1 A Special Supplement to The Wall Street Journal by Direct Selling News THE ULTIMATE SOCIAL BUSINESS MODEL !"#!"#$! $%&%&'()! *'()&'()& +'&),-! *)(+&,-)."&/001& .)//'01 2(&,-#&/0334&2"5& 2(6&7&689:;.:#& In 2010, direct selling 2)-<5<&<;)5.2& companies generated over %5::;=>&.(+6-=;5%& $125 billion in revenue in -?5)->5<&-&/@A& 150 countries through more 65).5=2&;=.)5-%5&;=& %2(.B&6);.5C than 75 million men and women who are changing lives serving others. This is the story of direct selling. $DE$FGH&!"#!2/#34/!566!7'8-'01!#9!-:)!*#;!+'&),-!.)//'01!<#(;40')8!'0!-:)!=#&/> 2 Inspiration. Leadership. Motivation. Everything the Entrepreneur Needs to Succeed THE TRUSTED MAGAZINE FOR SUCCESS ENTREPRENEURS & INTRAPRENEURS INTERVIEWS success.com/dsn Audio MP3 or CD ONLY with every issue $19.99 LIMITED-TIME OFFER SUBSCRIBE NOW FOR SPECIAL PRICING: 3 Serving the Direct Selling and Network Marketing Executive Since 2004 Contents A SUCCESS Partner Company COVER STORY Top Publicly Held Direct TECHNOLOGY The Heart of Direct Founder & CEO Stuart P. Johnson The Ultimate Social 11 Sellers Achieve Record Speed, Power, Reach 27 Selling: The Home 4 Business Model Sales and Profitability 18 by Teresa Day by Barbara Seale & John Fleming Publisher and Editor in Chief John Fleming by Katherine Ponder by Tim Blackwell Technological advances in mobile What’s the ideal home-based jfl[email protected] Direct selling is the original social More than half of the top 12 public devices and apps, as well as business? More than 15 million Managing Editor networking business … and now companies that sell direct have in social media tools, serve to Americans think it’s direct selling. Judith Emmert is prime time for direct sellers. outperformed the average stock increase the speed, power and They represent the hundreds of [email protected] return by impressive margins reach of what’s already utilized in U.S. direct selling businesses, Editors Solution to a Shrinking Job since the market dipped to its low the direct selling model. creating a significant social and Jennifer L. Mills 8 Market in early 2009. economic impact. Teresa Day by J.M. Emmert INDUSTRY Creative Director Carl Waters World-renowned economist, Jefferies Report Megawatt Returns Direct Selling News professor and best-selling 13 by Douglas M. Lane 22 for Energy Providers 29 by DSN Staff Production Manager Alan Dwelle author Paul Zane Pilzer offers a The direct selling model is by Jennifer L. Mills Whether providing readers with perspective on the direct selling uniquely well-positioned in the Deregulation in several states valuable information, offering a Production Artist Karla M. Garcia industry’s role in today’s economy. current investment environment. has opened up competition for forum for executives to share Copy Editor the retail portion of the energy ideas or profiling companies, Peter Tepp FINANCE INTERNATIONAL business. And that’s where direct DSN is the journalistic resource Contributors Making Dollars A Truly Global Channel sales companies are stepping covering the direct selling way of Tim Blackwell 10 and Sense 14 by Katherine Ponder in—and changing the game. doing business. Emma Johnson Douglas Lane by Emma Johnson Direct selling is a global Katherine Ponder Direct selling makes a lot of phenomenon. There are now 20 Of the People, by the DSN Global 100 Barbara Seale sense, not only for the individuals countries that are billion-dollar 24 People, for the People 31 by DSN Staff Advertising Manager worldwide who make a living markets for direct selling. by Teresa Day Direct Selling News presents Jerry Reagan [email protected] selling products from their home- The business model thrives its Global 100, the only based businesses, but also for when those who participate build comprehensive list of the top Operations Steve Norton savvy investors the world over. businesses and share with others 100 revenue-grossing direct how they, too, can do the same selling companies in the world Direct Selling News 200 Swisher Road t Lake Dallas, Texas 75065 thing, creating a positive social for 2010. Phone: 800-279-5249 t Fax: 940-497-9988 and economic impact on families www.directsellingnews.com and communities. © 2011 Direct Selling News. All rights reserved. Serving the Direct Selling and Network Marketing Executive As the trade publication for our vibrant industry, each month we bring you the latest news and information about the companies and the people who lead them. Learn the Industry Reach the Industry Subscribe to Direct Selling News, Through our multiple advertising platforms, we are a trade publication for industry the best way to build name and brand recognition executives and decision-makers. and to market your products and services directly to decision-makers. For more information, email [email protected] or call 940-497-9775 | www.directsellingnews.com | 800-279-5249 4 o$en educational, entertaining and <#?)&!.-#&@ certainly social have enabled direct selling to thrive for decades even through recessions, including this I"5&J:2;+-25&E(.;-:&K8%;=5%%&,(<5: latest one. #e e%ect holds true no by Katherine Ponder matter what the category as direct selling companies represent virtually all goods and services customers want and need. #e DSN Global 100 list of the top revenue-grossing direct selling companies in the world represents $66 billion in revenue for 2010, proof that this social business model has economic power. #e products and services sold by these companies range across such diverse categories as cosmetics, &nancial planning services, home decorating, home improvement and solutions, energy services, personal- care, health and wellness, apparel and accessories, legal services and &ne wines. Each company on the list had to have reached $80 million in 2010 revenue just to be listed. Analysts have noticed some of the advantages of direct selling. Doug Lane is Managing Director at Je%eries, a full-service securities and investment banking &rm that was recently ranked No. 1 in U.S. stock picking by the Financial Times / StarMine Research Analysis. He thinks that direct selling companies are successful because they have “strong top-line growth driven by outsized exposure to the rapidly growing emerging markets; relatively high gross margins to bu%er against the recent dramatic rise in commodity cost in"ation; and ownership of the distribution channel and the tendency towards Direct selling is the original social make interacting with customers time. #e direct selling model is over premium priced products that enable networking business. Long before extremely easy. Advancements in 150 years old; it has never needed the direct sellers’ pricing power over we even knew what a computer was, mobile devices and apps, as well as technology to be successful. A social traditional retail.” Lane goes on to people were getting together for fun, in social media tools, simply increase network and a good product is all that explain that direct selling companies socializing and shopping. Add in the reach of this socially driven is necessary. Additionally, the social o$en have under-leveraged balance technological power and globalization, model. Far-"ung friends and family connections put you far ahead of sheets and large free cash "ows, and you’ve got a winning formula. are now easily included in a tight the competitors who either can’t get which “tend to put the direct selling circle, and new friends across the product on the shelves or are pushed business model on particularly strong Model Advantages nation and world are made through into obscurity. And those competitors &nancial footing.” Whether a company is working common interests. don’t have a constant line straight to Jim Cramer, host of investment in a mature market or an emerging In an emerging market such their customers to gauge demand show “Mad Money,” has caught on one, the direct selling model as China, having scores of and feedback. as well. “#e direct selling model is has many advantages. In mature salespeople working directly with Products and services delivered going great guns,” he said, noting it markets, the existing infrastructure friends and family to make the directly to customers through could be the best way to sell goods in and high technology saturation personal pitch just reaches back in personalized presentations that are the #ird World. continued on page 6 5 This is the company that puts mascara on lashes and food on tables, that fights wrinkles with one hand and Breast Cancer with the other. That knows the value of a perfect lip, but still opens its mouth and speaks out against Domestic Violence and for women’s financial independence. This is the company that not only brings beauty to doors, but also opens them. The company that supports 6.5 million Representatives in over 10 0 countries. This is Avon. The company that for 125 years has stood for beauty, innovation, optimism and above all for women. avoncompany.com 6 continued from page 4 L);+5&I;+5&'()&F;)5.2&E5::;=> world simply cannot be overlooked or swept Attracting Attention under the rug. Scott Van Winkle, CFA, is a and Investors Research Analyst at Canaccord Genuity, known Within the DSN Global 100 list, the top 10 for serving institutional and corporate clients companies contributed $39 billion to the global through investment banking, research, sales economy in 2010. #e company at the top of and trading services. Van Winkle covers direct this list—Avon, the 125-year old brand known sellers Herbalife, Nu Skin Enterprises, USANA in virtually every household, which generated Health Sciences and Medifast. He says, “I think $10.9 billion of that number—is publicly held, there is &nally broad con&dence in the direct as are &ve additional companies on the top selling model in the private equity community.” 10 list.