MLM n DS

by Andrea Tortora Direct selling is an industry proving its mettle as it prepares to take advantage of major growth opportunities fueled by technology, increased entrepreneurial support and the new emerging market consumer.

Global estimated retail sales topped US$178 billion in 2013, up 8.1 percent from 2012, according to the most recent data from the World Federation of Direct Selling Associations (WFDSA). The worldwide sales force also grew, up 7.2 percent to 96 million independent contractors. Both are record numbers. In 2013 there were 23 countries with annual retail sales above $1 billion. That group accounts for 93 percent of global sales. Of special note is the industry’s 6.8 percent three-year cumulative growth rate (CAGR). The figures reinforce direct selling strength and show its potential, says Alessandro Carlucci, CEO of Natura Cosméticos and Chairman of the WFDSA. “The opportunity this industry has to really be even more powerful is in taking advantage of the fact that we are living in a moment in our society when technology is reinforcing relationships and allowing us to do more and better business,” Carlucci says.

STRONG SUSTAINABLE GROWTH This most recent data clearly illustrates direct selling’s sustainable growth—especially in times of economic recovery and improved governmental policies to support entrepreneurship. Among the direct selling associations reporting their data to the WFDSA Research Committee, about three-fourths of the markets show solid, sustained growth in the three-year compound annual growth rate. Here’s why that is important: “If the year-over-year percent change represents the snapshot, then the three-year Compound annual growth rate (CAGR) represents the video and shows the long-term change or the trend. The sustained growth of direct selling is shown in a positive CAGR,” says Amway’s Judy Jones, Chairman of the WFDSA Global Research Committee. Data is reported using constant 2013 dollars, to remove currency fluctuations from the equation. As more companies participate in sharing sales data with each country’s direct selling association (DSA), the entire industry begins to gain actionable knowledge it can use to enable sellers to better serve customers. The sales of the 23 billion-dollar markets in 2013 are familiar to those who follow this annual ranking. The top five countries account for 60 percent of direct selling’s global sales. All but one reports a positive CAGR: 1.  United States, 4.6 percent 2.  China, 23.3 percent 3.  Japan, -4.4 percent 4.  Korea, 8.0 percent 5.  Brazil, 8.6 percent China moved into the No. 2 spot for 2013. If the current rates of growth in the United States and China remain steady, China could become the No. 1 direct selling market in the next year or two. Interestingly, the billion-dollar markets that make up the bottom five show tremendous cumulative growth, particularly in emerging markets: 19.  Australia, 2.3 percent 20.  Venezuela, 15.7 percent 21.  India, 20.0 percent 22.  Philippines, 17.8 percent 23.  Indonesia, 12.0 percent The numbers reinforce trends seen in the past two years. Direct selling is growing rapidly in the Asia Pacific region and Africa—dubbed the “new frontier” by Carlucci. Africa posted just over 9 percent year-over-year sales change for 2013, trailing only Asia Pacific at 12.6 percent. “Africa is a place where everyone should put a seat now, because in 15 years it will be very relevant,” Carlucci says. Following closely is the Central and South American region, which also posted just over a 9 percent year-over-year sales change. Six Latin American countries—Brazil, Mexico, Colombia, Argentina, Peru and Venezuela—are billion-dollar markets. More multinational companies are starting to do business in Central and South America, where consumers embrace direct selling.