Direct Selling Channel: Growth Trend Continued in June

Transformation Capital reported June 2020 revenue results showed a continued growth trend in the direct selling channel.

According to the Dallas-based investment banking and business development firm, a survey set of its 50 leading direct selling companies continued to indicate strong sequential sales growth across most of the channel.

“This is the fourth month in a row with similar growth results, which we believe is past the point of a pleasant anomaly and now indicative of a trend and potential inflection point within our industry,” said Stuart Johnson, CEO of Transformation Capital.

June is historically a slow month for the direct selling industry—a fact traditionally attributed to kids being out of school and summer vacations. This year, however, 12 respondent companies reported record monthly revenue during the period and 70 percent of respondents reported a sequential increase in revenue when comparing June 2020 to May 2020.

June At A Glance

  • 12 companies reported record revenue for June
  • 70% of companies reported growth June over May
  • 28% remained flat or declined
  • 30% showed single-digit growth
  • 42% grew by double digits or more

 

 

The June results follow equally strong results in May (72% of respondents grew revenue over April), April (80%) and March (80%).

 

Key Takeaways

Historically speaking, June’s growth figures would be the inverse of what they are today (30% growth / 70% decline). Further, the majority of those companies that did grow in June over May would have been readily attributable to a specific catalyst, such as a product launch, event or the continuation of an explosive growth curve.

It’s important to note, says Johnson, that while the number of companies reporting high percentages of growth (10% or more) month-over-month declined, the same number grew during the same time period. This growth was achieved on a higher prior month revenue base and during the historically slow month of June, leading us to find the results all the more impressive.

Additionally, most respondents report that Q2 2020 revenue exceeded that of Q1, and many have exceeded first half 2019 revenue in the first half of 2020. Anecdotally speaking, customer acquisition and recruiting statistics continue to trend higher and surpass comparable periods from one year ago.

Looking Forward

The shift of “work from home” into the social and professional mainstream as well as a likely prolonged period of relatively high unemployment, cannot be ignored as significant tailwinds for the channel.

As evidence of this, approximately 8-12 legacy companies are on track and/or projected to reach record revenue this year on a renewal basis (meaning they peaked, troughed and are now poised to once again climb to record annual revenue).

“We believe it to be a reasonable and safe prediction that the current environment is not changing anytime soon,” said Johnson. “We have no reason to expect anything other than a continuation of the general trends we are currently experiencing in the near term and, potentially, the mid-to-longer term.