By Harry Alford
April 25, 2017 at 5:00 am ET
During the campaign, President Donald Trump pledged to enact policies that promote job growth for African-Americans. To support the aspirations of many African-American entrepreneurs, it is critical to enact legislation that supports direct sellers and job creation while combating pyramid schemes.
In this age of disruption, rapid technological advances are continuously innovating and replacing old business models, and creating new goods and services and the means to deliver them. But one activity remains as essential to the health of our economy as it was at our nation’s creation: entrepreneurship.
Of course, like all economic activity, entrepreneurship is profoundly affected by the digital revolution. As robotics and other advanced technology are boosting productivity and eliminating manufacturing jobs, social networking and cloud based computing are creating new entrepreneurship opportunities and markets for enterprising Americans from every background and experience.
Unsurprisingly, obstacles to entrepreneurship are greatest in communities that are technologically underserved and where business investment is weakest. That is the unfortunate reality in parts of the African-American community despite the growing strength of African-American consumers.
While the African-American share of the U.S. population has increased only slightly, our purchasing power has grown by more than 75 percent since 2013, and now accounts for $2.5 trillion annually. No less than any other group, African-Americans are looking for opportunities to start and build businesses in the consumer markets they are part of — opportunities that satisfy their particular economic, family and social needs. The retail channel known as direct selling readily offers those opportunities.
Much of the appeal of direct selling is its accessibility as a path to entrepreneurship.
With its typically low costs of entry and overhead, direct selling is a rapidly growing and increasingly popular retail channel where global brands and smaller companies sell all types of goods and services: cosmetics, nutritionals, jewelry, housewares, insurance and many others.
A direct seller’s average startup costs are just a little more than $100. Risks are minimal as well, as reputable direct selling companies offer at least a 90 percent refund for unused inventory. Success still depends on strong personal relationships between sellers and customers, even though technology innovations are changing some of the ways they interact.
Twenty million Americans are now involved in direct selling. They reside in every state and every congressional district in the country. They represent the broad diversity of the American population. Fully three-quarters of direct sellers are women, 20 percent are Hispanics and 11 percent are African-American.
Direct selling’s greatest appeal might be the independence it offers salespeople. Direct sellers are not employees but independent contractors. They affiliate with a company but retain the freedom to operate their business as they see fit. Not everyone involved in direct selling does so as a full-time occupation or to earn a large income. On the contrary, most Americans work at it part time to supplement their incomes or because they enjoy the social engagement it offers or because they use the products and want to purchase them at a discount.
Direct sellers are stay-at-home moms and early retirees. They are young people just entering the workforce and adults with full-time jobs who sell on the weekends. And they are people who work full-time at it, recruiting extensive networks of sellers, building large businesses and earning substantial. They are all entrepreneurs who decide for themselves the effort they will give to their enterprise.
Importantly, direct-selling companies are dedicated to providing opportunities to Americans of all races and ethnicities. According to an annual survey sponsored by the Direct Selling Association, the trade association for more than 160 direct-selling companies, almost two-thirds of direct sellers say their companies focus on diversity development.
That same survey found that African-Americans are more likely than white Americans to favor direct selling and are more frequently contacted by direct sellers. And while they are no more likely to have worked in the collaborative or “sharing” economy than other Americans, African-Americans are more interested in and favorable to that rapidly growing share of the national economy than are other segments of the population.
Direct selling will continue to be one of the most available routes to business ownership for African-Americans, particularly those who live in neighborhoods challenged by low levels of business investment. Some of these aspiring entrepreneurs will become tomorrow’s celebrated success stories credited to the American spirit of enterprise. Care must be taken to defend them from misguided attempts to restrict the independence of its millions of salespeople and from the threats posed to sellers and customers by pyramid scheme fraud.
To protect minority entrepreneurs for whom direct selling is a vital path to opportunity, federal anti-pyramid scheme legislation is needed. Last year, Reps. Marsha Blackburn (R-Tenn.) and Marc Veasey (D-Texas) introduced the bipartisan Anti-Pyramid Promotional Scheme Act to protect Americans involved in direct selling and their customers by clearly defining, for the first time in federal statute, the difference between a legitimate direct-selling business and an illegal pyramid scheme. This pro-consumer legislation is a critical safeguard for vulnerable populations, which is why its bipartisan supporters included members of the Congressional Black Caucus and Hispanic Caucus. There are plans to reintroduce similar legislation in the 115th Congress.
Millions of Americans, including more than 2 million African-Americans, are counting on their elected representatives and the regulators they oversee to protect the unique appeal of direct selling and the opportunities it offers Americans from all races and addresses, especially those living in underserved communities where economic opportunities are scarcer and less accessible than elsewhere. I urge Trump and Congress to support anti-pyramid scheme legislation to protect the aspirations of black entrepreneurs.
Harry Alford is president and CEO of the National Black Chamber of Commerce.
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