Direct Selling Comes Into a New Age

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Michael Foit founded Apex in 1998. Michael Foit founded Apex in 1998.

A $36 billion U.S. industry is the process of evolution – and the result will mean that both customers and business operators will be protected from the scammers and schemers that too often give that industry a bad name.

The direct-selling industry – or what you might know better as the door-to-door-selling industry – is a giant economic engine that grows bigger each year. But it’s also an industry that struggles against a bad reputation perpetuated by a handful of bad actors.

Fortunately, legislation being considered in Washington, D.C., and research being done by an industry association should make it easier for those of us who believe in the virtues of direct selling to stop wasting so much time explaining that we’re not the ones causing trouble.

You no doubt recognize door-to-door sales as a cornerstone of American lore and business. When direct selling was an emerging industry, you could expect to have people knocking on your door selling just about everything, from kitchen utensils to encyclopedias and from household appliances to beauty products.

What you might not realize is that one of the pros who literally “wrote the book” on door-to-door sales also sold his literary masterpieces on doorsteps. An ambitious writer named Samuel Clemens - aka, Mark Twain - once penned a direct-selling guide that is still considered a gem of marketing literature. Meanwhile, he sold The Adventures of Tom Sawyer and The Adventures of Huckleberry Finn through “subscription agents” who garnered pre-orders by going door-to-door with sample pages.

Of course, today direct selling is a very different industry, being dominated by massive firms such as Fuller Brush, Avon, Sara Lee and Tupperware. And it continues to grow: People like Warren Buffet sing its praises, and companies like Ambit, an energy company that leapt to the top of the Inc. 500 list in 2010, use it to great effect. Globally, direct selling is a more than $182.6 billion industry that employs millions of people, most of them women.

Unfortunately, a number of companies have claimed to be direct-selling businesses when in fact they run what is best described as pyramid schemes. Meanwhile, the industry as a whole has sometimes struggled to clearly define itself.

Now those challenges are being addressed. First of all, legislation proposed in July by Rep. John Moolenaar (R-MI) would define a pyramid scheme under federal statue and offer other language to help the industry describe acceptable and unacceptable practices. In time, it is hoped that such legislation will help to get the disreputable operators out of direct selling.

At the same time, the Direct Selling Association has conducted research to help the industry better understand the people and businesses that claim to be direct sellers. Broadly speaking, the research shows that 20.5 million people in the United States have signed agreements with direct selling companies making them eligible to purchase discounted products and resell them that at a profit, and to sponsor others individuals who also can sell the products.

However, that 20.5 million figure can be misleading. The DSA’s research shows that, actually, only 5.3 million of those people are actively building businesses as direct sellers, and only 800,000 of are full-time operators. The remainder are people who use their direct-selling affiliations simply to buy discounted products for their own use. While this is perfectly acceptable, including those people in the direct-selling total is misleading.

Even with these changes, I encourage everyone who does business with us or any other direct seller to do the kind of due diligence they should do before signing anything: Check the company out with the Better Business Bureau, Angie’s List or other resources; find out how long they’ve been selling in your community; ask for references; check technical information about products and services; and check on the company’s financial strength.

With the recent legislation and research that will help us clean up our industry, I see a bright future and continued growth for the direct-selling industry. In 14 markets across the U.S., Apex Energy Solutions has used that approach to help entrepreneurs launch their own businesses and employ hundreds of people.

And we’ve done it despite the scammer and schemers that, we hope, soon will no longer be a hindrance.

Michael Foit is chief executive officer of Apex Energy Solutions.

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