Direct Selling Establishments

SIC 5963

Industry report:

Retail companies that sell merchandise door-to-door, from trucks and wagons or from other temporary locations, make up the direct selling industry. Included are individuals who sell products by these methods and are not employees of the organizations they represent, as well as establishments that are retail sales offices from which employees operate to sell merchandise by house-to-house canvassing.

Although direct selling has been a staple method of distribution for retailers in the United States since colonial times, the industry has undergone major changes since the 1970s. This industry, which for years included just a few mainstays such as books, household appliances, and cosmetics, now encompasses an enormous variety of products, from household goods to gourmet foods. By 2005, there were an estimated 14 million independent sales consultants working in the direct selling industry, which generated more than $30 billion in revenue.

In 2007 the total number of independent sales consultants working in the direct selling industry increased by one million, however, total revenues remained unchanged when compared to earlier figures. By 2008 total revenues began to trend downwards falling below $30 million with a reported 15.1 million sales consultants. During 2009 the total number of sales consultants climbed to 16.1 million, while total revenues fell further to $28.33 billion.

As the economy worsened and unemployment reached nearly nine percent, more and more unemployed workers sought relief in direct sales jobs. In fact, Neil Offen, president of the Direct Selling Association told USA Today "We're recession resistant in the sense that more people come to us during the hard times for supplemental income or replacement of a lost job" in May 2009. Both Mary Kay and Avon were using the recession as a "recruiting tool" launching aggressive recruitment TV advertising hoping to lure unemployed workers as sales consultants. For example, one ad launched by Avon had a company spokesperson stating, "I can't get laid off. It's my business."

For most of its history, the direct selling industry relied on door-to-door sales. Indeed, many organizations built large retail empires based primarily on home sales methods. Avon Products Inc., Tupperware Corp., and AB Electrolux are a few of the organizations traditionally associated with house-to-house canvassing that generated huge profits during the post-World War II economic boom.

Despite past successes, the effectiveness of some forms of direct selling waned in the 1970s and 1980s as new retail channels emerged. As a greater proportion of women entered the work force, salespeople found it increasingly difficult to find prospects at home during the day. Moreover, because two-income families had less time to shop at stores, they began to purchase more goods through direct mail, catalogs, and the Internet. The increased popularity of consumer goods shows, warehouse stores, television shopping networks, and other selling techniques further reduced direct sales to the remaining one-income families. Finally, increased crime rates caused many potential customers to refuse to allow strangers into the home, and some municipalities banned door-to-door sales altogether.

Responding to this trend, in 1992 both Avon and Tupperware started marketing their products for the first time through mail-order catalogs and direct mail. AB Electrolux also shifted its focus from door-to-door sales to catalog showrooms and warehouses in the late 1980s.

In 1996, after 60 years of selling door-to-door, Encyclopedia Britannica Inc. laid off its entire sales force in the United States and Canada. Sales had declined from $650 million in 1990 to $405 million in 1995, mainly due to the advent of CD-ROM encyclopedias. In June 1996, Collier's Encyclopedia followed suit. According to Linda Corman of Sales & Marketing Management, Britannica's decision to eliminate door-to-door selling marked the "end of an era in sales," and noted that it was probably a "harbinger of what lies ahead for the sales profession, as selling and marketing in the information age become more sophisticated, more targeted, and more driven by technology."

The largest growth area in the direct selling industry in the 1980s and 1990s was the direct selling organization (DSO), also known as network or multilevel marketing (MLM). With MLM, one person becomes a product distributor and then makes a commission on the sales made by other distributors he or she signs up. The first network marketing company, founded in the 1940s, was Nutrilite (now part of Amway), a maker of nutritional supplements. By the mid 1990s, almost every kind of product was being sold through DSOs, including cosmetics, art, time management systems, tires, kitchen tools and appliances, lingerie, long-distance phone services, and computers. According to the Direct Selling Association 2005 Fact Sheet, the Personal Care product group (make-up, jewelry, etc.) comprised almost 34 percent of all direct sales; Home/Family care had approximately 27 percent in sales; and the Wellness product category (weight loss, vitamins, etc.) accounted for 19 percent of all direct seller sales.

Many DSOs use the party plan, in which the seller invites friends to a party where goods are displayed and sold, or else they build sales through networking. In 1996, Christina Gold, Avon's chief for North America, told The New York Times that since 1994 she had expanded her sales force from 45,000 to 445,000. Explaining that more than one-half the company's sales are made or arranged at work, Gold stated that "We train people in how to connect at the office and factory.... It's a high touch business."

According to the Direct Selling Association, worldwide retail sales in U.S. dollars reached approximately $68 billion in 1995. There were 17 million distributors worldwide, covering at least 44 countries, with the 6.3 million U.S. distributors producing $16.5 billion in sales. Total industry sales reached about $30 billion in the mid-2000s, with over 14 million U.S. distributors. The primary channel continued to be face-to-face sales, which made up nearly 74 percent of all sales.

In the late 2000s, according to the Direct Selling Association 2009 Fact Sheet, the Personal Care product group (make-up, jewelry, etc.) comprised 21.3 percent of all direct sales; Home/Family care accounted for 23.9 percent in sales; the Wellness product category (weight loss, vitamins, etc.) was responsible for 22.8 percent of all direct seller sales; and the Clothing & Accessories category held 10.3 percent of all direct seller sales.

Direct selling, or doorstep marketing, also was growing overseas by the mid 1990s. In 1995, Brazil became Avon's largest market outside of the United States, with 478,000 sales representatives. Amway, introduced to Brazil in 1991, had increased its number of distributors to 200,000 by 1995. The Direct Selling Association reported that other countries with a strong selling presence included Japan, where sales reached $30.3 billion; Taiwan, with sales of $1.7 billion; and Korea, with sales of $1.3 billion.

Some of the leading direct selling companies by the mid-2000s include Amway Corporation, which has more than three million distributors in 2007 and estimated sales of $6 billion; Avon, which has approximately 5.3 million representatives and $8.8 billion in 2006 sales; Mary Kay Inc., which has more than 1.7 million consultants and $2.2 billion in 2005 revenue; Forever Living Products International Inc., with $1.2 billion in 2005 revenue; and Herbalife International Inc., with roughly $1.9 billion in revenue. In 2003, the direct selling industry employed a total of nearly 155,000 people with a mean annual salary of $32,000.

Amway Corporation reported revenues of $8.4 billion in 2009 with 14,000 employees. Avon reported revenues of $10.6 billion in 2008 and $10.3 billion in 2009 with 41,000 employees who oversee about 6.2 million independent distributors. Mary Kay Inc. with over 2 million independent sales consultants reported revenues of $2.6 billion in 2008 with 5,000 employees. Privately-held Forever Living Products International Inc. sells its products through a worldwide network of more than 9.3 million independent distributors in 2009. Herbalife International Inc. reported revenues of $2.1 billion in 2007 before reaching $2.3 billion in 2009 with 4,100 employees that manage 2 million distributors.

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