anything that puts them or their company in jeopardy.” Linking technology to compliance, Hester says that direct selling companies can help their distributors via an app that flags a social media post, for example, before it goes live if it is a compliance risk. The app would then depict the risk and what needs to be done to make the post compliant. In this way, the company would be educating the field on how to use social media appropriately instead of the company having to “clean things up after-the-fact.”

In terms of the customer, Hester thinks direct selling has some catching up to do with respect to really understanding the customer journey. Additionally, he feels “there is a massive opportunity for the industry to redefine itself by paying attention to the customer retention game.” To educate companies about customers, Hester thinks there is a greater need to understand the data to move the focus to the lifetime value of the customer.

Direct selling, according to Hester, has always been heavy on intuition. While intuition is great, technology can enable the capturing of so much customer data that can validate (or invalidate) management’s intuition. Firm technology has changed dramatically over the years, and Hester thinks that direct selling companies would benefit from a greater focus on the overall architecture of the firm’s technology; that is, learning to put pieces together so that the middleware is driving the technology. He says, “It is really about aligning the right tech strategy and people and then having the courage to invest in technology to facilitate a digital transformation of the company. With technology today, it is learning to put the pieces together so they can work in unison. Ultimately, what technology is designed to do is to support the people so they can be more successful for the field, for the customer, and for the operations of the firm.”

Navigating the Future

The four direct selling experts identified several current external issues providing opportunities and challenges for direct selling companies (i.e., social, technological, and legal). A direct selling company’s leadership must stay abreast of the ever-evolving macroenvironmental and stakeholder factors that can positively or negatively impact future organizational success. Identifying trends in their infancy can provide new opportunities for product development, cost savings, market expansion, or business model revision. Understanding these externalities also allows direct selling leaders to develop strategic plans appropriate for the challenges they face, whether now or in the near future. Organizations like the DSA can aid firms by researching and providing data on broad PESTEL factors and stakeholder trends on a country-market basis.

The PESTEL and stakeholder frameworks presented in this chapter provide a methodology for direct selling managers to structure issues that create company opportunities and challenges. While material presented within the frameworks will help managers recognize and understand current issues facing direct sellers, it is important to recognize that these factors will evolve, resulting in the need to update the external analysis on a periodic basis. It is also essential for managers to design the analyses to integrate company specific factors. By paying attention to externalities, leaders of direct selling companies can approach change positively, resulting in positioning that allows them to seize opportunities as they arise.

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¹ Compensation, compliance, and ethics were discussed in greater detail in Chapters 3 and 4.

² Details about the DSSRC appear in Chapter 4.