Despite a revival in consumer spending, online competition will inhibit industry growth
Los Angeles, CA (PRWEB) April 11, 2013
Reduced consumer spending caused recessionary conditions that negatively impacted the Direct Selling Companies industry early in the five-year period to 2013. Rising unemployment rates, combined with falling consumer confidence and disposable income, forced households to cut back on discretionary products, which include many products sold by direct sellers. In addition, “increasing competition from big-box retailers, department stores and e-commerce websites have further threatened the industry by increasingly providing a wider selection of substitute products at lower prices,” says IBISWorld industry analyst Natalie Everett. Consequently, revenue took a blow during 2009, falling 12.3%. Revenue has gained ground since then, though. So over the five years to 2013, it has been relatively flat, growing at a meager 0.3% average annual rate.
Direct selling companies have relatively low start-up costs, “so many Americans who lost their jobs in the wake of the recession established direct selling businesses as a means of income,” Everett says. “Such growth in industry participation has heightened competition internally, however, and did not completely protect the industry from contraction.” The number of enterprises fell slightly at an annualized rate of 0.2%, while employment remained flat. The Direct Selling Companies industry is considered to have a low level of concentration and is highly fragmented, characterized by a large number of individually owned businesses that are small in size. Major industry players include Alticor Inc., Avond Products Inc., Mary Kay Inc., Tupperware Brands Corperation and The Pampered Chef.
Led by improved consumer confidence and disposable income, consumer spending is anticipated to rise further in the five years to 2018. As such, households are expected to increase purchases from direct sellers that they had curtailed throughout the recession, boosting industry demand. However, despite the appeal and relative ease of buying goods from friends or family, consumers will increasingly turn to the fast-growing e-commerce industry for purchases. With its competitive prices, convenience and broad range of products, the internet will pose a formidable challenge to the Direct Selling Companies industry through 2018. For more information, visit IBISWorld’s Direct Selling Companies in the US industry report page.
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IBISWorld industry Report Key Topics
Direct selling is the sale of a product or service from person to person, away from a fixed retail location. People in the industry are known as independent consultants, distributors or representatives. Sales are usually done via home parties, workplaces, street corner carts and door-to-door. However, direct sellers of food for immediate consumption and fuel are excluded from this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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