Overview of Global Direct Selling Industry

Tamuna Gabilaia Executive Director December 7, 2012

Ho Chi Minh City, Vietnam

Month/Year

Overview

  Founded in 1978, voluntary, non-governmental organization

  60 Member National DSAs Around the World: Asia – 12, plus Direct Selling Committee; Europe - 30, Latin America – 16, North America – 2

  Governing Mechanism: CEO Council

  Regional Federation – SELDIA

  Doing Business in 170-plus Countries

WFDSA Leadership

Operating Group:

•  Chairman – Alessandro Carlucci (Natura) •  Executive Director – Tamuna Gabilaia (WFDSA) •  Vice Chairmen – Andrea Jung (Avon); Magnus Brannstrom (Oriflame) •  Treasurer - DeVos (Amway) •  Assistant Treasurer – Moacir Salzstein (Natura) •  Secretary Truman Hunt (Nu Skin) •  Advocacy Committee – German Martinez Corral (Stanhome) •  Association Services Committee – Dora Hoan (Best World Lifestyle) •  Ethics Committee – Joe Mariano (USDSA) •  Legal/Regulatory Affairs Committee – Nathan Moore (Mary Kay)

To build understanding and support for direct selling worldwide. The Federation supports direct selling companies and associations by:

–  Developing, maintaining and promoting the highest global standards for responsible and ethical conduct.

–  Advocating the industry's positions and interest with governments, media and key influencers.

–  Serving as a trusted global resource for information on direct selling.

–  Facilitating interaction among direct selling executives on issues of importance to the industry.

Mission

Direct Selling Association Objectives

•  Protect •  Promote •  Police

Speak with one voice!

Direct Selling: A Definition

•  The sale of a consumer product or service, in a person-to-person manner, away from a fixed retail location, where the company offers opportunities to an independent contractor salesforce

Multi-Level Marketing

•  Commonly referred to as MLM, is a type of compensation plan found in direct selling. A direct selling company that offers a multilevel compensation plan pays its representatives based on the individual’s product sales as well as that of their “downline,” which refers to a group of people that consultants bring into a company to generate sales, their recruits, and so on.

Pyramid Schemes: A Quick Test

 Ask two questions 1. Do you risk substantial financial loss by joining the

company? If Yes – Be Careful!

2. Is the money you will earn primarily coming from the sale of the product or service to the ultimate

consumer of that product or service? If No – Stay Away!

Investigate carefully!

How To Differentiate Illegal Pyramids from Lawful Direct Selling Businesses

•  Genuine Business Opportunity – the sale of products/services to the consumer

•  Cancellation rights •  Buy-back guarantee •  Low- start up fee

•  Business opportunity based solely on recruitment

•  Encourage/require purchase of large stocks of non-refundable inventory

•  Usually high start-up fee

WFDSA Programs

•  Women’s Economic Empowerment •  Socio-Economic Impact Studies •  Reputation Building Studies •  Corporate Social Responsibility/Philanthropy Surveys •  APEC Consumer Education and Protection Initiative •  Global Code of Ethics Initiative •  Regional Association Performance Seminars •  Minimum DSA Criteria •  Media Outreach/Public Affairs

Socio-Economic Impact Studies

Ernst&Young IPSOS Mori Partner

Since 2004 WFDSA 24 socio-economic impact studies:

• Brazil, Canada, Japan, Korea, Mexico, Russia, Taiwan, the US (2005)

• Czech Republic, France, Finland, Germany, Poland, Italy, Turkey, UK (2007)

• South Africa, Thailand (2008)

• Colombia, India (2009)

•  Canada, Chile (2010)

• Brazil and Ecuador (2011).

• Australia, New Zealand and Peru (2012)

Global Conditions

 Growth expected to dropt to 3.5% in 2013

 Gains expected to 4% in 2013

Source : International Monetary Fund

 Advanced Economies 2012 – 1.5 % 2013 – 2%

 Emerging and Developing Economies 2011 – 6% 2012 - 5.34% 2013- 6%

Source : International Monetary Fund

Global Conditions

 Widening of the Euro-area crisis could reduce that area’s output by 2% and 3.5% over two year horizon

 Increase in Oil Prices would lower global output by 1.25%

Source : International Monetary Fund

 Asia still projected at 7.5% on average in 2012-13

 Economic Activity in Middle East and North Africa expected to accelerate

 Sub Saharan Africa expected to expand at about 5.5%

 Central and Eastern Europe most affected by Euro-crisis

Source : International Monetary Fund

  Self employed or Employee Preference

 US- 55% would opt for self-employment

 South Korea - 51%

 Turkey 51%

 China – 71%

 EU – 45% (49% prefer employment) Source – The Gallup Organization

Global Entrepreneurship and Self-Employment

Global Annual Retail Sales (USD Billion)

Global Salesforce Size (In Millions)

Global Statistical Data

Global retail sales increased 9% year-over-year

• Global retail sales increased 9%, from US$141.2 billion to 153.7 billion.

• The number of Direct Sellers increased 9% from 84.3 million to 91.5 million.

2010 $141.2 billion

2011 $153.7 billion, 9%

84.3

91.5, 9% S

elle

rs = M

illion

s

Global Sales & Sellers 2010 - 2011

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Sales were UP in all major regions

2011 Retail Sales (US$) 2011 Seller Count

Asia Sellers * 52 million, 15%

57% of total

Americas Sales $60.4 billion, 8%

39% of total

Africa / Mid-East Sales US$ 1.4 billion, 6%

1% of total

Europe Sellers 11.4 million, 4%

12% of total

Europe Sales US$ 25.0 billion, 4%

16% of total

Americas Sellers 26.7 million, 4%

29% of total Asia Sales $ 66.9 billion, 12%

44% of total

Africa / Mid-East Sellers Unknown

x

Global Total Sales

US$ 153.7 billion, 9%

x

Global Total Sellers

91.5 million, 9%

8%

4%

12%

* Not including China

In 2011, 2 new countries joined the Billion Dollar Club: In 2011, 2 new countries joined the Billion Dollar Club:

Indonesia and Turkey

Country

2011 Retail Sales [US$

billions]

Number of Sellers (millions)

% Sales Growth (Local

Currency) 1 United States $29.9 15.6 4.6% 2 Japan $23.9 3.4 -4.7% 3 China $16.3 not available 16.2% 4 Korea $12.9 4.2 4.7% 5 Brazil $12.0 2.8 5.2% 6 Mexico $6.3 2.2 10.2% 7 France $5.1 0.5 2.2% 8 Germany $3.7 0.3 -5.1% 9 Russia $3.6 4.1 4.6%

10 Italy $3.4 0.4 -- 0.0% 11 Malaysia $2.9 7.4 30.9% 11 Venezuela $2.9 1.2 75.5% 13 Taiwan $2.8 4.7 3.0% 14 Canada $2.2 0.7 -- 0.0% 15 Thailand $2.1 15.6 8.3% 16 Colombia $2.0 1.2 14.1% 17 United Kingdom $1.9 0.4 -2.0% 18 Argentina $1.6 0.6 23.0% 19 Australia $1.4 0.4 -12.4% 20 Peru $1.2 0.4 8.0% 20 Turkey $1.2 1.2 17.6%

Rest of Billion $ countries at less than 2% each

The Top 22 countries generate more than 90% of global sales

The “Billion Dollar Club” : Share by Country

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DSA CODE OF ETHICS DSA CODE OF ETHICS

Who must comply with the Code?

DSA‘s

2

4

5 Member Companies

Sales Distributors

Company Employees

Code Compliance

WFDSA and DSA Code of Ethics

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DSA CODE OF ETHICS DSA CODE OF ETHICS

KEY PROVISIONS—COOLING OFF What is cooling off? • If a consumer agrees to purchase an

item and changes her mind, she has the right to cancel within a specified number of days

• The number of days varies by country

This is called COOLING OFF

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DSA CODE OF ETHICS DSA CODE OF ETHICS

KEY PROVISIONS—COOLING OFF • The Code of Ethics allows

consumers to cancel an order: •  Without any specific reason •  Within a specific time limit

• Your order receipt should clearly state what the policy is in your country

25

DSA CODE OF ETHICS DSA CODE OF ETHICS

KEY PROVISIONS— EARNINGS CLAIMS • Companies and direct sellers

cannot provide false or misleading statements about the earnings opportunity

• Statements made must be documented by facts

Source: IPCC

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DSA CODE OF ETHICS DSA CODE OF ETHICS

KEY PROVISIONS— PRODUCT BUYBACK • Company must not encourage

inventory purchases in unreasonably large amounts

• If you terminate your business, the company will buy back product you haven’t sold

–  if it is still marketable –  less any costs such as

handling and commissions

27

DSA CODE OF ETHICS DSA CODE OF ETHICS

KEY PROVISIONS— PRODUCT CLAIMS • Companies or direct sellers

must not make untrue claims about a product

The skin cancer treatment

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DSA CODE OF ETHICS DSA CODE OF ETHICS

GUIDELINES FOR CODE COMPLAINTS

Complaints should be in writing and should Include the following information:

• The date and details of the incident • The individuals involved • The code violation (if possible) • Efforts made to resolve the matter • The cost of the product

(including invoices or other documentation) • The current status of the complaint • Resolution being sought

Contact the Company

Resolution Directly with the

Company

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DSA CODE OF ETHICS DSA CODE OF ETHICS

GUIDELINES FOR CODE COMPLAINTS

Complaints should be in writing and should Include the following information:

• The date and details of the incident • The individuals involved • The code violation (if possible) • Efforts made to resolve the matter • The cost of the product

(including invoices or other documentation) • The current status of the complaint • Resolution being sought

Contact the DSA Code

Administrator

Resolution with Assistance of Code

Administrator

If not resolved…

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 Global Code of Ethics Program

WHAT?

• Global Code Promotion/Communication Initiative • Approved by the CEO Council • Demonstrates commitment to your direct sellers and their customers

• Proactively Communicates Standards of Excellence to External Audiences • Raises the Bar on Performance • Encourages Ethical Behavior • Increases public awareness of the Code

WHO? • DSA’s • Member companies

Q&A Document

Thank you!

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