Guest author Alan Luce is Co-Founder and Managing Principal of Strategic Choice Partners (SCP), a consulting firm that provides strategic support and services to help today’s direct selling companies thrive.
Alan is a US DSA Hall of Famer, and member of the DSEF’s Circle of Honor. He’s served in executive roles at Tupperware, PartyLite, DK Family Learning and other companies, and has been a part of launching more than 30 direct selling companies over his career.
Guest Post by Alan Luce
The Elephants in Direct Selling’s Room!
No one likes having difficult conversations. But there comes a time when you can no longer ignore the proverbial “elephant in the room.”
Well, guess what? That time has come for the direct selling industry. We need to face our most recent “elephant,” better known as “the gig economy.”
So let’s take a moment to address this problem pachyderm.
The gig economy is the general term that describes the ever-widening variety of non-employee income opportunities available to Americans. Some of the giants of this new work relationship include:
- Uber and Lyft, offering transportation
- DoorDash and Deliveroo offering food delivery
- TaskRabbit which offers on-demand freelance services.
More are popping up every day, creating a growing work force that just keeps getting bigger, and in the process, is also becoming a bigger competitor to direct selling industry. Need proof? Here’s a quick comparison of US numbers from 2015, when the gig economy was just heating up, versus 2017.
That’s more than a 9% drop in both sellers and sales in just two years. Meanwhile, The Bureau of Labor Statistics (BLS) estimates that 55 million people, 35% of the work force, were gig workers for some or all of their income in 2017. So there were almost 3 times as many gig workers as direct sellers last year. And that’s only the beginning. The BLS expects gig numbers to rise to 43% of the work force by 2020, and possibly as high as 60% by 2030.
It’s no stretch to assume that direct sellers are already losing prospective recruits to other types of gig income opportunities. It’s also no stretch to imagine that if the BLS is right about the growth of gig work, we direct sellers are going to be in for an even more challenging competition with the companies of the gig economy.
All of which raises these questions:
- Can direct sellers successfully compete for workers attracted to the gig economy?
- More to the point, can direct sellers show our earnings opportunities rival those offered by Uber or DoorDash?
The likely answer is that some direct sellers will be able to do so and others won’t. The growing competition to attract people back to direct selling, and away from the opportunities of the gig economy, presents the biggest challenge that our industry has faced in the last 40 years! But almost no one is talking about it…. at least not out loud or at industry meetings.
And competition for people isn’t the only “elephant” in the room, either! In the title of this article I used the term “elephants,” as in more than one. And what is this other elephant? I’ll give you a clue, its initials are “IRS.”
If the BLS is right about the continuing growth of the gig economy, do we believe the IRS will be satisfied with 45% of all work-related income being paid via the current system of quarterly estimates rather than monthly withholding? I don’t! What will we do as an industry if the IRS decides to move to revoke the current legislative safe harbor that protects direct sellers, real estate agents and other independent contractors? It seems to me that we better start thinking about this now rather than waiting for the challenge to be thrust upon us.
Competition for sales people AND the threat of a changing tax code. These are just two of the great big elephants that have quietly snuck into direct selling’s room over the last several years as the gig economy has continued to grow. We need to recognize that they’re very much here with us, and then we need to undertake a serious discussion about them. And we need to do it very, very quickly.
Before we get trampled.
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Great points, Alan. After analyzing over 9 million lifecycles of global direct sellers, it’s clear that much of the comms we send out simply do not apply to the way the majority of people want to do their business. It seems to us that despite what we think, most of our sellers treat us like a gig in spite of many conpanies’ messaging of residual income, leverage, etc. we in corporate must come to terms with our inherent biases which too often color our decisions in spite of the data that’s right in front of us, proving otherwise. We are all facing these challenges and none really know what the answer will be. So we must set ourselves up to be Lean or at least Agile so that we can try things, measure the results, learn, and try again in extremely rapid cycles. We simply don’t have time to build big massive plans with big price tags and a long decision process. The way the gig companies got so big is exactly with a “Lean Startup” approach. That book is a gift we offer all of our customers as a window into rapid innovation.
We are even organizing a “delegation” of DS executives to join us at the Lean conference in Nov right after DSA in DC.
Alan, I agree with your assessment that the gig economy is the elephant in the room, but my take is that it’s just one of two elephants that we direct sellers must face. The other elephant is Amazon. The gig economy represents competition to the income opportunity side of direct selling. Gigs offer independent contractors instant cash for a plethora of relatively low-skill services with no selling required. Frankly, that does not cause me nearly as much concern as the competition from the product side of the equation (in other words – competition from Amazon) because from a legal perspective direct sellers cannot rely on selling the income opportunity. Let’s be frank – the income opportunity has been overblown and over-hyped in many cases and has contributed to giving DS a deserved black-eye on multiple occasions.
Direct sellers have long claimed that they are about the products they offer. Yet are they? Why have many relied on selling the income opportunity if they are really about the products? Amazon offers buyers just about any merchandise imaginable, highly competitive prices, free shipping (for Amazon Prime members), and takes the uncertainty out of “mail order” since you can track your package and depend on timely delivery in 2 days (again, Prime members). Now THAT’s tough competition.
So Alan, I agree that the gig economy is indeed an elephant in the room, but it primarily impacts those direct sellers that rely on the income opportunity to attract and keep their sales force. Amazon is the elephant that impacts those direct sellers who are product oriented (i.e., party plans). Neither gigs nor Amazon can be ignored. The good news is that notwithstanding the challenges presented by gigs and Amazon, direct sellers have competitive advantages that neither gigs nor Amazon can match. But that’s a detailed discussion for another day… 🙂
Well said Alan. It really should be a front burner to for DS, but I’ll bet it won’t be
People need to realize that all these “gigs” are just “trading time for money.”
A video we made in 2016 that addresses this very concern…
https://vimeo.com/189335308
We have analyze the lifecycle of 9 million DS people over 6 years. The truth is that the time for money argument doesn’t really hold up for over 90% of people. When we break it down to dollars per hour worked, we must compete with gigs not by offering millions, but by what people want: a few extra dollars on demand at various levels of effort and income. We discovered 9 unique paths a person can take with a DS company. We need more personalized pathways for people vs a one size fits all approach.
Interesting take. Let’s not forget, however, that (1) the economy of 2015 looks different than the economy of 2017. When unemployment drops, so does the # of direct sellers. And (2) the motivation for a gig is similar, but not altogether identical to joining a direct sales company. Namely: stability vs high ceiling, easy access vs social center, etc.
I know many companies position themselves as gig alternatives. But DS attracts a different person.
Enjoyed reading this.