IBISWorld Industry Report Direct Selling Companies in The US 2019

WWW.IBISWORLD.
COM Direct Selling Companies in the USJune 2019 1
Out of stock: The threat of e-commerce will

stifle industry revenue growth
This report was provided to
Edeska (2129455405)
by IBISWorld on 22 July 2019 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report 45439

Direct Selling Companies
in the US
June 2019 Dan Spitzer
2 About this Industry 17 International Trade 28 Revenue Volatility

2 Industry Definition 18 Business Locations 29 Regulation and Policy
2 Main Activities 30 Industry Assistance
2 Similar Industries 20 Competitive Landscape
3 Additional Resources 20 Market Share Concentration 31 Key Statistics
20 Key Success Factors 31 Industry Data
4 Industry at a Glance 20 Cost Structure Benchmarks 31 Annual Change
22 Basis of Competition 31 Key Ratios
5 Industry Performance 23 Barriers to Entry 32 Industry Financial Ratios
5 Executive Summary 24 Industry Globalization
5 Key External Drivers 33 Jargon & Glossary
7 Current Performance 25 Major Companies
9 Industry Outlook 25 Herbalife Nutrition Ltd.
11 Industry Life Cycle 25 Amway
25 Avon Products Inc.
13 Products and Markets 26 Mary Kay Inc.
13 Supply Chain
13 Products and Services 27 Operating Conditions
15 Demand Determinants 27 Capital Intensity
15 Major Markets 28 Technology and Systems
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM Direct Selling Companies in the USJune 2019 2
About this Industry
Industry Definition Direct selling is the retailing of a product or usually done via home parties, workplaces,
service from one person to another away trucks, wagons, street-corner carts or
from a fixed retail location. Providers are door-to-door. Direct sellers of fuel and food
referred to as independent consultants, for immediate consumption are excluded
distributors or representatives. Sales are from this industry.
Main Activities The primary activities of this industry are

Direct selling of home goods
Direct selling of coffee-break services
Direct selling of cosmetics
Direct selling of vitamins and nutritional supplements
Direct selling of home delivery newspaper routes
Direct selling of party plan merchandisers
Direct selling of miscellaneous merchandise
The major products and services in this industry are

Clothing and accessories
Home and family care products
Leisure and educational products
Wellness and personal care products
Other products and services
Similar Industries 45421 Vending Machine Operators in the US

This industry provides snack food, drinks and necessities to the general public via vending machines.
45431 Fuel Dealers in the US

This industry primarily retails heating oil, liquefied petroleum gas and other fuels via direct selling.
72233 Street Vendors in the US

This industry prepares and serves food for immediate consumption from motorized vehicles or nonmotorized
carts.
45411a E-Commerce & Online Auctions in the US

This industry retails merchandise via direct sale to customers through websites such as eBay.com.
Provided to: Edeska (2129455405) | 22 July 2019

About this Industry
Additional Resources For additional information on this industry

www.dsa.org
Direct Selling Association
www.dsef.org
Direct Selling Education Foundation
www.dswa.org
Direct Selling World Alliance
www.census.gov
US Census Bureau
www.wfdsa.org
World Federation of Direct Selling Associations
IBISWorld writes over 1000 US

industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com

WWW.IBISWORLD.COM Direct Selling Companies in the US June 2019 4
Industry at a Glance
Direct Selling Companies in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

Snapshot
$44.0bn 1.2% 0.0%
Profit Wages Businesses
$2.9bn $7.1bn 766,236

Revenue vs. employment growth Per capita disposable income
Market Share
There are no major 3 4
players in this
2
industry 2
1
% change
% change
0
0
-2
-1
-2 -4
Year 11 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 25
Products and services segmentation (2019)
6.3%
Key External Drivers Leisure and educational products
Per capita disposable 8.6%
Clothing and accessories
income
External competition
32.3%
Wellness and personal
for the Direct Selling care products
Companies industry
Number of adults
aged 20 to 64 23.8%
Home and family
Consumer spending care products
National
unemployment rate
p. 5
29.0% SOURCE: WWW.IBISWORLD.COM
Other products and services
Industry Structure Life Cycle Stage Decline Regulation Level Medium

Revenue Volatility Low Technology Change Low
Capital Intensity Low Barriers to Entry Low
Industry Assistance None Industry Globalization Low
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31

Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary Operators in the Direct Selling alone. However, industry profit
Companies industry retail a range of margins are expected to decrease
products from one person to another slightly during the current period.
away from a fixed retail location. While Direct selling companies have
intense external competition has relatively low start-up costs; therefore,
negatively affected the industry over the many Americans who are unemployed or
five years to 2019, the industry has underemployed establish direct selling
managed to achieve growth as a result of businesses as a means of income. As the
the strengthening national economy. unemployment rate declined over the
Increased competition from mass past five years, these operators mainly
merchandisers, department stores and opted to remain part of the industry,
online retailers has threatened the taking on part-time roles instead of
industry by providing a wider selection of exiting the industry entirely. As demand
substitute products at low prices in a and direct sellers’ revenue rose during
the current period, more operators
entered the industry to use it as a flexible,
Despite
the appeal of buying goods from low-commitment way to earn
knowledgeable direct sellers, consumers are supplemental income.
Driven by improved macroeconomic
expected to turn to online competitors conditions and disposable income,
consumer spending is anticipated to rise
convenient one-stop location. However, further over the five years to 2024. As a
as many industry operators have no result, households are expected to ramp
physical locations, the price advantage up purchasing. However, despite the
competitors have over many retailers appeal and relative ease of buying goods
is minimized, which has somewhat from knowledgeable direct sellers,
mitigated the effects of dwindling consumers are expected to increasingly
industry customers. Additionally, as turn to online competitors for purchases.
consumer spending and per capita With its competitive prices, convenience
disposable income grew during the and a broader range of products, the
current period, more consumers had internet will likely be a hindrance to the
the resources to purchase goods from industry over the next five years, which
direct sellers. Overall, industry will curtail the effects of macroeconomic
revenue is expected to rise an growth. Consequently, IBISWorld
annualized 1.2% over the five years to forecasts that industry revenue will
2019 to reach $44.0 billion, including stagnate during the outlook period to
an anticipated 1.0% jump in 2019 reach $43.9 billion in 2024.
Key External Drivers Per capita disposable income from industry operators, leading to low
Fluctuations in household disposable demand. In contrast, high incomes
income largely influence demand for the increase consumers’ likelihood to buy
merchandise retailed by this industry, as nonessential goods, driving up demand.
much of the inventory this industry sells Per capita disposable income is
is considered discretionary. When expected to increase in 2019,
incomes are low, consumers refrain representing a potential opportunity for
from making discretionary purchases the industry.

Key External Drivers External competition for the Direct Consumer spending
continued Selling Companies industry Consumer spending patterns influence
Direct selling companies compete with a demand for the merchandise retailed by
variety of other industries due to the range this industry. When consumer spending
of goods and services they provide. Some is low, consumers refrain from
of the industry’s largest competitors are purchasing retail goods, leading to low
department stores and big-box retailers, demand for industry operators. When
which stock a range of similar products, consumer spending is high, consumers
such as cosmetics, jewelry, apparel and are more likely to purchase retail goods,
kitchenware. Online retailers also pose leading to higher demand for industry
significant competition to the industry, as operators. Consumer spending is
e-commerce websites enable consumers to expected to increase in 2019.
conveniently buy a wide variety of
products at low prices from the comfort of National unemployment rate
their homes. External competition for the In terms of revenue, the unemployment
Direct Selling Companies industry is rate is inversely related to demand for
expected to increase in 2019, representing industry products. When
a potential threat to the industry. unemployment rises, consumers tend to
reduce their discretionary spending,
Number of adults aged 20 to 64 leading to lower sales for direct sellers.
The number of adults aged 20 to 64 However, in terms of industry
represents the majority of this industry’s participation, increasing
customers. As a result, a growing number unemployment can be beneficial to the
of people in this age group generally industry. Since direct selling companies
increases demand for industry goods. require low startup costs, the industry
People in this age group typically have often experiences a wave of new
steady incomes, enabling them to spend participants during periods of high
freely on industry products. The number unemployment. The national
of adults aged 20 to 64 is expected to unemployment rate is expected to
increase slightly in 2019. decrease in 2019.
Per capita disposable income Number of adults aged 20 to 64
4 1.0
0.8
2
0.6
% change
% change
0 0.4
0.2
-2
0.0
-4 -0.2
Year 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25

Current Direct selling, also known as multilevel

marketing (MLM), has a unique position Industry revenue
Performance within the retail sector that is amplified
3
during times of economic downturn.
Americans whose income levels fall or are 2
dissolved altogether are often drawn to
direct selling’s entrepreneurial 1
% change
advantages. Instead of selling products in
brick-and-mortar locations, they prefer 0
selling products independently, often to

-1
friends and family, or by hosting parties to
present products. The revenue gathered -2
by the Direct Selling Companies industry Year 11 13 15 17 19 21 23 25
is directly related to the number of
workers within it at any given time, as the SOURCE: WWW.IBISWORLD.COM
workers are the ones traveling door-to-

door or selling goods at parties they plan. overall demand expansion has enticed
While the unemployment rate has largely more people to join the industry to take
declined over the five years to 2019, many advantage of macroeconomic growth. As
Americans who entered the industry a result of these trends, revenue for the
during times of unemployment or Direct Selling Companies industry is
underemployment have chosen to remain expected to rise at an annualized rate of
in the industry in a part-time capacity to 1.2% over the five years to 2019 to total
supplement their income. Over the past $44.0 billion, including an anticipated
five years, increased consumer spending 1.0% jump in 2019. However, despite
and rising per capita disposable income improved demand conditions, the
have enabled more consumers to industry’s growth prospects have been
purchase goods from direct sellers. dampened by intense competition from
Growth in direct sellers’ revenue and mass merchandisers and online retailers.
Retail market Operators in the industry retail a wide conditions have encouraged consumers
improves and varying range of products, from to increase discretionary spending on
cosmetics to rubber stamps, through industry goods, such as beauty products,
well-known companies such as Avon nutrition supplements and kitchenware.
Products Inc. (Avon) and Amway. Other Per capita disposable income and
major companies in this industry include consumer spending are projected to rise
nutrition supplement company Herbalife an annualized 2.2% and 2.9%,
Ltd. and dance-fitness company Zumba respectively, over the five years to 2019,
Fitness LLC. Broad changes in consumer bolstering demand growth for the
spending patterns, rather than product- discretionary products that industry
specific trends, have driven the industry operators retail.
because of its diverse nature. During the However, despite improved demand
current period as the national economy conditions, IBISWorld estimates that
strengthened and consumer confidence profit margins, measured as earnings
and per capita disposable income grew, before interest and taxes, for the industry
industry customers have felt increasingly will decrease slightly from 6.7% of
confident in spending. Positive revenue in 2014 to 6.5% in 2019 due to

Retail market stronger performance earlier during the profitability. Additionally, as external
improves continued period as online competition was lower. competition has become more of a threat
Increased demand and sales have to the industry, operators have begun to
enabled direct sellers to purchase goods focus more on retailing higher-end
in larger quantities, lowering per-unit goods, which have also bolstered per-unit
costs and bolstering industry revenue figures.
External competition Over the five years to 2019, rising

competition from external industries has Competitors lowered prices
intensifies
posed a threat to direct sellers’ revenue. as a result of consumer
Competitors such as department stores,
large-format retailers and e-commerce
price sensitivity to boost
sellers have eroded direct selling demand
companies’ market share by providing
convenience and competitive prices. Each Competitors also lowered prices as a result
competitor features an array of substitute of consumer price sensitivity in an attempt
products, brands and options in a single to boost demand, which has enticed even
location, enabling consumers to compare more shoppers away from direct sellers in
prices and product information before the United States. While the effects this
making a purchase. Additionally, these trend on revenue have been slightly
external competitors are generally able to mitigated by the price advantages industry
offer similar goods at lower prices than operators gain from not having physical
industry operators because their margins locations, many consumers have found the
are not hampered by the customer one-stop-shop aspects of competitors
service costs that characterize direct increasingly appealing, to the detriment
selling, such as product demonstrations. of industry operators.
Direct opportunities There are few start-up costs required to income during unemployment regained
enter the Direct Selling Companies employment, many chose to continue
industry because participants do not working as a direct seller to supplement
physical retail locations or large their income. According to a poll by the
inventories. Therefore, initial capital Direct Selling Association, an estimated
investment for direct selling operations is 85.0% of direct sellers indicated that
low compared with establishments in additional income was their primary
other retail sectors. To this end, many reason for entering the industry. Direct
MLM companies have established selling companies have not let this
low-priced start-up kits, making it easier opportunity pass them by; over the five
for individuals to enter the industry. For years to 2019, companies such as Avon
this reason, many Americans who have and Tupperware Brands Corporation
lost their jobs or experienced reduced (Tupperware) have increased their
income have turned to this industry to spending on recruitment advertising.
earn full-time or supplemental income. According to its annual report, Avon has
Even as the economy largely recovered invested more than $127.6 million
during the period and operators that through 2018 (latest data available) in its
entered the industry as a means of sales leadership program, while it more

Direct opportunities than tripled its investment in advertising after regaining full-time employment, as
continued since 2005. opposed to leaving the industry entirely.
The recruitment efforts of larger As revenue began to grow during the
industry operators have spurred growth period, more small operators chose to
in employment during the current period. enter the industry. Coupled with the
The number of industry employees, trend of part-time workers staying in the
which includes individually operating industry, this led to growth in the
sales forces, is expected to rise at an number of direct selling businesses.
annualized rate of 1.2% over the five Overall, the number of industry
years to 2019 to reach 839,350 workers. enterprises is expected to rise at an
This growth was partially due to the fact annualized rate of 1.6% during the
that many nonemployers chose to work current period to total 766,236
in the industry in a part-time capacity independent companies.
Industry After expanding over the five years to

2019, revenue for the Direct Selling
merchandisers and online retailers are
expected to continue to siphon market
Outlook Companies industry is forecast to stagnate share from the industry, capturing much
over the five years to 2024. Improved of the growth in retail sales. Nevertheless,
consumer spending has helped the the appeal and persistence of direct selling
industry gain ground in recent years and companies will likely mitigate some
this trend is anticipated to continue. competitive pressure and constrain more
However, heightened competitive robust declines. Overall, as a result of
pressure in an oversaturated retail market these trends, industry revenue is forecast
will likely curtail the industry’s growth to stagnate over the five years to 2024 at
prospects. Department stores, mass $43.9 billion.
Performance driven Since industry operators retail a wide

range of products, from cosmetics and Consumer spending
by macroeconomic
factors jewelry to gardening supplies and will increase in line with
kitchenware, the industry is not driven by
product-specific trends. Rather, the
improvements in per capita
industry is driven by broader changes in disposable income levels
economic conditions, including consumer
confidence and per capita disposable capita disposable income is expected to
income, which directly affects consumer increase at an annualized rate of 1.5%
spending. Over the five years to 2024, over the five years to 2024. Such growth
these conditions are expected to improve, in discretionary income will likely
benefiting industry demand. IBISWorld encourage households to spend more on
forecasts that consumer spending will industry products overall, but increasing
increase during the outlook period, in competitive pressures in the wider retail
line with expected improvements in per market are still expected to inhibit
capita disposable income levels. Per industry growth.

Threatened by the Competitive pressures from e-commerce and a wider range of products. Products
internet retailers are expected to increase as a sold through the channels of direct
result of their anticipated sales growth selling companies generally have high
over the five years to 2024. Revenue for retail markups to compensate for
the E-Commerce and Online Auctions thorough customer service.
industry (IBISWorld report 45411a) is The proliferation of internet access is
forecast to grow at an annualized rate of expected to continue growing, which will
12.8% over the five years to 2024, likely further boost online sales and
threatening the Direct Selling Companies encourage retailers to devote resources
industry. The percentage of services to developing online stores. The number
conducted online is also expected to of broadband and mobile internet
during the outlook period, rising an connections is anticipated to continue
expected annualized 23.2%. The internet rising during the outlook period; as sales
enables retailers to reach a larger shift to the internet, competition among
domestic and international audience with direct sellers will continue to be based
low distribution costs (e.g. shipping on the reputation and reliability of
rates). This factor makes online retailing products and operators. However, some
more attractive than traditional door-to- operators still may find better results
door or street selling, which limits the through traditional door-to-door selling
scope of customers that industry as they are better able to sell the
operators can successfully reach. From a products’ features, instead of trying to
consumer’s perspective, online retailers differentiate from competition on
provide more convenience, lower prices e-commerce platforms.
Wavering profitability As a percentage of sales, average industry

profit margins are expected to remain Profitability
for smaller and
relatively steady. Conversely, profitability nonemploying operators is
for smaller and nonemploying operators
is anticipated to decline as a result of anticipated to decline
harsh competition. Slowly declining
revenue and falling margins for smaller marginally at an annualized rate of 0.7%
and nonemploying operators, as well as to total 794,823 enterprises. Similarly,
increased competition from e-commerce the industry’s workforce is anticipated to
operators will likely discourage new grow at an even slower pace during the
industry entrants over the next five years. outlook period, increasing at an
Accordingly, the number of industry expected annualized rate of just 0.3% to
operators is expected to grow only 852,186 workers.

Life Cycle Stage The industry will grow slightly
slower than the US economy
There will be little change in technological systems
Increasing competition will slow industry growth

Industry Life Cycle The Direct Selling Companies industry is the direct selling nature of this industry,
expected to stagnate compared with the the application of such technological
broader macroeconomy over the 10 years systems is limited. Most industry
Thisindustry is to 2024. Industry value added, which operators generate sales within homes
in D
ecline measures an industry’s contribution to in small quantities; therefore, there has
the overall economy, is projected to fall been little need for technology such as
an annualized 0.2% during the 10-year cash registers and computerized
period to 2024. Comparatively, US GDP inventory tracking systems. For this
is expected to grow at an annualized rate same reason, IBISWorld anticipates
of 2.2% during the same period. little technological change over the next
Typically, an industry whose growth rate five years.
is slower than GDP growth is considered Increasing competition from
to be in a decline phase of its life cycle. department stores, large-format retailers
Additionally, direct selling companies and online retailers has threatened
also exhibit little technological change, a demand growth for industry products
contracting buyer group and low industry over the five years to 2019. By providing
growth. All of these factors are symptoms wider selections, as well as lower prices
of an industry that is in the declining for comparable products, external
phase of its life cycle. competitors have cut into industry sales.
Most industries within the general As a result, a rising number of consumers
retail sector have implemented have turned away from direct sellers to
computerized point-of-sale (POS) external retailers. Unfortunately for the
systems, which include cash registers Direct Selling Companies industry, the
and barcode scanners, to increase level of external competition is expected
operating efficiencies. However, due to to increase through 2024.

Products & Markets

Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

55 Management of Companies and Enterprises in the US
This industry often purchases products, such as cleaning supplies and computer software, from
direct selling companies.
81311 Religious Organizations in the US
This industry often purchases industry goods for fundraising events.
81341 Civic, Social & Youth Organizations in the US
This industry often purchases industry goods for fundraising events.
99 Consumers in the US
American households dominate sales from direct selling establishments, with women
accounting for a larger share of demand.
NN006 Wedding Services in the US
Industry merchandise is often purchased for events, such as weddings.
KEY SELLING INDUSTRIES

32541a Brand Name Pharmaceutical Manufacturing in the US
This industry supplies brand name botanical drugs and vitamins sold by industry operators.
32541b Generic Pharmaceutical Manufacturing in the US
This industry supplies generic botanical drugs and vitamins sold by industry operators.
32561 Soap & Cleaning Compound Manufacturing in the US
This industry supplies toiletry and personal grooming products sold by industry operators.
32562 Cosmetic & Beauty Products Manufacturing in the US
This industry supplies cosmetics and beauty products sold by industry operators.
42 Wholesale Trade in the US
This sector supplies a variety of merchandise sold by industry operators.
Products and Services Products and services segmentation (2019)

6.3%
Leisure and
educational products
8.6%
Clothing and accessories 32.3%
Wellness and personal care products
23.8%
Home and family care products
29.0%
Total $44.0bn Other products and services
Home and family care products percentage of industry revenue in 2019,

Home and family care products are representing 23.8% of total revenue. This
expected to account for the significant segment includes cleaning supplies and

Products & Markets
Products and Services solutions, cookware, cutlery and other Leisure and educational products
continued kitchenware sold by direct sellers. Sales Leisure and educational products, such
from this segment have declined as sporting equipment, videos and DVDs,
modestly as a share of industry revenue toys and books, are expected to account
over the five years to 2019 as a result of for 6.3% of industry revenue in 2019.
rising competition from mass Similar to clothes and accessories, this
merchandisers and online retailers. segment has also experienced a declining
Consumers, who have become share of revenue due to greater
increasingly price sensitive to this availability of less-expensive, comparable
segment’s products, have turned to mass products in other retail stores and online
merchandisers and e-commerce sites to outlets. Electronic readers and the
take advantage of their discounted prices, increasing popularity of online video
lowering demand for this segment and streaming have drastically reduced the
leading it to contract slightly as a share of popularity of books and videos,
total revenue. respectively, sold by industry operators,
leading this segment to contract as a share
Wellness and personal care products of revenue relative to other product lines.
Wellness and personal care products,
which include weight-loss products, Clothing and accessories
dietary supplements, cosmetics, creams, The clothing and accessories segment is
shampoos, conditioners and razors, are estimated to account for 8.6% of industry
expected to account for the largest share sales in 2019. Products in this segment
of industry revenue in 2019 at an include clothing for men, women and
estimated 32.3%. With rising concerns children, fine jewelry, fashion jewelry,
for health and appearance, this segment shoes and other accessories. Over the
has experienced growth over the past five past five years, this segment has
years. Consumers have increased contracted due to harsh competition in
spending on wellness products to the clothing retail industry. Online
maintain health or to proactively improve clothing outlets have risen quickly in
health during the period. Growth in this popularity over the past five years, to the
category has been further fostered by the detriment of this segment. Department
aging population, who are increasingly stores, mass merchandisers and online
using direct selling channels to purchase retailers are all currently offering a wider
wellness products for convenience. selection of segment products at various
Additionally, Herbalife, which has price points and are increasingly swaying
emerged as one of the industry’s top consumers away from direct sellers,
companies over the past five years, leading this segment to contract as a
almost exclusively sells products within share of revenue for the industry.
this segment, as so do other top industry
companies Avon and Mary Kay. Other products and services
However, there are concerns regarding The industry includes a large number of
the validity of some vitamins, minerals direct sellers that provide a wide range of
and supplements sold by this industry. products and services, so revenue
Many supplements traditionally sold in generated by this segment is significant.
this segment are not approved by the In 2019, an estimated 29.0% of industry
Federal Drug Administration, and some revenue is expected to be derived from
customers have been pushed away from operators that sell products such as wine,
this segment by concerns regarding the scrapbooking supplies, cigars and
efficacy of these products. cigarettes, pet products, as well as

Products & Markets
Products and Services various service providers. Overall, high low and rising disposable income,
continued levels of consumer spending have individual consumers and businesses
positively affected this segment over the have increased purchases of industry
past five years. With unemployment rates products in this segment.
Demand This industry incorporates a range of into account household finances,

Determinants operators that retail a diverse variety business conditions, unemployment,
of goods. Therefore, the trends that inflation, interest rates and income and
drive demand vary according to the government economic policy. When
differing product segments of the consumer perceptions of the economy
industry. However, as most industry are positive, consumers spend more
products are considered discretionary, freely on discretionary items, including
the level of disposable income industry products.
generally determines spending at External competition from department
direct selling companies. While stores, large-format retailers and
consumer spending has gained traction e-commerce websites unfavorably affects
during the current five-year period, industry demand. Comparable items
relatively sluggish growth in per capita offered at lower prices by external
disposable income has resulted in competitors shifts consumer spending
slowed growth in industry demand. away from industry operators. Over the
Consumer confidence also drives five years to 2019, external competition
demand for industry products. has heightened, siphoning away demand
Movements in consumer confidence take for industry services.
Major Markets Major market segmentation (2019)

2.0%
Construction and
special trade
contractors 2.6%
Retailers for resale
6.1%
Wholesalers for resale
5.9%
Other business customers
11.9%
Businesses for end use
51.5%
20.0% Household consumers -
person-to-person
Household consumers - parties and other
Total $44.0bn SOURCE: WWW.IBISWORLD.COM
Household and individual consumers Household buyers are the most likely to
Household and individual consumers purchase from the industry’s largest
account for the majority of industry product segment, personal care and
revenue at an estimated 71.5% in 2019. wellness items. Cosmetics have long been

Products & Markets
Major Markets one of the most prominent types of makes a connection with someone and
continued products sold by direct selling companies, then stops by with their wares at a later
as evidenced by the industry-leading time. This format accounts for an
positions of prominent industry estimated 51.5% of revenue in 2019 while
companies Mary Kay and Avon. Mary other formats, such as product parties,
Kay and Avon employ sales staff that account for an estimated 20.0%.
often sell products door-to-door, entering
a home to show off their products to a Business customers
buyer. Men and women, but most Business customers account for an
prominently women, will have a sales expected 28.5% of industry revenue in
representative show them samples of a 2019. Industry operators use the door-to-
cosmetic product in an attempt to door sales method for most business
convince them to buy their cosmetics. customers, which can be broken down
Product parties are also used for cosmetic into several categories. Businesses that
products, as industry operators will use products for their own operations
gather groups of potential customers to account for an estimated 11.9% of
gather and show off their products to a industry revenue in 2019. Operators
large group all at once. Door-to-door and primarily sell tools and other hardware,
product party sales methods are also furnishings and electronics to business
heavily used by vitamin, mineral and customers that intend to use these
dietary supplement sellers. The products for their business. For example,
prominence of cosmetics and health a direct seller can target a landscaping
supplements in this industry gives way to business to sell fertilizers and lawn tools,
household and individual customers among other products. Due to the wide
accounting for such a large proportion of range of products sold by this industry,
industry revenue. many direct sellers retail products that
The second-largest product segment, can directly benefit a business for their
home and family care products, is day-to-day operators. Retailers that
purchased almost exclusively by intend to resell products are expected to
household and individual consumers. account for the second-largest proportion
These products, which include soaps, of business customers at 8.7% of revenue,
detergents, paper towels and plastic and with individual retailers accounting for
paper tableware, are directly marketed 2.6% and wholesalers accounting for the
toward household buyers. Since these remaining 6.1%. Direct sellers can target
products are designed almost exclusively businesses that sell products similar to
for buyers in this segment, it would stand those that the direct seller retails. For
to reason that household and individual example, an industry operator that sells
consumers would account for a high clothing can bring their products to a
proportion of industry revenue. However, clothing retailer that intends to resell
this segment has contracted slightly over those clothes. Boutique shops are a
the past five years as household prime example of a buyer in the retail
consumers have increasingly turned to reseller market. Construction and
online retailers for industry products. special trade contractors account for an
The most popular form of sales to estimated 2.0% of industry revenue,
household customers is door-to-door or rounding out the business customer
person-to-person sales. This occurs when segment, having expanded slightly during
a salesperson either makes a stop to a the period as a result of rebounding
household on a route unsolicited or construction activity.

Products & Markets
International Trade As merchandise trade figures are classified of products that are sourced from foreign
in the relevant upstream manufacturing suppliers such as cosmetics and beauty
industries, the Direct Selling Companies products (IBISWorld report 32562),
industry has no trade by convention. cleaning supplies (32561) and male and
However, the industry retails a wide range female apparel (31522 and 31523).

Products & Markets
Business Locations 2019
West
AK
0.2 New
England
ME
Great Mid- 0.4
Lakes Atlantic 1 2
NY 3
WA MT ND 5.9
5 4
2.3 0.4 MN
Rocky
0.7 2.6
WI
OR Mountains SD
0.6
Plains 2.0 MI
3.0
PA
3.5
6
7
1.4 ID IA OH 9 8
1.6 WY 2.5
0.4
NE
1.2
IL IN WV VA
4.3 2.1 2.4
West NV
1.0 0.4
KY
UT MO
1.1 NC
1.1
4.9 CO KS 1.8 2.7
2.7 1.1 TN
SC
Southeast
1.3
CA 1.3
10.1
OK AR GA
1.2 0.7 AL 2.8
AZ MS 1.1
2.4 NM
0.5 Southwest 0.6
TX LA
1.2 FL
6.0 8.7
West Establishments (%)
HI Less than 3%
0.4 Additional States (as marked on map) 3% to less than 10%
1 VT 2 NH 3 MA 4 RI 10% to less than 20%
0.2 0.4 2.0 0.3 20% or more
5 CT 6 NJ 7 DE 8 MD 9 DC
0.7 2.4 0.2 1.4 0.1

Products & Markets
Business Locations Similar to most retail industries in the

Distribution of establishments vs. population
United States, the geographic spread of
direct selling establishments closely
30
reflects the distribution of the US
population. In general, the greater the
number of residents, the stronger 20
demand will be for industry products. In
2019, IBISWorld expects that industry
%
establishments will be concentrated in 10
the Southeast, Western and Mid-Atlantic
regions, which capture three of the
highest population segments in the 0
United States.
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
However, while population
concentration is important, a large
number of other factors also affect the
geographic spread of establishments. Establishments
Household income, demographics, Population
housing density and local shopping SOURCE: WWW.IBISWORLD.COM
trends are a few factors that may drive

consumer spending on industry products. Meanwhile, the Western region is
These factors may also explain why some estimated to account for 15.4% of total
regions have a greater share of establishments, which is the second-
establishments than population. highest figure for the industry.
Based on US Census Bureau data and California, with 12.1% of the US
IBISWorld estimates, the Southeast population, accounts for the largest
region is expected to account for the share of industry establishments in the
highest share of industry establishments nation with 10.0%. The Mid-Atlantic
in 2019 with 24.2% of the total. In turn, region is expected to share the third-
population projections indicate that this highest establishment concentration of
region will also account for the largest 13.5%. New York is home to the largest
share of the nation’s population at number of establishments and
25.7%. Florida accounts for the most population in this region with 5.9% and
significant share of both population 6.1%, respectively. The Mid-Atlantic
(6.4%) and industry presence (8.7%) region is home to several large
within the Southeast; the state has metropolitan areas, including New York
several large cities, which are hubs for City and Washington, DC, facilitating
consumer activity. consumer activity.

Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Direct Selling Companies industry is operators is characteristic of an industry
Concentration considered to have a low level of market with low concentration.
share concentration, with the four largest Over the five years to 2024, the size of
players estimated to collectively account the industry is expected to remain
Level
for just under 7.0% of industry revenue stagnant as low-performing enterprises
Concentration in in 2019. The industry is highly stop competing for customers and exit
this industry is L ow fragmented, characterized by a large the industry. A decline will be mitigated
number of individually owned because the industry requires minimal
businesses that are small in size. These startup costs and small operators will also
operators generally work within a small enter the industry. Concentration growth
locality and serve a limited clientele. is anticipated to remain minimal during
The vast majority of operators are the outlook period and smaller operators
individual contractors that work part will continue dominating the industry.
time to sell industry products. Overall, the fragmented nature of the
Consequently, over 95.0% of industry industry and prominence of nonemployers
operators are considered nonemployers. will enable low market share
This extreme prominence of small concentration to persist moving forward.
Key Success Factors Receiving the benefit of word- Ability to allocate product/service
of-mouth recommendations to area of greatest need
Word-of-mouth recommendations Companies must be able to allocate
IBISWorld identifies boost credibility, thus attracting products or services properly, ensuring
250 Key Success additional consumers. they meet the needs of consumers.
Factors for a
business. The most Access to niche markets Close monitoring of competition
Having a unique product or access to a It is vital for industry operators to
important for this
niche market gives operators a closely monitor products and pricing
industry are: competitive advantage in the marketplace. offered by competitors, including
traditional retailers.
Ensuring pricing policy is appropriate
Accurate pricing of merchandise helps Attractive product presentation
companies compete with other Products must have an appealing and
merchants, both inside and outside attractive presentation to motivate
this industry. impulse buying.
Cost Structure This cost structure represents the Wages

Benchmarks average breakdown of costs as a share of Labor expenses account for the second-
a direct selling company’s revenue. largest cost for the industry at an
Nonemployers make up a majority of the estimated 16.1% of revenue in 2019. The
market share, however most operators industry’s relatively high share of wages
in this industry incur similar costs, most is attributed to the highly labor-intensive
notably being purchases since moving nature of direct sellers. Most businesses
inventory is vital for profitability. in the industry are small in size;

Cost Structure therefore, they rely heavily on employees has moved toward during the period.
Benchmarks for daily operations, such as door-to-door Overall, however, wages have contracted
visits, party hosting (e.g. Tupperware and slightly as a share of total industry
continued
Pampered Chef parties), product revenue, down from 18.0% in 2014.
demonstrations and other customer
services. Many smaller operators also do Purchases
not have the resources necessary to Purchase costs are estimated to comprise
implement laborsaving technologies. the largest expense for the industry at an
Since such a large proportion of industry expected 47.3% of revenue in 2019. This
operators are small nonemployers, a is typical for most operators in the retail
heavy reliance on labor characterizes the industry because sellers must obtain
industry. Over the past five years, wage some inventory to meet consumer
expenses have fluctuated within a demand. Inventory items are typically
relatively narrow band. Industry purchased from a large number of
operators dealing with a highly wholesalers and manufacturers, but
competitive retail environment have individual operators working for
focused on hiring more highly skilled multilevel marketing (MLM)
workers, increasing wage costs in the corporations, such as Amway and Avon,
beginning of the period. Furthermore, must purchase inventory from their
companies have been willing to pay respective companies. However, many
employees more for salespeople with operators working within the MLM
more skill and experience that can sell structure carry little excess inventory on
the higher-end goods that the industry them at a time, keeping purchase costs
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2019) (2019)
100 3.2 6.5 n Profit
9.3 n Wages
16.1 n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
n Other
Percentage of revenue
60
69.1 47.3
40
0.9 2.2
4.5
20
0.7 1.4
4.1 22.5
12.2
0

Cost Structure from being higher than they already are. Depreciation
Benchmarks Purchase costs have grown slightly over Depreciation is expected to account for
the five years to 2019 as companies have 0.9% of industry revenue in 2019.
continued
focused more on selling higher-margin Depreciation remains low as most
goods, pushing up the cost of purchasing operations only require an inventory of
such products. goods to be sold. However, some
companies such as Herbalife focus on
Profit selling perishable nutritional products
Profit margins, measured as earnings that have varying shelf life, forcing their
before interest and taxes, vary among sellers to move inventory quickly.
industry operators as direct sellers
retail a wide range of products that Marketing
have different purchase costs and Marketing and advertising represent a
selling prices. Overall, industry relatively significant portion of revenue at
operators are able to experience higher an estimated 2.2% in 2019. Operators rely
margins compared with others in the heavily on promotion in the absence of
retail sector because direct sellers physical stores. Marketing for direct sellers
generally incur lower rental and is typically in the forms of free product
utilities costs. With increased samples and demonstrations, TV and radio
consumer spending over the past five advertisements, flyers, brochures and other
years, most industry operators have specifically designed sale aids.
experienced rising sales, enabling
companies to minimize fixed costs Rent
such as rent and utilities and Since direct sellers do not operate in a fixed
bolstering profit margins. Operators location, they incur minimal rent expenses
have also trended toward selling estimated at 2.9% of revenue in 2019.
higher-end, higher-margin goods
during the current five-year period. The Utilities
confluence of these trends has enabled Utilities vary across direct sellers but
margins to reach an estimated 6.5% in mainly comprise of transportation costs
2019. Nonetheless, increased of traveling and shipping inventory,
competition from mass merchandisers estimated at 1.6% in 2019.
and online retailers has constrained
profit growth during the current period. Other
By offering comparable industry Operators also incur a variety of other costs,
products at discounted prices, these such as marketing and advertising expenses,
retailers have diverted consumers that contract fees paid to MLM companies and
have traditionally purchased from transportation costs. All together, these
direct sellers, limiting further growth in costs are estimated to account for 22.5% of
industry profitability. industry revenue in 2019.
Basis of Competition Internal competition specialized lines of products and do not

Due to the highly disparate nature of compete for the same customers.
industry products, there is little Therefore, these operators do not
Level & Trend
competition among industry operators compete directly with one another in
ompetition
C in this that retail different product groups. For the industry.
industry is H
ighand instance, direct sellers for kitchenware However, there is a high level of
the trend is S teady and vitamin supplements each retail internal competition between operators

Basis of Competition that retail the same products. Since External competition
continued products offered by the industry are The Direct Selling Companies industry
discretionary, consumers will shop in experiences significant competition
search of the lowest price, so those from operators in other industries, such
companies selling similar products will as mass merchandisers, department
often engage in price competition in an stores and online retailers. These
attempt to bolster demand. Therefore, competitors are able to maximize cost
industry operators are subject to strong savings using economies of scale by
brand recognition that helps maximize purchasing large volumes of inventory
sales. In addition, customer service is an at once, enabling them to offer heavily
important basis for competition among discounted products to consumers.
industry operators because industry Online retailers can also leverage their
products often require specific lack of physical storefronts to lower
knowledge. Therefore, consumers are product prices beyond that of some
more likely to purchase from sales industry operators. Furthermore, they
personnel who are knowledgeable. provide a greater selection of goods in
Personality also plays a role in internal one location, enabling customers to
competition. Since some operators rely easily compare prices and product
on using in-home demonstrations and information. The continued success of
planning product parties to sell their these competitors will lead to a loss of
wares, sales staff must be personable and revenue from the Direct Selling
engaging to attract and retain a steady Companies industry over the five years
crowd for these events. to 2024.
Barriers to Entry The Direct Selling Companies industry

exhibits relatively minimal barriers to Barriers to Entry checklist
entry, with low establishment costs and Competition High
Level & Trend
no licensing requirements that prevent Concentration Low
arriers to Entry
B companies from entering the industry. Life Cycle Stage Decline
in this industry are However, industry competition and Capital Intensity Low
Lowand S teady market awareness can pose a threat to Technology Change Low
potential new entrants. Regulation and Policy Medium
Most industry operators are Industry Assistance None
individually owned small establishments
that cater to the local community. SOURCE: WWW.IBISWORLD.COM
Therefore, start-up costs are low because

there is little need to invest heavily in High levels of competition, while not
technological equipment, such as regarded as a formal barrier to entry,
computerized inventory controls and may prevent new businesses from
point-of-sale systems. In fact, many entering the industry. With external
multilevel marketing corporations, such competitors such as department stores,
as Avon, provide start-up kits for mass merchandisers and online retailers
businesses for as low as $21.50. As a increasingly drawing sales away from
result, the industry has a high number of industry operators, new entrants may
enterprises, estimated at 766,236 find it especially difficult to remain
companies in 2019. profitable in the industry.

Industry Domestic operators in foreign markets countries, including in Australia, Asia

Globalization The majority of operators in this industry and Europe. Additionally, Amway
are domestically based and earn their operates in more than 100 countries.
revenue in the United States. The industry’s level of globalization is
Level & Trend Nonetheless, all major players in this expected to further increase over the five
lobalization
G in industry have established numerous years to 2024 as the domestic direct selling
this industry is international operations that account for market becomes progressively saturated.
Lowand the trend a significant, if not the majority, share of
their annual sales. For example, Foreign operators in domestic markets
is I ncreasing
Pampered Chef has independent Analysis indicates that there is no
representatives operating in the United significant foreign player operating in the
Kingdom, Germany, Canada and domestic market. This may be due to the
Mexico. Meanwhile, Avon operates in nature of the industry, which is largely
over 100 countries outside of the fragmented and incorporates a range of
United States, including in Latin merchandise not commonly found across
America, Europe and the Asia-Pacific other industries. Unlike entering a
region, having sold all US operations to traditional retail industry, foreign
a private equity firm in 2015. operators may be discouraged from
Tupperware operates in Europe, the entering this industry due to the unstable
Asia Pacific and Latin America, while market demand and unknown acceptance
Mary Kay operates in more than 30 by consumers.

Major Companies
There are no Major Players in this industry | Other Companies
Other Company Global nutrition company Herbalife 2018 (latest data available) generated
Performance Nutrition Ltd. (Herbalife) was founded in from products sold within the weight
1980 and is currently headquartered in management segment. North America
Los Angeles. The company uses a direct comprises the third-largest market for
Herbalife Nutrition selling model to market products that fall the company, following the Asia-Pacific
Ltd. into five categories: weight management; and Europe, Middle East and Africa
Market Share: 2.4% targeted nutrition; energy, sports and (EMEA) regions. The company’s North
fitness; other nutrition; and literature, American market reported net sales of
promotional and other. Herbalife cites $855.8 million in 2018, a 10.6% increase
the direct sales model as the ideal way to that was primarily the result of an
sell products because of the ongoing increase in sales volume. In 2019,
personal contact, coaching and education Herbalife is expected to generate an
that can take place between sellers and estimated $1.0 billion in Direct Selling
their customers. The company sells more Companies industry-relevant revenue,
than 150 product lines in 91 countries, giving the company a 2.4% industry
with 63.5% of Herbalife’s revenue in market share.
Other Company A global manufacturer and marketer of response to years of underperformance,

Performance beauty and related products since 1886, Avon sold its North American operations
Avon Products Inc. (Avon) primarily to Cerberus Capital Management in 2015
operates as a direct selling channel. The for $170.0 million, transferring its
Avon Products Inc. company sells cosmetics, fragrances, operations to the company and making
Market Share: 2.1% jewelry, watches, apparel, home its North American operations private.
products, gifts and health and wellness This enabled Avon to expand its presence
merchandise through its representatives in its highest-grossing market, Latin
in more than 100 countries. Sales America, by splitting its operations in
mediums include catalogs, mall kiosks that region into two separate North and
and the internet. Both the company’s South Latin America divisions. More
industry-relevant revenue and total recently, in May 2019, Natura
revenue have fallen over the five years to Cosmeticos, a Brazil-based personal care
2019, as consumers continue to shift holding company announced that it
toward online retailers for their beauty would acquire Avon products in an
products. As American consumers have all-stock offering. Avon’s US industry-
moved away from buying Avon products specific revenue is expected to total
through direct sales staff, the company $921.9 million in 2019, representing a
has shifted focus to emerging markets. In 2.1% industry market share.
Other Company Amway uses a multilevel marketing personal care products, jewelry,
Performance model to sell a variety of health, beauty electronics, Nutrilite dietary
and home care markets. Founded in 1959 supplements, water purifiers, air
and based in Ada, MI, the company purifiers, insurance and cosmetics. The
Amway operates under its holding company company conducts its business through
Market Share: 1.5% Alticor Inc. The company’s sales several affiliated companies in over 100
representatives sell a variety of product countries around the world. Amway is
lines, including home care products, among one of the largest privately owned

Major Companies
Other Company companies in the United States, generating financial information. In 2019, IBISWorld
Performance $8.8 billion in global revenue in 2018 expects Amway to generate $678.0 million
(latest data available). As a private in US industry-specific revenue,
continued
company, Amway does not disclose representing a 1.5% industry market share.
Other Company Founded by Mary Kay Ash in 1963, Mary facial, body, nail, sun care, perfumes,
Performance Kay Inc. (Mary Kay) began its operations cosmetics and vitamins. The company
as a small supplier of skin care products remains a family-run operation and it
that sold its goods via shows and has does not publicly release information on
Mary Kay Inc. since grown to comprise 3.5 million its financial performance. Mary Kay has
Market Share: 0.9% independent sales force members, continued to invest resources into
one-fifth of which work domestically. growing its US sales staff, unlike several of
Today, Mary Kay is headquartered in its competitors that have been focusing on
Addison, TX, and is considered one of the emerging markets. In 2019, Mary Kay’s
largest direct selling organizations for US industry-specific sales are anticipated
women. It offers hundreds of products to reach $377.5 million, representing a
that cover a range of categories, including 0.9% industry market share.

Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Direct Selling Companies industry

exhibits a low level of capital intensity. Capital Intensity
Capital units per labor unit
IBISWorld estimates that for every dollar
Level
spent on wages, industry operators will 0.5
The levelof capital allocate $0.05 toward capital investment
intensity is L ow in 2018. The industry’s low level of 0.4
capital intensity is partly due to the 0.3

industry’s heavy reliance on human labor
rather than computerized systems. 0.2
Generally, capital expenditure in retail 0.1

industries includes fixtures and fittings,
cash registers, point-of-sale (POS) 0.0
Economy Retail Trade Direct Selling
systems, storage units and other Companies
equipment. The implementation of such Dotted line shows a high level of capital intensity
systems simplifies labor tasks and SOURCE: WWW.IBISWORLD.COM
minimizes the level of human error in

processing purchases, which result in industry occur on a small cash basis.
better stock control and cost efficiencies. Therefore, there is little need for most
However, most transactions in the industry operators to invest in such

Capital Intensity technology. Furthermore, most industry other customer service activities. Over
continued operators do not have physical the five years to 2018, overall capital
storefronts. Consequently, little is spent intensity has fallen marginally. This
on store fittings and POS equipment. slight change can be attributed to the
Additionally, storage units are often not industry having experienced a steady
necessary for the vast majority of increase in nonemployers during the
industry operators, which sell small five-year period. While employing
quantities of materials and do not carry operators have grown and contracted in
large inventories. the years since 2013, nonemployers have
To compensate for the lack of grown steadily. Nonemployers are much
technological implementation, direct less likely to have the resources
sellers rely heavily on human labor for necessary to make capital investments
daily operations. Employee duties relative to larger, employing operators.
include door-to-door visits, party hosting As the ratio of nonemployers to
(e.g. Tupperware and Pampered Chef employers has grown, capital intensity
parties), product demonstrations and has slightly declined.
Technology and There has been a relatively low level of member that can be customized and
Systems technological development pertaining to through which buyers can locate a sales
the Direct Selling Companies industry member on the go and request an order.
Level over the past five years. Although the Herbalife has a compilation of recruiting
overall retail sector has benefited from tips and advice for planning product
The level
of technological advances like computer parties, but these are only available via
technology scanning cash registers and electronic downloadable Portable Document
change is L ow data interchange, the small- Format (PDF) documents.
establishment nature of this particular IBISWorld anticipates that this
industry has minimized the need for such industry will continue to experience little
technology. However, some larger technological change over the five years
operators have introduced online to 2024, as the vast majority of operators
member tools to assist their sales force. are small nonemployers that do not have
For instance, Avon has implemented an the resources to implement the
electronic ordering system to assist its technology noted above. Although larger
sales force in efficiently ordering operators are expected to increasingly
inventory. In addition, its sales force is use the internet and integrate more
able to use the internet and mobile mobile sales management options, they
devices to manage their own businesses. will continue to fundamentally focus on
Mary Kay offers websites for each sales face-to-face selling to generate revenue.
Revenue Volatility Demand for industry merchandise is discretionary purchases; the available
influenced by fluctuations in many leisure time of consumers, as it affects the
different factors. These factors include viability of demonstration parties and the
Level
the overall level of real household amount of time potential customers have
The level of disposable income; consumer confidence, to attend these parties; and the
volatility is L ow as industry products are generally percentage of services conducted online,

Revenue Volatility as online retailers are the industry’s top damper on industry growth, as
continued competitors. Over the five years to 2019, consumers have purchased more
the combination of these factors has kept products online that were previously sold
revenue volatility at a relatively low level. by industry operators. While positive
Per capita disposable income has grown trends have boosted industry revenue
steadily during the current period, rising each year consecutively during the
at an annualized rate of 2.2%, and current period, countervailing trends
consumer confidence has also expanded. have leveled this growth, preventing wild
However, consistent growth in the swings in revenue year-over-year. The
percentage of services conducted online push and pull of these factors has led to
and external competition have put a low volatility over the past five years.
Regulation and Policy Operators in the Direct Selling of the Federal Trade Commission (FTC),
Companies industry are subject to a which regulates against pyramid
moderate degree of regulation by the schemes. Many multilevel marketers
Level & Trend federal government, although individual (MLMs) have been subject to scrutiny by
he level of
T states have enacted their own antitrust the FTC as a result of the similarities
Regulation is laws to ensure that the general public is between legal MLMs and illegal pyramid
Mediumand the provided with the best prices, quality and schemes. Many illegal pyramid schemes
choice. Industry operators must also are disguised as legitimate MLMs, and
trend is S
teady satisfy occupational and workplace safety the FTC can place an injunction on an
requirements for staff; companies are industry operator that it perceives as a
subject to federal wage laws such as the pyramid scheme.
Fair Labor Standards Act, which This happened in August of 2015
establishes a minimum wage, and the when, at the request of the FTC, a federal
Americans with Disabilities Act of 1990, court placed an injunction on direct seller
which protects those with disabilities Vemma, which sold energy drinks and
from discrimination. However, the most nutritional supplements. The commission
important government oversight that the claimed that Vemma was taking
industry is subject to comes at the behest advantage of its sellers by promising high

Regulation and Policy incomes that did not match its average The industry also imposes self-
continued seller’s earnings, charging a high markup regulation through its trade associations,
for its initial product investment, such as the Direct Selling Association and
mandating that sellers purchase a high the World Federation of Direct Selling
volume of products each month to be Associations. These organizations have
eligible for bonuses and pushing earnings established codes of ethics that set forth the
through recruitment instead of sales, basic fair and ethical principles and
which ultimately leads to defrauding its practices to which member companies
recruits. Vemma has since ceased must adhere. Such codes of ethics speak to
operations since this injunction. A similar both the consumer and the seller to prevent
case occurred in 2016 against Herbalife, any statements or promises that may
in which the FTC ordered the company to mislead consumers or prospective sales
restructure its business and pay a $200 forces. Pyramid schemes, a fraudulent form
million dollar fine. The FTC ultimately of business that promises participants
has the ability to investigate industry payment for enrolling other people into the
companies and vet the legality of MLMs scheme rather than for sale or products or
by placing them in court. services, are illegal under these codes.
Industry Assistance The Direct Selling Companies industry services that are sold directly to
does not receive any industry-specific consumers. The association assists
government assistance in the form of members by providing research and
Level & Trend subsidies or otherwise. While tariffs are education, hosting international meetings
he level of
T applicable to goods supplied by this and increasing consumer awareness of
Industry Assistance industry, they do not exist at the retail the industry. In addition, the DSA
is N
oneand the level. Retail operators purchase goods requires members to pledge and abide by
from manufacturers or wholesalers after its code of ethics, a self-regulated system
trend is S
teady
the tariff has already been applied. to prevent pyramid schemes and other
The industry, however, does receive unethical behavior.
some indirect assistance from various On a global scale, the World
industry associations. The Direct Selling Federation of Direct Selling
Association (DSA) is the largest Associations also represents the
association representing the industry. industry as well as provides its own
Established in 1910, the DSA consists of code of ethics. This nongovernmental
over 200 member companies that organization consists of members in 60
manufacture and distribute goods and different countries worldwide.

Key Statistics
Industry Data Industry Percentage of services
Revenue Value Added Establish- Wages Domestic conducted online
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand (%)
2010 40,509.2 9,786.7 684,533 682,901 775,934 -- -- 7,558.7 N/A 6.4
2011 41,202.5 10,603.9 686,042 684,416 775,690 -- -- 7,431.3 N/A 7.0
2012 41,713.1 10,228.1 698,235 696,607 786,357 -- -- 7,266.5 N/A 7.9
2013 41,056.0 10,014.1 703,321 701,842 783,846 -- -- 7,304.4 N/A 9.6
2014 41,394.1 10,574.2 708,860 707,448 789,651 -- -- 7,469.7 N/A 11.0
2015 41,882.3 10,642.6 716,981 715,646 795,625 -- -- 7,375.7 N/A 12.7
2016 42,768.6 10,080.5 742,268 740,871 816,297 -- -- 6,872.9 N/A 14.3
2017 43,107.4 10,158.4 749,122 747,746 822,471 -- -- 6,925.4 N/A 16.0
2018 43,517.6 10,199.8 757,821 756,503 830,456 -- -- 6,992.4 N/A 17.6
2019 43,966.6 10,304.5 767,480 766,236 839,350 -- -- 7,066.6 N/A 18.5
2020 44,213.4 10,366.0 775,484 774,442 845,504 -- -- 7,116.0 N/A 19.4
2021 43,904.6 10,318.4 779,873 777,043 844,762 -- -- 7,101.1 N/A 20.4
2022 43,721.9 10,296.8 785,019 782,670 845,407 -- -- 7,099.5 N/A 21.3
2023 43,711.3 10,304.8 791,103 789,101 848,073 -- -- 7,117.1 N/A 22.2
2024 43,882.1 10,353.3 796,681 794,823 852,186 -- -- 7,150.3 N/A 23.2
Sector Rank 21/63 16/63 1/63 1/63 5/63 N/A N/A 17/63 N/A N/A
Economy Rank 228/694 242/694 10/694 9/694 44/694 N/A N/A 225/694 N/A N/A
Annual Change Industry Establish- Domestic Percentage of services

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand conducted online
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2011 1.7 8.4 0.2 0.2 0.0 N/A N/A -1.7 N/A 9.8
2012 1.2 -3.5 1.8 1.8 1.4 N/A N/A -2.2 N/A 11.9
2013 -1.6 -2.1 0.7 0.8 -0.3 N/A N/A 0.5 N/A 21.7
2014 0.8 5.6 0.8 0.8 0.7 N/A N/A 2.3 N/A 14.1
2015 1.2 0.6 1.1 1.2 0.8 N/A N/A -1.3 N/A 15.7
2016 2.1 -5.3 3.5 3.5 2.6 N/A N/A -6.8 N/A 13.0
2017 0.8 0.8 0.9 0.9 0.8 N/A N/A 0.8 N/A 11.6
2018 1.0 0.4 1.2 1.2 1.0 N/A N/A 1.0 N/A 9.9
2019 1.0 1.0 1.3 1.3 1.1 N/A N/A 1.1 N/A 5.3
2020 0.6 0.6 1.0 1.1 0.7 N/A N/A 0.7 N/A 5.1
2021 -0.7 -0.5 0.6 0.3 -0.1 N/A N/A -0.2 N/A 4.8
2022 -0.4 -0.2 0.7 0.7 0.1 N/A N/A 0.0 N/A 4.6
2023 0.0 0.1 0.8 0.8 0.3 N/A N/A 0.2 N/A 4.4
2024 0.4 0.5 0.7 0.7 0.5 N/A N/A 0.5 N/A 4.2
Sector Rank 33/63 33/63 19/63 18/63 31/63 N/A N/A 31/63 N/A N/A
Economy Rank 445/694 470/694 304/694 284/694 427/694 N/A N/A 441/694 N/A N/A
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2010 24.16 N/A N/A 52.21 18.66 1.13 9,741.42 0.06
2011 25.74 N/A N/A 53.12 18.04 1.13 9,580.24 0.07
2012 24.52 N/A N/A 53.05 17.42 1.13 9,240.71 0.06
2013 24.39 N/A N/A 52.38 17.79 1.11 9,318.67 0.06
2014 25.55 N/A N/A 52.42 18.05 1.11 9,459.50 0.06
2015 25.41 N/A N/A 52.64 17.61 1.11 9,270.32 0.06
2016 23.57 N/A N/A 52.39 16.07 1.10 8,419.61 0.06
2017 23.57 N/A N/A 52.41 16.07 1.10 8,420.24 0.06
2018 23.44 N/A N/A 52.40 16.07 1.10 8,419.95 0.05
2019 23.44 N/A N/A 52.38 16.07 1.09 8,419.13 0.05
2020 23.45 N/A N/A 52.29 16.09 1.09 8,416.28 0.05
2021 23.50 N/A N/A 51.97 16.17 1.08 8,406.04 0.05
2022 23.55 N/A N/A 51.72 16.24 1.08 8,397.73 0.05
2023 23.57 N/A N/A 51.54 16.28 1.07 8,392.08 0.05
2024 23.59 N/A N/A 51.49 16.29 1.07 8,390.54 0.05
Sector Rank 9/63 N/A N/A 62/63 12/63 63/63 62/63 16/63
Economy Rank 444/694 N/A N/A 662/694 381/694 681/694 684/694 242/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM

Industry Financial Ratios

Apr 2017 - Mar 2018 by company revenue
Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large
Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.5 1.8 1.7 1.7 1.7 1.7 1.4
Quick Ratio 0.9 1.0 0.9 0.9 0.9 0.7 0.7
Sales / Receivables (Trade Receivables
Turnover) 25.4 21.0 19.8 20.0 19.3 20.9 26.3
Days’ Receivables 14.4 17.4 18.4 18.3 18.9 17.5 13.9
Cost of Sales / Inventory (Inventory Turnover) 8.0 8.6 6.8 7.1 7.6 7.1 4.9
Days’ Inventory 45.6 42.4 53.7 51.4 48.0 51.4 74.5
Cost of Sales / Payables (Payables Turnover) 14.4 14.9 13.9 17.0 24.2 12.9 14.5
Days’ Payables 25.3 24.5 26.3 21.5 15.1 28.3 25.2
Sales / Working Capital 14.4 12.5 11.9 12.7 11.2 13.5 13.5
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 10.4 10.2 10.1 7.2 5.8 9.4 13.0
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 2.4 3.1 4.5 3.2 n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 0.3 0.2 0.3 0.3 0.3 0.3 0.5
Debt / Net Worth 2.2 1.7 2.0 2.1 2.2 2.1 1.8
Tangible Net Worth 23.7 28.9 28.8 25.3 23.6 28.8 25.3
Operating Ratios
Profit before Taxes / Net Worth, % 45.4 43.3 52.8 37.4 40.3 33.5 33.5
Profit before Taxes / Total Assets, % 14.8 13.3 15.6 11.1 11.4 10.5 13.4
Sales / Net Fixed Assets 54.0 56.5 62.3 44.6 57.3 39.5 31.9
Sales / Total Assets (Asset Turnover) 3.4 3.1 3.0 3.2 3.1 3.4 2.8
Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 38.3 41.5 39.7 38.2 47.7 29.8 45.8
Cash after Operations 5.0 5.3 4.7 4.5 4.8 3.7 8.1
Net Cash after Operations 5.1 5.1 4.9 5.0 6.6 3.3 7.1
Cash after Debt Amortization 1.3 1.4 0.9 1.3 1.3 0.1 2.3
Debt Service P&I Coverage 4.3 3.3 4.0 3.1 2.5 3.0 4.5
Interest Coverage (Operating Cash) 9.6 7.8 7.4 6.4 5.4 6.4 14.3
Assets, %
Cash & Equivalents 20.1 19.6 19.9 16.9 18.2 15.9 13.3
Trade Receivables (net) 20.8 21.2 20.2 20.4 20.3 21.1 19.5
Inventory 27.7 28.1 28.3 30.4 29.6 32.3 29.7
All Other Current Assets 2.9 3.5 3.7 3.6 3.3 3.3 5.6
Total Current Assets 71.4 72.4 72.2 71.3 71.4 72.5 68.1
Fixed Assets (net) 14.4 13.0 14.1 16.6 16.4 17.5 15.4
Intangibles (net) 5.3 6.5 6.0 5.0 4.6 3.7 9.7
All Other Non-Current Assets 8.9 8.1 7.7 7.1 7.6 6.2 6.8
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 4,244.7 4,664.6 4,021.0 3,058.1 206.7 655.1 2,196.3
Liabilities, %
Notes Payable-Short Term 16.2 13.2 12.2 11.8 14.5 9.9 4.2
Current Maturities L/T/D 2.8 2.4 2.4 2.5 2.3 2.5 2.9
Trade Payables 17.8 15.9 17.4 14.8 11.9 20.0 16.1
Income Taxes Payable 0.4 0.1 0.1 0.3 0.4 0.1 0.4
All Other Current Liabilities 13.5 14.3 14.2 16.1 15.2 14.6 23.2
Total Current Liabilities 50.6 45.8 46.3 45.4 44.3 47.2 46.7
Long Term Debt 12.1 12.2 14.3 17.0 17.9 15.7 15.7
Deferred Taxes 0.1 0.1 0.1 0.1 0.1 0.1 n/a
All Other Non-Current Liabilities 8.1 6.6 4.6 7.2 9.5 4.6 2.6
Net Worth 29.0 35.4 34.8 30.3 28.2 32.5 35.0
Total Liabilities & Net Worth ($m) 4,244.7 4,664.6 4,021.0 3,058.1 206.7 655.1 2,196.3
Maximum Number of Statements Used 320 314 289 265 154 77 34
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.

Jargon & Glossary
Industry Jargon BIG-BOX RETAILERA retail store that is differentiated MULTILEVEL MARKETINGA marketing strategy in
by its sheer size and large range of products, including which the sales force is compensated not only for sales
electronics, household goods and other consumer they personally generate, but also for the sales of others
products. they recruit.
E-TAILERA retailer that primarily sells goods and
services via the internet. Many of these companies do
not have brick-and-mortar locations.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service
of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and
labor. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA)The market value of
the base year. This removes the impact of changes in goods and services produced by the industry minus the
the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is
“real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or
adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation.
US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADEThe level of international
deflator. trade is determined by ratios of exports to revenue and
DOMESTIC DEMANDSpending on industry goods and imports to domestic demand. For exports/revenue: low is
services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more
country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than
industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than
EMPLOYMENTThe number of permanent, part-time, 35%.
temporary and seasonal employees, working proprietors, LIFE CYCLEAll industries go through periods of growth,
partners, managers and executives within the industry. maturity and decline. IBISWorld determines an
ENTERPRISEA division that is separately managed and industry’s life cycle by considering its growth rate
keeps management accounts. Each enterprise consists (measured by IVA) compared with GDP; the growth rate
of one or more establishments that are under common of the number of establishments; the amount of change
ownership or control. the industry’s products are undergoing; the rate of
technological change; and the level of customer
ESTABLISHMENTThe smallest type of accounting unit
acceptance of industry products and services.
within an enterprise, an establishment is a single
physical location where business is conducted or where NONEMPLOYING ESTABLISHMENTBusinesses with
services or industrial operations are performed. Multiple no paid employment or payroll, also known as
establishments under common control make up an nonemployers. These are mostly set up by self-employed
enterprise. individuals.
EXPORTSTotal value of industry goods and services sold PROFITIBISWorld uses earnings before interest and tax
by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
IMPORTSTotal value of industry goods and services
interest and tax.
brought in from foreign countries to be sold in the
United States.

Jargon & Glossary
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.

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IBISWorld Industry Report Direct Selling Companies in The US 2019

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WWW.IBISWORLD.

COM Direct Selling Companies in the USJune 2019 1

Out of stock: The threat of e-commerce will

IBISWorld Industry Report 45439

2 About this Industry 17 International Trade 28 Revenue Volatility

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 45421 Vending Machine Operators in the US

45431 Fuel Dealers in the US

72233 Street Vendors in the US

45411a E-Commerce & Online Auctions in the US

Provided to: Edeska (2129455405) | 22 July 2019

About this Industry

Additional Resources For additional information on this industry

IBISWorld writes over 1000 US

Provided to: Edeska (2129455405) | 22 July 2019

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

$2.9bn $7.1bn 766,236

Industry Structure Life Cycle Stage Decline Regulation Level Medium

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Per capita disposable income Number of adults aged 20 to 64

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Current Direct selling, also known as multilevel

selling products independently, often to

workers are the ones traveling door-to-

Provided to: Edeska (2129455405) | 22 July 2019

External competition Over the five years to 2019, rising

Provided to: Edeska (2129455405) | 22 July 2019

Industry After expanding over the five years to

Performance driven Since industry operators retail a wide

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Wavering profitability As a percentage of sales, average industry

Provided to: Edeska (2129455405) | 22 July 2019

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Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products and Services Products and services segmentation (2019)

Home and family care products percentage of industry revenue in 2019,

Provided to: Edeska (2129455405) | 22 July 2019

Products & Markets

Provided to: Edeska (2129455405) | 22 July 2019

Products & Markets

Demand This industry incorporates a range of into account household finances,

Major Markets Major market segmentation (2019)

Total $44.0bn SOURCE: WWW.IBISWORLD.COM

Provided to: Edeska (2129455405) | 22 July 2019

Products & Markets

Provided to: Edeska (2129455405) | 22 July 2019

Products & Markets

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Products & Markets

Business Locations 2019

West Establishments (%)

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Products & Markets

Business Locations Similar to most retail industries in the

trends are a few factors that may drive

Provided to: Edeska (2129455405) | 22 July 2019

COM Direct Selling Companies in the USJune 2019 1