Meet Direct Selling’s Billion Dollar Markets.

The story of direct selling is one of sustained growth that keeps breaking records.

Global retail sales and the industry’s total salesforce both hit new highs in 2015. The World Federation of Direct Selling Associations (WFDSA) estimates that retail sales rose 7.7 percent in 2015 to $183.7 billion, up from $170.6 billion in 2014. The total salesforce jumped 4.4 percent, to 103 million people, up from 99.7 million in 2014. In all, 23 countries posted sales of $1 billion or more from direct selling.



“Direct selling is well positioned in today’s marketplace as consumers seek personalized service and quality products from people who they know and trust,” says Amway President and WFDSA Chairman Doug DeVos. “It results in a great opportunity for aspiring entrepreneurs, many of whom are seeking an opportunity to make a little extra while sharing products that they enjoy. With general attitudes toward entrepreneurship at very positive levels, the recent industry results are encouraging and the future is even brighter.”

Every region in 2015 reported sales jumps, and 80 percent of countries around the world showed increases in both sales and sellers. These are not just flash-in-the-pan bursts of activity, but sustained, steady growth spanning years.

“Given the mediocre performance of the global economy in 2015, I was pleasantly surprised by the steady and broad-based growth of direct selling during the year,” says Paul Bourquin, managing economist at Nathan Associates Inc. The Washington, D.C.-based economic consultancy works with the WFDSA to maintain confidentiality of incoming data, and to verify and vet the annual global data report.

The numbers are powerful because most national governments do not collect and report statistics on the direct selling channel, and “quite a few direct selling companies seek better or alternative information from that provided by syndicated sources,” Bourquin says. “The worth of the data is revealed by member companies wanting the information and dedicating the time and resources to do the research.”

The WFDSA also tracks the compound annual growth rate (CAGR), a measure of sustained growth over time. The global direct selling industry boasts a 7.2 percent three-year CAGR (2012-2015), with increasing sales from $149.3 billion to $183.7 billion.

The group of 23 countries with retail sales of $1 billion or more in 2015 claims 94 percent of all global sales. Sales are concentrated among the very largest direct selling markets, with the Top 5 countries accounting for 64 percent of all sales and the Top 10 accounting for 80 percent. The countries are an interesting mix of advanced and developing economies, which points to the strength and appeal of the selling channel in nations with a wide variety of infrastructure and technology as well as political and economic situations.

THE BATTLE FOR No. 1

China was predicted to eclipse the United States as the world’s largest direct selling market as early as in 2015, but growth of 4.8 percent meant the U.S. reached record sales of $36.1 billion, up from $34.5 billion in 2014 and enough for the U.S. to hold onto the No. 1 spot. There are now 20.2 million Americans involved in direct selling, up 11 percent from 18.2 million in 2014.

These latest numbers illustrate the industry’s “strength, vibrancy and vigor” in the United States, says Joseph N. Mariano, President of the U.S. Direct Selling Association. He says the sales growth rate outpaces growth for traditional retail sales and the overall gross national product in the U.S.

“It is gratifying to see record growth in direct selling in the United States for the past five years,” Mariano says. “Today, there are more people involved and more revenue is being generated than at any other time in our history. Direct selling remains relevant today, because in an age defined by technology, people still see great value in person-to-person interaction and demonstration.”

Industry watchers note that China exhibited strong sales growth of its own, with sales jumping 19 percent to $35.5 billion, up from $29.8 billion in 2014. (The number of people selling products for direct selling companies in China is unknown.) As the Chinese government continues to approve more licenses for direct selling companies to do business within its borders, sales in the industry can only skyrocket, and China will most likely overtake the U.S. position in direct selling in 2016 or soon after. Today there are 78 companies with a direct selling license. Within two years that number is expected to jump above 100.

China’s Ministry of Commerce keeps close watch on the direct selling channel but does plan to keep issuing licenses. Observers say the Chinese government wanted to see slow, controlled growth in the sector before allowing it to accelerate. There are established direct selling firms in China, including Amway, Herbalife, Vorwerk, Infinitus, Mary Kay, Perfect, Tupperware, Nu Skin and Tiens. At the same time, startup homegrown Chinese companies are seeking their own success in the channel. These firms sell nutritional, beauty and healthcare products and are experiencing 15 percent to 20 percent year-over-year growth. They include: Kangmei, Kasley Ju, Golden Sun and Ten Fu Tenmax.

There is no doubt that the Chinese market is definitely opening up. A recent example is a November 2015 direct selling symposium held in Beijing. Sponsored by the WFDSA and the Direct Selling Research Center at Peking University, the event brought together the WFDSA CEO Council members, which included companies like Amway, Shaklee, Mary Kay, Bestworld Lifestyle, Nu Skin and Tianshi, among others.

The benefits of direct selling in China also are catching the eyes of traditional retailers like France’s Millet, a seller of outdoor and mountaineering equipment. The brand is employing a variety of distribution channels, including single-brand stores and e-commerce as it tries to reach consumers in second- and third-tier cities.

Such specialty shops are how some direct sellers, including Avon and Amway, maintained a presence in the Chinese market during the country’s ban on direct selling between 1998 and 2005. When China reopened its borders to the channel, it imposed strict rules for acquiring a direct selling license.

At the same time, the Chinese government welcomed online sales with a goal of boosting online shopping to more than 5 percent of China’s total retail sales, in an effort to reach more consumers. China encouraged multi-channel sellers with traditional stores to also open online shops.

This model embraces the Chinese middle class and its younger generations, which have money to spend and a love of technology, especially smartphones. Social media apps such as WeChat are popular ways for distributors to build online stores that let them promote and sell products.
In fact, the Internet and social media play a much larger role in China’s economy than in the U.S. economy.

TOP PRODUCT CATEGORIES


Wellness, cosmetics and personal care, and household goods are the Top 3 product categories across the globe. Independent consultants also provide customers with clothing, utility services, financial services, food items, books and toys.

The above report and write-up is credited to :
Meet Direct Selling's Billion Dollar Markets by Andrea Tortora