Technology is transforming industries, challenging traditional marketing channels, and providing digital avenues
for dynamic growth (Crittenden et al., 2017). Companies are seizing the opportunity to share resources and
increase profits from convenient transactions among digitally connected marketplaces. Evident in high-growth
industries often associated with the sharing economy,
digital-matching firms, or access-based business models,
digitally connected marketplaces are becoming a prime
example of the modern economic distribution method
where underutilized resources (e.g., networks and skills)
have been “patched together for various jobs and skills”
(Roush, 2016) as well as economic advantage.
For example, the sharing economy, consisting of companies such as Craigslist or Freecycle (Telles, 2016), can
be defined as communities of people sharing products or
services through peer-to-peer digitally connected marketplaces. Digital-matching firms include companies such as
Airbnb or Uber and are defined as companies that provide
a digital platform to facilitate the matching of peer service providers, using their personal assets, with consumers
(Telles, 2016).
The fervent use of technology or digital platforms is
not unique to the sharing economy or digital-matching
firms. The use of technology is similarly fueling an evolution in the direct-selling model to maintain pace with the
times.
Although the direct-selling industry’s business models
operate in a somewhat parallel nature regarding innovative digital models, it is important to note that the sharing
economy or digital-matching firms function as an access
business model, providing peer-to-peer, that is consumer to-consumer (C-to-C), access to products and services. In
contrast, direct selling remains a business-to-consumer
(B-to-C) business model that mainly provides ownership
that is facilitated through a peer network.
The popularity of digital platforms has disrupted traditional distribution channels, increased reach of social
networks, and changed the way people interact (O. C.
Ferrell et al., 2017). Traditional business models, such as
direct-selling companies performing direct-selling functions, have been increasing the use of digital technology to reach consumers. Direct selling, an ownership based model, is a channel where companies exchange
products and services with consumers through microentrepreneurs such as nonsalaried and independent contractors (Direct Selling Association, n.d.; Peterson &
Albaum, 2007). Well-known companies such as Rodan
and Fields, Amway, and AdvoCare help to comprise this
channel.
Direct-selling companies generate over US$36 billion
per year in the United States (U.S.). Some 20 million
people in the U.S. are involved in these organizations as
independent contractors such as direct sellers and consultants (Direct Selling Association, 2016). In addition,
direct-selling companies continue to experience a steady
increase in the number of direct-selling representatives.
Several factors are contributing to industry growth.
Societal transformation during the economic recession
of 2008 to 2009 led to an increase in entrepreneurial
endeavors and a shifting of a work-life balance, with
more workers opting for greater control of their income
potential and their work environment. Most direct sellers (i.e., independent contractors) engage peers on a
part-time basis when and where they decide to connect.
Moreover, direct sellers recognize the low-barriers to
becoming a small business owner or micro-entrepreneur,
the additional income potential, and the autonomous
work environment.
Involvement in direct selling continues to have a strong
appeal, with 78% of direct sellers reporting that the
opportunity meets or exceeds their expectations (Direct
Selling Association, 2014). Due to the impact of the
direct-selling industry on micro-entrepreneurs and the
economy, it is important to further explore its evolution.
Although there are many similarities in the sharing economy business model providing access based on
applications (apps) and direct-selling companies, there
are also many differences. Consistent with the sharing economy business model, technology fuels connectivity
of networks enabling both direct sellers and consumers
to access each other as well as an exclusive line of
products. In contrast, although the sharing economy
provides access to services, direct selling provides ownership of products. Independent-contract workers become
peer-connected sellers that expand the scope of the
direct-selling company’s distribution system and increase
peer-to-peer interactions.
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