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July 01, 2017

DSA News

Direct Selling and the Changing Face of Retail

by Ben Gamse



Click here to order the July 2017 issue in which this article appeared or click here to download it to your mobile device.


DSA’s 2017 Growth & Outlook market-sizing survey helps direct selling companies better understand the direct selling industry. This research also explores broader consumer, workforce, and other economic trends and their implications for direct selling. These trends include the evolution of the retail sector as many brick and mortar retailers struggle while e-commerce experiences explosive growth. Other trends, such as the rise of the gig or sharing economy and wage stagnation have significant implications for direct selling. First, here’s a look at DSA’s new Growth & Outlook survey results, showing direct selling data and insights for the 2016 year:

Size and Scope of Direct Selling

A record 20.5 million people were involved in direct selling in the United States in 2016, a 1.5 percent increase from the previous year. “People involved in direct selling” have signed an agreement with a direct selling company and are eligible to purchase products at a discount and resell them at a profit. They are also eligible to sponsor others to do the same.

For the first time, DSA has released “segmentation” figures of those involved in direct selling, to better describe who they are and how they are involved:

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Of the 20.5 million “involved,” 5.3 million are building independent businesses as direct sellers, meaning they are actively managing a customer base and possibly sponsoring others to do the same. Of these, 800,000 are full-time and 4.5 million are part-time. In addition, 15.2 million others receive a discount on products and services they personally enjoy and use. (Outside of the 20.5 million are preferred/registered customers as well as customers who have not signed an agreement with a direct selling company).

Estimated direct retail sales in the United States in 2016 was $35.54 billion. This is a 1.6 percent decline from last year but still the second-highest in direct selling history. This modest dip in sales represents an opportunity for the industry to take advantage of a more customer-consumer-centric model, provide the best of both offline and online shopping experiences, and attract some of the 89,000 retail employees laid off in the United States since October, according to a recent New York Times (NYT) article on American retail. Finally, direct selling must compete with a growing gig economy for salespeople and with e-commerce giants like Amazon and Walmart/Jet.com for customers.

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Below are some strengths, opportunities, and challenges faced by direct selling:

Personalization (Strength)

A key strength of direct selling is personalization, and a one-on-one personalized experience is a likely reason why we continue to see growth in the wellness sector in direct selling. Consumers are increasingly focused on health and wellness as the obesity epidemic in the United States worsens, the U.S. population ages, and people seek a more healthy and happy lifestyle. Direct selling “coaches” provide a long-term, personalized relationship and help customers stick to regimens and achieve results. The wellness product group represents the largest direct selling category with a 34.9 percent share of overall sales. The category grew from $10.4 billion in 2014 to 12.4 billion in 2016 (19.2 percent increase).

As competition increases in all direct selling categories, the industry must leverage the unique one-on-one relationship between seller and customer to stay above competition from other retail channels.

E-commerce/Omni-channel Retail (Opportunity)

E-commerce, social media, and mobile technologies are improving—creating opportunities for direct selling companies to complement in-person sales by broadening company and salesperson reach and increasing efficiency of the customer experience.

Of the retailers experiencing the most success, many (such as Warby Parker, Ulta Beauty, and Walmart/Jet.com) have an omni-channel approach.

Online and offline shopping both have specific advantages, and when combined make for a better consumer experience. According to findings by market and consumer research expert GfK, people who shop at brick and mortar stores do so because they can physically see the product before they buy, are familiar with the store, and derive instant gratification from obtaining the product immediately. Reasons for shopping online include saving money, better selection and convenience.

Combining these channels makes sense as “people who shop both online and offline spend 2.5 times more than those that just use one channel,” says Scott Galloway, Professor of Marketing at NYU Stern School of Business.

Direct selling is already leveraging the value of omni-channel retail. DSA’s 2016 Managing Your Company’s Web Presence & Technology systems Report shows that many DSA members offer e-commerce, mobile commerce, and social media training and tools to complement in-person service.

Growth & Outlook Methodology

In early 2017, DSA conducted the industry’s largest market-sizing survey, with 104 direct selling companies participating. Nathan Associates, an economic consulting firm, confidentially collected survey data, conducted secondary research, and generated industrywide estimates. The Growth & Outlook Report was generated with diligent guidance and oversight from the DSA Industry Research Committee and with assistance of Artemis Strategy Group. This DSA data and industry insights cannot be found anywhere else.

Wage Stagnation and Retail Closures/Layoffs (Opportunity)

A key strength of direct selling is its ability to offer supplemental income—attractive in an environment of wage stagnation and large retail closures and layoffs.

More Americans are working, but income hasn’t increased proportionally. According to Bloomberg, “even though the unemployment rate hit a decade low of 4.4 percent in April, average hourly earnings of all private non-farm workers grew just 2.5 percent over the past year.”

Also, Slate substantiates what we’ve already seen happening—the decline of the shopping mall. Department stores that often serve as “anchors” to malls, such as Macy’s and Sears, are closing hundreds of locations, with Sears closing 150 stores and Macy’s to close 100.

Those workers affected by this continuing decline already have experience in retail and are likely looking for additional income, presenting an opportunity for direct selling.

Increased Competition with Amazon/E-Commerce (Challenge)

According to NYT, “Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years, average annual growth has increased to $40 billion.”

While e-commerce presents an opportunity for direct selling, it also serves as a competitive threat when e-commerce companies can offer a wide range of low-cost products and services, quick delivery, and convenient user experience.

DSA Industry Research Committee:

  • Judy Jones, Amway; Industry Research Committee Chair
  • Jeff Kaufman, Isagenix International; Immediate Past Industry Research Committee Chair
  • Pammie Strickland, Ambit Energy; Past Research Committee Chair
  • Martha Broda, Mary Kay Inc.
  • Julie Cabinaw, Scentsy Inc.
  • Michael Freeman, Team Beachbody
  • Gordon Hester, The Juice Plus+ Company
  • Tyler Horton, Nature’s Sunshine Products Inc.
  • Omobola Imoisili, Team Beachbody
  • Susan Leen, Amway
  • Brian Matney, Thirty-One Gifts
  • Erich Pagel, Scentsy Inc.
  • Jay Schwartz, New Avon
  • Erica Sheffield, Arbonne International
  • Jesse Stamm, Take Shape For Life - Medifast
  • Monica Wood, Herbalife
  • Ben Gamse, DSA
  • Nancy Burke, DSA

To learn more about DSA research, visit http://www.dsa.org/benefits/research or contact DSA Market Research Manager Ben Gamse at bgamse@dsa.org.

For example, NYT shares, 52 percent of American households have an Amazon Prime account (2016). The Washington Post reports that Walmart experienced a 63 percent surge in online sales in Q1 2017, and Walmart customers enjoy two-day shipping on millions of items without a membership fee. Walmart’s online offerings include 50 million items, a 500 percent increase from last year.

One of direct selling’s advantages is personalization, but other companies are offering increasingly sophisticated personalization through e-commerce, mobile commerce, social media, and in-store experiences. Many of these companies have loyalty programs, collecting vast amounts of user data used to improve personalized experiences. Many of these companies have loyalty programs, collecting vast amounts of user data used to improve personalized experience.

Professor Galloway suggests that retail as we know it is going to change dramatically in the next five years. The direct selling industry will need to embrace these changes and find ways to demonstrate its unique value, sell more products and provide better customer service online, improve logistics, and quicken delivery.

Gig/Shared Economy (Challenge)

In the past several years, a significant number of “gig economy” organizations, such as Uber, Lyft, Task Rabbit, and AirBnB have entered the market with success. These companies compete with direct selling for salesforce members, touting similar benefits such as freedom, flexibility, and supplemental income. Direct selling must build and capitalize on its strengths of socialization and personal connection.

As the face of retail continues to change, with new technology disrupting many product categories, direct selling has the opportunity to capitalize on current trends and innovate for the future.


NameBen Gamse is Market Research Manager at the U.S. Direct Selling Association.