Direct Sales Model Discussed on TechCrunch

Jeremy Lieu, managing direct at Lightspeed Venture Partners, wrote a fantastic guest post on TechCrunch about the direct sales model.  The article is titled “Is Direct Selling The Next Driver of Startup Commerce Companies?”  In the article, Jeremy highlights three reasons why direct sales is being “invigorated” in this new economy.  It’s great to see venture firms take notice at the amazing power the industry offers.  In January, I wrote about ViSalus’s amazing success.  When venture firms like Blythe and Lightyear place successful bets on MLM startups, it’s attracts more capital for the space, which raises the bar for everyone.  In Lieu’s article, the three key reasons for the uptick in direct sales are:

First, the sluggish economy.  He writes, “In this slow economy, people are more willing to supplement their income (and seek alternative career paths) than they have been over the last few decades. Direct sales is one of the most attractive and accessible ways for people to supplement their income.”

Second, the rise of social media.  He writes, “When you add Twitter and Facebook, that is a tremendous reach for an average person. Direct selling is all about selling through your network – friends and friends of friends. The social networks make this whole network far more visible, and accessible, than ever before.”

Third, technology.  He writes, “These devices, combined with lightweight SaaS ERP, CRM and SFA software, dramatically improve the productivity of direct sales reps.”

Check out the article here.  This is great visibility for the industry.  At the end of the article, several direct sales companies were referenced.  They all have one thing in common: they were all companies with merchandising cultures i.e. focus on product.  The companies referenced were Stella and Dot, Chloe and Isabel, Gigi Hill, Miche Bags, J Hilburn and Thirty One Gifts.

 

Google Plus, ViSalus Growth and Direct Selling Edge

In the video, I talk about three exciting things: Google Plus, ViSalus’s stellar growth and the Direct Selling Edge conference.

Google Plus

It’s an amazing platform, period.  If you’re not on it, I strongly encourage you to create a profile and get started.  If you’re on it, scroll over to the top right corner and add the MLM Attorney + Page to one of your circles.  The main reasons why I think it’s amazing: first, it’s driven more by “what you’re into,” not “who you know.”  There’s a strong difference and if you don’t understand it, you will once you play around on the platform.  It’s so easy to connect with people that share your interests, so no more awkward friend requests.  Second, it’s already influencing search results, which is important for anyone with a website.

ViSalus kills it.

I recently wrote about this.  ViSalus’s success benefits the entire industry for four reasons.

Direct Selling Edge conference.

We’re bringing it back!  The first event was spectacular and we’re making this one even better.  Jay Leisner and I are hosting the MLM Startup conference event in Las Vegas on March 8 and 9.  Click here for tentative details.

ViSalus Sales Increase Seven-Fold, Raises the Tide

The 4-minute mile was impossible...until Roger did it.

The rising tide raises all ships.

MLM company, ViSalus recently announced a seven-fold increase in sales from 2011!  They must not have heard the news about the sour economy.  They grew from a solid $34 Million in 2010 to a stellar $231 Million in 2011.  This sort of growth is fantastic for the network marketing industry in general.  Regardless if they’re a competing business, their success matters for multiple reasons.  

Increased Visibility

First, as the heading suggests, their success increases the visibility of the network marketing industry.  Blyth, a private equity firm, placed a very successful bet on a small MLM company a few years ago.  The bet paid off…big time.  It’s a great testimony to the geometric possibilities for growth that the network marketing industry offers.  Another example of venture capital throwing their hat in the network marketing arena, Sequoia Capital invested $37 Million in party plan company, Stella and Dot, last year.  With more capital in the industry, the level of play increases, which benefits everyone.

Customers Volume Supports Growth

Second, ViSalus grew substantially while focusing on customer sales.  Sure, they recruited a lot of talent this year.  But they’ve also maintained a great customer to distributor ratio.  Purportedly, this ratio is 7 to 1, customer volume to distributor volume.  Customer volume is vital for stability, not only for ViSalus and its investors, but for the industry in general.  There’s too many companies that live by four principles:

1) Recruit distributors
2) Teach distributors how to buy for self-consumption
3) Repeat steps 1 and 2
4) Teach distributors about steps 1 through 3

This leads to a terrible sales culture dependent on hype and opportunity driven demand.  Assuming worst case scenario that ViSalus’s ratio was 1 to 1, it’s a demonstration that growth does not need to occur at the expense of customer sales.  Customer sales can support growth, as evidenced by ViSalus’s hockey-stick growth. Customer volume and distributor volume are not mutually exclusive goals.

Healthy Market

Third, this growth occurred mainly in the continental United States.  Think it’s tough to build in the American market?  

Those who care the most win

Fourth, their success demonstrates the awesome power of person to person marketing.  There’s nothing unique about weight loss.  But combine an age-old solution to an age-old problem and mix it with a personal, human touch…it dramatically changes everything.  While network marketing is certainly about selling unique and innovative products, at the end of the day, it’s really about connecting with people and influencing them to honor simple commitments.  And when good commitments are honored over time, the results can dramatically change lives and build emotional bonds.  ViSalus is not world class at selling weight loss shakes, they’re world class at creating an encouraging culture, one that gets people to honor commitments.

So if you get good at creating culture and “delivering happiness,”  you’ll build a loyal tribe regardless if you have the latest magic pill.  Do not try to out-ViSalus ViSalus and do not try to copy Amway or any other company you think is cool.  If you fake it, the market will find you out.  Be authentic, bring your unique style to the equation, solve a real problem and slowly build emotional connections with your customers.  Care about your customers!  ViSalus and Blyth’s success proves that good decisions compound over time.  The barriers have been obliterated.  If you’re an executive for a network marketing company, there’s never been a better time to engage than RIGHT NOW.

Rick Gutman, MonaVie Black Diamond, moves to Visalus Sciences

In a video post, MonaVie Black Diamond, Rick Gutman, announces his new alliance with ViSalus Sciences.  ViSalus has been making a lot of noise lately given their recent surge in growth.  ViSalus is trying to mold itself as MLM 2.0 for the younger generations…and it seems to be working.  Their recent score of Rick Gutman will certainly put them in the cross-hairs of one of the industry’s largest companies.  After watching Rick’s announcement, the lawyer in me wondered if there was going to be an issue with MonaVie’s noncompete clause.  As I was referencing their policies, I learned that their noncompete does NOT extend beyond termination of the agreement. The language can be found below.

2.3.4 Sale of Competing Goods or Services.  While a Distributor, you shall not sell, or attempt to sell, any programs, products, or services to MonaVie Customers or Distributors that compete with our Products.  Any program, product, service, or Network Marketing opportunity in the same generic categories as our Product is deemed to be competing, regardless of differences in cost, quality or other distinguishing factors.. . .

Rick Gutman, unless he’s wildly soliciting everyone in his database, appears to be in the clear.

One thing about MonaVie, love ‘em or hate ‘em, is that when the distributors leave, there’s not much litigation.  This is surprising given their itchy trigger finger when they made a legal threat at Ted Nuyten.  In August of 2010, they threatened Ted with litigation after reporting on their decline in revenue in 2010.  Specifically, they accused him of knowingly publishing false information with an intent to defame and disparage.  In August of 2010, Ted projected a 25% decline in 2010 revenue from 2009 numbers.  They demanded that he retract his statements and write “that such statements and figures were and are false and unsupported by fact.”  Ted put the legal threat on his site here.  In the original article that got him trouble, he literally provided two numbers: $785 million in 2009 and he projected $600 million in 2010.  MonaVie alleged that a $600 million projection was “defamatory” and harmful to their reputation.  In this month’s Direct Selling News magazine, they publish MonaVie’s revenue for 2009 and 2010: $785 million for 2009 and $600 million for 2010.  The man was spot on the money…to the digit.  “False and unsupported by fact…”  Really?