Direct selling business defies advent of Internet and recession

By BERNIE CAHILES-MAGKILAT

WASHINGTON D.C. – The direct personal service in direct selling business has defied the advent of Internet and even the economic recession could not do much to adversely impact on this proven recession proof business model, an industry expert said.

Joseph N. Mariano, executive vice-president and chief operating officer of the U.S. Direct Selling Association and chairman of the industry's global regulatory authority – World Federation of DS Associations, told visiting Philippine journalists on invitation by the world's leading direct selling company Amway Corp. that direct selling is expanding on a global basis despite the crisis and the growth of the internet.

"Up to 2007, we experienced 20 years of consecutive growth because of the level of personal service and level of education invested by market players on their people," Mariano said.

Mariano said that some sectors have predicted that the advent of internet would be the end of the direct selling business model because consumers can now shop more conveniently by going online.

"But the internet turned out to be a bust because ultimately what matters are the product and the direct personal service that online transactions cannot provide," Mariano pointed out. Sales of direct selling companies continue to grow. In 2008, industry sales reached $29.6 billion or a flat growth from $30 billion in 2007.

The current global financial crisis is even anecdotal on its part as it has proven the industry to be recession-resistant because direct selling creates opportunities and additional income so more people are availing of these opportunities as a way to supplement income.

"Some people who participated turned out to be full time sellers," he noted.

Mariano noted the high unemployment rate in countries particularly the U.S. at 11 percent has encouraged people to join the direct selling companies.

"This creates an opportunity for us and some companies are not just advertising their products but the opportunities to make an additional income," said Mariano.

In the U.S. alone, there are an estimated 15 million people involve in direct selling from over 1,300 direct selling firms, he said. The top 220 direct selling firms account for 30 percent of total DS industry. The top DS companies include Amway, Avon Products Inc., Mary Kay Inc. and Tupperware Corp.

"The U.S. has remained the biggest DS market but other countries are nipping at our heels like Japan," he said.

The growth of the industry has made it imprimatur upon the global federation to police itself against illegal activities like pyramiding schemes masquerading as legitimate direct selling business and in the end besmirching the reputation of the long-established and reputable direct selling firms.

"Direct selling companies have rules to follow and the federation also imposes disciplines on member companies to ensure their behaviour is acceptable in the market place," said Mariano.

The federation has been vigilant in their job because pyramiding schemes have proliferated unfortunately especially with the growth of Internet. Mariano himself admitted that direct selling is really susceptible to such unscrupulous activities.

"In direct selling, the basis of compensation is the product sales. If the basis of compensation is coming from recruitment then forget about it," Mariano said.

One thing to guard against is if a would be member is going to incur a financial loss upon joining the company.