Relatively rapid economic recovery has helped mask the industry's recessionary declines
New York, NY (PRWEB) July 02, 2014
Over the past five years, the Direct Selling Companies industry has been on a roller-coaster ride. When the Canadian economy began to slump following the collapse of the global economy, consumers immediately tightened their purse strings. Furthermore, lending institutions became cautious, leading to a full-scale recession in 2009 and 2010. Consequently, according to IBISWorld Industry Analyst Sally Lerman, “consumers, who make up the largest source of industry sales, cut back on discretionary purchases and more frequently sought to save money by shopping at department stores, mass merchandisers and e-commerce retailers.” Due to this drop in demand, revenue is expected to increase at a low average annual rate in the five years to 2014. Unlike the United States, Canada made a considerably faster recovery, which helped mask declines in revenue early in the period. However, “a slight decline in the housing sector over 2014 is expected to deter some consumers from making purchases, leading to growth during the year,” says Lerman.
The Direct Selling Companies industry is vulnerable to a substantial number of external competitors due to the wide array of products industry operators sell. Therefore, many direct selling companies are unable to compete due to a lack of size and scope. In 2014, IBISWorld estimates that the majority of industry enterprises are nonemployers. As a result, the majority of industry operators do not have the ability to purchase products in bulk from manufacturers and wholesalers, leading to a steady loss of revenue from brick-and-mortar stores, such as Walmart and Target, and e-commerce retailers. Due to their global scale, these competitors are able to easily beat any price direct sellers might offer. Consequently, the industry has faced stagnant profit margins over the past five years.
The Direct Selling Companies industry is highly fragmented with a low level of market share concentration, with the four largest players expected to account for a share of industry revenue in 2014. However, the intense competition has not had an adverse effect on industry expansion. In fact, the recession and subsequent rise in unemployment has led to an influx of new enterprises due to low barriers to entry. Over the past five years, the number of direct sellers increased at an annualized rate. In the five years to 2019, the industry will experience slightly better revenue growth; however, the continued presence of fierce external competition will offset this increase. Over the next five years, revenue is forecast to increase at an average annual rate.
For more information, visit IBISWorld’s Direct Selling Companies in Canada industry report page.
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IBISWorld industry Report Key Topics
The Direct Selling Companies industry sells a product or service from person to person, away from a fixed retail location. Retailers 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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