For the past ten months, Transformation Capital has been evaluating the financial performance of both public and private direct selling companies that are domestic and have a minimum of $50 million in annual revenue.
December revenue results were flat and slightly lower than November due to the holiday season and a higher baseline that was set by sequential revenue growth in the preceding months. However, on a year-over-year basis, December 2020 results far exceed 2019.
In 2020, at least 80% of companies grew revenue as compared to 2019, with at least ten doubling in revenue year-over-year. A total of 30 companies grew their revenues by more than $100 million and at least ten more than doubled their annual revenue. Three private companies, including MONAT and Scentsy (which more than doubled their revenue), grew revenue by more than $400 million in 2020. In the public tracking set, eXp World Holdings and potentially Herbalife appear to be on track to grow more than $400 million as well. In addition, ten companies recorded record annual revenue after experiencing some period of decline.
With this growth, Transformation Capital believes renewal in these legacy companies as well as revenue spikes point to an industry-wide renaissance within the domestic direct selling market. Based on these findings, it is projected that domestic selling revenue will set a new record high in 2020, easily surpassing the $36.12 billion benchmark set in 2015. With revenue growth projected to be in the 7% range on a year-over-year basis, the total revenue is expected to reach $37.7 billion.
These projections are supported by the financial performance of public companies. The Transformation Capital Direct Selling Index (TDSI), a market cap weighted index of all domestically traded direct selling companies with a market capitalization of at least $25 million, rose 77.1% between the end of February and December 31,2020. This compares to a gain of only 20.5% for the Dow Jones Industrial Average (DJIA).
With the remarkable growth experienced in 2020, Transformation Capital expected a positive year-over-year revenue trend to continue through at least the first quarter of 2021. There is some potential for more heavy-handed regulatory challenges with a democratic administration, but the industry is better prepared now to weather enhanced scrutiny than ever before. The industry’s positive trends exhibited in 2020 are expected to continue, and the momentum built up over the last ten months will surely positively impact 2021.
