Despite a revival in consumer spending, online competition will inhibit industry growth
Los Angeles, CA (PRWEB) August 18, 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, increased competition from big-box retailers, department stores and e-commerce websites has further threatened the industry by increasingly providing a wider selection of substitute products at lower prices. Consequently, revenue took a blow during 2009, falling 12.3%. Revenue has gained ground since then, and over the five years to 2013, grew at an estimated average annual rate of 0.3%. According to IBISWorl industry analyst Natalie Everett, recent improvements in economic conditions will further boost the industry; IBISWorld estimates that industry revenue will increase 5.1% in 2013 to $41.5 billion.
Direct selling companies have relatively low start-up costs; therefore, many Americans who lost their jobs in the wake of the recession established direct selling businesses as a means of income. This appeal did not completely protect the industry from contraction, however. The number of enterprises fell slightly at an annualized rate of 0.2%, while employment remained flat with an annualized growth rate of 0.0%. The Direct Selling Companies industry is considered to have a low level of concentration, with the largest player being Alticor Inc., continues Everett The industry is highly fragmented, characterized by a large number of individually owned businesses that are small in size. In 2013, about 68.3% of total establishments have fewer than five employees, while only 0.3% employ more than 100 workers. In the five years to 2013, the industry is expected to largely retain its level of enterprises, with low-performing enterprises being replaced by eager new entrants. Because the industry requires minimal startup costs, many Americans who lost their jobs as a result of the recession have picked up direct selling as a means of obtaining supplemental income. However, such growth in industry participation has heightened competition internally.
Driven 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 they cut back on 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 and Online Auctions industry (IBISWorld report 45411a) for purchases. With its competitive prices, convenience and broad range of products, the internet will pose a formidable challenge to the 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 marketing and selling of a product or service from one person to another, away from a fixed retail location. People in the industry are referred to as independent consultants, distributors or representatives. Sales are usually done via home parties, workplaces, street corner carts and door-to-door. 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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