Risky is the New Safe (11 page)

It will mean sorting out the nebulous lines between personal posting versus company positions, branding accounts with people versus company departments and other issues. This will take some discernment, and it will be different for every company and entrepreneur. (Note that if you're an attorney or financial planner—or a law, accounting, or financial planning firm—there are serious legal issues that you need to consider regarding social media posts.)

Nobody wants to follow a Twitter account or Facebook page from the ExxonMobil marketing department, but they may like one from Mary in marketing. It's probably good and adds personality if Mary expresses her undying love for the Red Sox, but not so good if she updates her views on gay adoption.

There are no fixed rules for this now. We'll all be sorting them out for the next few years. Many old companies will disappear, because this new approach to branding and marketing will expose their mediocrity. They'll be replaced by authentic companies that embrace social media and have nothing to fear from transparency. This will give a much greater degree of power to the consumer and actually result in better companies and business practices.

Okay, it's not dead yet, but retail is becoming less relevant every week. And that's not surprising, since the business model for retail hasn't really changed at all in at least a couple hundred years.

Goods used to be manufactured in England and transported by ship to the New World. They arrived at ports like Boston and New York, and then traveled by stagecoach across the country for delivery to general stores, where the consumer came in and purchased them. Ships turned into planes, stagecoaches turned into trains and 18-wheelers, and general stores turned into department stores and shopping malls, but the business model stayed the same. In fact, we could really argue it got more cumbersome, as layers of rack jobbers, wholesalers, and warehousing got involved in the process.

The endless parade of retailers filing for bankruptcy shouldn't surprise anyone. What other industry is still trying to use the same business model in 2012 as they were using in 1776?

There are two business models that pose the greatest threat to retail: One surprising and misunderstood by most, the other predictable and also misunderstood by most. The first is multi-level or network marketing, and the second is online retailing. Let's look at what the future likely holds in store for each of them.

Network marketing (often called MLM, short for multi-level marketing) as we know it today began, for all practical purposes, in 1956 when Dr. Forest Shaklee started the Shaklee Corporation, and two childhood friends, Jay Van Andel and Richard DeVos, founded what later morphed into the Amway Corporation. Since then, network marketing and its sister profession, direct selling, have grown steadily in acceptance and sales. The business has survived the pyramid schemes, chain letters, and money games of the seventies and eighties and emerged as a serious player. Right now MLM companies are moving fast and breaking things to the tune of $28 billion annually in the United States and $117 billion worldwide.

The skepticism that surrounded the business for so long has been replaced with acceptance. Millions of people have become involved, mainstream media has started to notice, and there are lots of proven results to offer. American business magnate Warren Buffett's Berkshire Hathaway now owns three companies in the business, and he has been quoted as saying that, dollar for dollar, it's the best investment he's ever made. That's quite a statement for someone widely considered to be the most successful investor of the twentieth century. (And for those of you keeping score at home, I just referenced both Buffetts in the same chapter!) Although popular folklore says the Oracle of Omaha and the Minstrel of Margaritaville are related (and they call each other Cousin Jimmy and Uncle Warren)—they're actually not. Although as
Fortune
magazine noted in a 1999 piece, both play stringed instruments, stick to their guns, and are filthy rich!

Besides me, other financial and success authors like Robert Kiyosaki and David Bach have been recommending the business for years.

Now, we are about to enter the golden era of network marketing.

In the next few years alone, tens of millions of new distributors will join the network marketing profession. And as much as companies like to suggest they are heading for an exponential growth curve, when sales increases are almost vertical, it's likely
the profession as a whole
will experience that growth cycle. There are lots of indicators and trends suggesting this will be the case.

First, we need look no further than the current broken model of retail distribution today, with all its needless parasites between the manufacturer and the consumer. Contrast that with the elegant model of network marketing, where the company that manufactures a product ships it directly to a distributor. This person is often either the end consumer or someone who conversationally markets it to family, neighbors, and friends. (And if you don't know how this works, you haven't been on Facebook lately!)

The money that retailers of the regular retail model normally waste on advertising and unnecessary layers of distribution is instead spent on product research and development (R&D) and sharing the profits with those who actually do the work and provide value.

Network marketing is the ultimate results-based compensation, because it's a business where people are paid exactly what they're worth.

The other big advantage of network marketing is the social aspect. MLM is like social media on steroids, in 3-D and living color! Every product is presented along with a personal testimonial from someone you know and trust. It's done in small home meetings, one-on-one encounters in coffee shops, and through friend networks on social media sites.

It's for this reason that many health and nutritional products found their way into mainstream consciousness through network marketing. If they just sat on a grocery or health food store shelf, no one would buy them because people needed to be educated about products before making a purchase. Network marketing is perfect for this, and it's the perfect distribution model for the new economy.

Think about the millions of jobs we know will be eliminated by advances in technology, and the millions more that will require the people who have them to radically retrain themselves in order to keep them. For example, a detective used to get trained by working a beat as a patrol officer, but soon they're going to have to be experts in biotechnology and DNA. In another case, the promotion for a simple pack-and-pick warehouse job may go to the people who can lift and stack 400-pound boxes quicker, which they do because they're more proficient with the powered exoskeleton suit they're wearing. A large number of these people are likely to seek out business opportunities—and the benefits that network marketing provides will appeal to many.

Now think of the millions more layoffs that will occur because of governments having to face reality and make hard choices to move toward balanced budgets. Some countries will actually go bankrupt; others will slash pensions and entitlements to the bone. Millions of people will recognize that they cannot trust their futures or retirement to government, and many of them will also see network marketing as a vehicle to proactively protect their future.

It's conceivable that 40 or 50 million new people will become network marketing distributors in the period from 2013 to 2017, as all this economic upheaval is taking place. It took almost 60 years for network marketing to reach $100 billion in sales. The second $100 billion will likely be reached in only 10 or 15 years. And that $200 billion could easily double to $400 billion in five to seven years after that. For the most part these are not new sales—they are coming out of existing channels, mainly retail.

The next dot-com bubble won't really be a bubble, but the logical migration of a huge swath of purchasing from the retail environment to the online world. We can (hopefully) assume that this time around, companies and investors will not lose sight of the necessity of delivering a quality product at a fair price that also allows for a profit.

The thing most often overlooked about e-commerce today is the beginning. Not the yeas-ago beginning, but the
real
beginning, meaning the one that's starting right now.

The statistics you read about online commerce may seem mind-boggling, and they grow substantially every season, but you have to keep in mind that we are still at the very,
very
earliest of stages of online purchasing right now. Those huge sales figures you see reported today are miniscule in comparison to what they will be 5 and 10 years from now.

This massive migration to online buying will cause two very different demands on entrepreneurs
.

First, of course, will be the necessity of brick and mortar retailers to remain relevant and create a reason for people to still come to them. Stores and malls won't go away, but they will have to do a lot of things differently. It's possible no one has done this better thus far than Tesco (or demonstrated a better use of QR codes). In Korea they faced the challenge of competing with other supermarket chains with more stores in better locations. Their solution: virtual stores in places like subway stations.

They have set up displays that looked just like their actual stores, except they are simply large photos on banners. Shoppers use their smartphones to scan the QR code on the picture of the item they want, select a quantity, and add it to their virtual cart. Once they finish shopping, they complete the order, and it's delivered shortly after they get home. (You can see a great case study here:
http://simplesells.tumblr.com/post/24044870654/homeplus
).

The other demand will be on the existing and emerging online retailers. They have to create an online experience (or more likely, a mobile one) that's comparable to retail and better than other online retailers.

Put another way, physical retailers will need to mimic the convenience of online buying, and online retailers will need to mimic the social aspects of the stores and malls. And of course, the savvy ones will be operating seamlessly through
both
channels. Some companies, like Apple and clothing retailer Andrew Christian, are already doing this well. The majority of both brands' sales take place online, with the rest done in iconic flagship stores.

Amazon is absolutely crushing right now with their Prime account. They offer free two-day shipping, one-click buying, and a subscribe-and-save program that allows you to order staples on auto-ship with deep discounts and the convenience of home delivery. (As a bonus, Prime account holders can also instantly stream hundreds of free movies and TV shows right to their computers or televisions.) Mill around a Best Buy or another big box retailer and watch the foot traffic and chat up the people you meet. You might be shocked to discover how many of them now use these stores as virtual show rooms for Amazon, especially with the new Amazon scan app.

A sampling of some of the other issues those retailers will need to address:

• Supermarkets, health food stores, and big box stores will need to invest in and strengthen store brands because their declining market share will require bigger profit margins.
  
• As the pace of life becomes increasingly hectic, people will more readily pay for convenience. Supermarkets with floral departments, bakeries, cafes, and pharmacies are probably just the beginning. Whether they will also include child-care centers, nail salons, day spas, and virtual reality holo-suites remains to be seen. Then they'll have to factor in the virtual store angle, as Tesco has done.
  
• Both physical and online retailers will need to figure out a way to handle delivery for the automatic orders placed by smart appliances.
  
• Physical retailers will need to get good at offering SMS updates with special offers and premiums for foot traffic, as well as for cars or landspeeders cruising by.
  
• Both online and physical retailers will have to deal with the seven billion people who subscribe to
  The My Network
  , and who will be ordering lots of content and won't want any advertising in it.
  

Once again, it will be about the experience. Physical retailers will have to work harder on what customers
experience
in their stores. Most people have a coffeemaker at home, so why do they go to Starbucks? It's really easy to buy computers and electronics online, so why do people eagerly trek to the Apple store?

It's just the opposite for online merchants. They need to emulate a model like the Mall of the America, a shopping center located in Minnesota that has over 30 million visitors a year. People drive from many miles away just to shop there, often at the same chain stores they have in their hometown. They do it because they can also ice skate, ride a roller-coaster, visit the aquarium, walk through the Nickelodeon Universe, or see the 34-foot-tall robot in the Lego store at the Mall of America.

Contrary to what the great philosopher Yogi Berra once proclaimed, people go there because that
is
the place where people go. There is a social proof and tribal element of retailing that cannot be ignored.

Why do teenage girls hang out at the mall on Saturdays? Because that's where the teenage boys hang out. Why do teenage boys hang out at the mall on Saturdays? Because that's where the teenage girls hang out.

Picture this scenario: It's Saturday morning and you need to buy a rake, some socks, and a clock. So you head out to the mega mall like you usually do. You pull into the lot and there are no cars there. You think about it, and you're sure it's not a holiday. You get that coveted space, the first one next to the handicapped ones, right by the front door.

You walk in the mall, and all the lights are on. All the stores are open with people working there. There are just no customers. This should be your dream scenario—a perfect parking spot and no other shoppers to contend with. But what would happen next would belie that . . .