The World Federation of Direct Selling Associations (WFDSA) recently released its Global Statistical Report after compiling the data for the year 2010. Although a comparison with the prior year shows several significant changes, it’s to be noted that a portion of the increases reported from 2009 to 2010 is due to changes in the collection of data (see the article, “WFDSA—Working to Improve Statistical Reporting”). However, there are still some wonderful growth stories in the direct selling industry to tell.
GLOBAL DIRECT SALES BREAKDOWN BY REGION
Judy Jones, who serves as Chair of the WFDSA Global Research Sub-Committee and of the United States DSA Industry Research Committee and is Insights Lead, Consumer & Market Insights for Amway, prepared the following global highlights for DSN:
In all, the global direct selling industry is sized at over US$132 billion in estimated retail sales, generated by over 87 million individual direct sellers around the world. Asia Pacific is by far the largest region for direct selling in the world, followed by North America. Latin America and Europe/Africa make up the final regions accounted for in the report.
Recent research shows that individual direct sellers in 21 countries in the world generate 90 percent of the world’s direct retail sales. Each of these countries generates in excess of $1 billion in direct sales per year (see chart below).
GLOBAL MARKET REVENUE BY COUNTRY (IN U.S. DOLLARS)
Points of Interest:
- Two new countries have entered the “Billion Dollar Markets”: South Africa at $1.1 billion and Peru at $1.05 billion. The total number of markets that cross the billion dollar threshold is now 21.
- The U.S. and Japan continue to dominate by nearly twice as much as any other nation.
- Outside of China, Brazil continues to hold in the top four markets, several billion ahead of any other South American nation as well as others—though South American countries have a small increase, and there’s a new entry with Peru entering the game in 2011.
- China continues to climb—going from $8 billion to $10.9 billion to $12.5 billion.
- South Korea increases by almost $2 billion.
- Malaysia is increasing steadily from $1 billion to $2 billion over the last year.
- Many European nations continue to hold around $3 billion.
In terms of how individual direct sellers approach their customers, globally 76 percent use a person-to-person sales method and 18 percent a party plan method.
- The range is 64 percent person-to-person/ 28 percent party plan in North America.
- The range is 91 percent person-to-person/ 9 percent party plan in Latin America.
There is also a great difference in the ratio of single-level companies to multi-level companies across regions of the world. Globally, 57 percent of companies are multi-level in structure; 40 percent are single-level.
- Multi-level companies range from 20 percent in Latin America to 93 percent in North America.
- Single-level companies range from 7 percent in North America to 80 percent in Latin America.
WFDSA—Working to Improve Statistical Reporting
For serious researchers, statistics provide a good starting point. However, it’s always a good idea to delve deeper and understand how the numbers are derived. Ross Creber, President of the Direct Sellers Association of Canada, emphasizes just how important it is to understand what a given statistic actually represents.
“We probably created more excitement than we should have,” Creber says about Canada’s hefty increase in retail sales within the industry. He then went on to explain that the numbers reported to the WFDSA most recently were those from a socio-economic impact study done on the direct selling industry in Canada back in 2010. This data was on the entire industry, as opposed to data from only DSA member companies, as had been reported in 2009 and prior years. “That’s what has created these numbers,” he says. “It’s distorted from what we had been presenting in the past.”
Indeed, when some countries provide data on their entire market, while others provide data only on DSA member companies, an apples-to-apples comparison among countries cannot be made. The WFDSA has Global Research Sub-Committee to address this issue so that the data collection process can be standardized around the world. Judy Jones, who serves as Chair of this WFDSA sub-committee and also of the United States DSA Industry Research Committee as well as Insights Lead, Consumer & Market Insights for Amway, notes that the data year-to-year will not be strictly comparable until the new process is completely implemented.
Jones goes on to explain why implementing this standardized process to include entire markets is so important to the direct selling industry and how they plan to do it:
“The direct selling industry must present credible statistics in order to be viewed as a serious industry,” Jones says. “Statistics form the basis for the story of direct selling and why it is such a powerful engine of opportunity. And this story is used for government affairs purposes, to ensure that new legislation and regulations relating to direct selling actually protect consumers and company distributors, while not being restrictive.
“The direct selling industry must present credible statistics in order to be viewed as a serious industry.”
—Judy Jones, Chair, WFDSA Global Research Sub-Committee
“As well, when journalists wonder about the direct selling ‘opportunity engine,’ it is again statistics that are used to tell the story at the global, regional and local country levels for these media relations purposes,” she continues.
“Finally, direct selling statistics can be highly useful at the individual company level, providing a benchmark against which any one company’s performance can be measured.
“By way of process, we collect company data from all the member companies of DSAs around the world, in over 60 countries,” Jones says. “We have a 2012 goal of 100 percent participation from all member companies. In addition, this year our goal is to size the entire industry beyond just member companies, and to do so we have a group of professional researchers from Avon, Mary Kay, Natura, Tahitian Noni, Amway and Seldia (the European Direct Selling Association) on our research sub-committee. This team will apply their expertise to research the sales of non-members of the direct selling industry, as well as to size those areas of the world where there are no DSAs yet in place.”
Certainly, with an improved data collection process in place, statistics in the future will present an even clearer picture of the direct selling industry.
When Dollars Aren’t What They Seem!
Comparisons from one year to the next seem pretty straightforward: If the dollar amount is more this year than it was last year, there’s been a gain, right? Maybe so, but then again, maybe not.
In order to create a meaningful comparison of one country with another, retail sales must be expressed in the same currency. Problems occur when transactions in one country’s currency are then expressed or translated into another country’s currency. Exchange rates fluctuate almost constantly, which creates an extra layer of complexity. The exact same amount in one currency will translate to different amounts in another country’s currency at different points in time.
Companies with international operations face this issue when preparing their financial statements. They may have divisions that are operating profitably in a particular country, but when the earnings are translated into the currency of the parent company’s operations, those divisions may even show a loss.
Maurits Bruggink, Executive Director for Seldia, the European Direct Selling Association, points out this type of distortion also occurs when preparing global comparison tables. “One example would be France,” he says. “That country’s sales figures went up in 2010 as compared to 2009, from 1.7 billion to 1.8 billion euros. But when translated into U.S. dollars, it shows France had a decline of 0.4 percent.” In this case, the decline reflects the currency exchange rates and masks the gains experienced in France.
As someone with quite a bit of experience in collecting global statistics, Bruggink has found currency translation to be a difficult problem to get around. He suggests producing two sets of statistics, one in the currency of the particular country, and the other in that of the standard currency. Examining both sets creates a better picture of what is actually occurring in that country. For its 2010 Global Statistical Report, the WFDSA has enhanced the information it presents to show both sets of statistics to help provide a more complete picture of each country’s activities.
To see Europe’s statistics expressed in euros, pull up the chart, Direct Selling in Europe – 2010 Retail Sales, at seldia.eu/statistics. [Note: If you have difficulty bringing up this address, you may need to switch to a different browser.]
To see the global industry statistics in both the local currencies and in U.S. dollars, pull up the chart, Global Statistical Report – 2010, at wfdsa.org/files/pdf/global-stats/Global_Statistical_Report_11311.pdf.
To see exchange rates for various world currencies, visit finance.yahoo.com/currency-investing. Note that you can add different currencies, and the interactive chart can be adjusted for various time periods, up to two years.
Seldia—Promoting the Direct Selling Industry in Europe
The European Commission, in Brussels, Belgium, is one of the main institutions of the European Union.
Seldia is now the name of the Federation of European Direct Selling Associations. Formerly known as FEDSA, this organization seeks to represent the direct selling industry in Europe. Its membership currently consists of 22 DSAs in the European Union States and 13 corporate members.
Direct selling companies must comply with the laws of each country in which they operate. Even with the European Union providing a framework for the many countries which are members, there are no uniform laws across Europe dealing with the direct selling industry. With Europe comprised of so many different countries, direct selling companies often find the various laws challenging.
With its office in Brussels, Belgium, Seldia is able to keep current with much of the legislation affecting Europe. Not only is Brussels the capital of Belgium, but it also serves as the capital of Europe and is an important political, financial and commercial hub. The European Union is headquartered there, and as Maurits Bruggink, the Executive Director of Seldia, notes, approximately 80 percent of all laws concerning the European Union are made in Brussels.
While laws and regulations are needed to protect consumers and ensure ethical operations, overregulation can suppress enterprise, particularly the entrepreneurship on which direct selling thrives. Of particular concern to Bruggink currently is the proposed legislation that would require distributors to be classified as employees of direct selling companies. “That, of course, would kill our sector completely,” he says. “In the European Union, we have 4.5 million direct sellers. If they would all have to be employees, it becomes unaffordable.”
Such legislative proposals can be a threat to the industry, but they also give occasion for Bruggink and other Seldia representatives to lobby for the direct selling industry in Europe. “We have the opportunity to educate governments and to gain recognition for our trade,” he says. And, he goes on to note, the country of France has formally recognized direct selling and given it legal status. This has come with an increased cost to direct sellers, who must now make social and health contributions, but it has served to promote the industry in France. It has increased consumer confidence in direct sellers, and the government can make claims concerning job creation. Hopefully, this recognition by France will open the door for similar legislation in other countries.
Currently, the European countries with higher growth in the direct selling industry are mostly in Central and Eastern Europe—Turkey, Ukraine and Russia, among others. Not only are there fewer government regulations to deal with, Bruggink notes, but also the people are eager for the opportunities that direct selling has to offer. Poland, which served as host for the first Round Table on the Future of Direct Selling conference in 2011, and other Central European countries tend to be champions against overregulation of the industry, he says.
While the debt crisis in Europe has created much economic pain, direct selling continues to offer the people of Europe the opportunity to create their own work.
Asia—Engine of Growth
The total 2010 retail sales for the top-ranking Asia/Pacific countries—Japan, China and South Korea—amount to an astonishing $44 billion. These three countries alone account for one-third of the $132 billion in global retail sales. Adding in the other countries of the Asia/Pacific region pushes the total to over $55 billion, or a whopping 42 percent of global sales.
Clearly, Asia/Pacific is the current world heavyweight champion, but will this region be able to maintain its standing in the future? Grant Pace, Co-Founder of Joy Life International, believes that it will, and his expectations are particularly high for China where his company has significant operations. Having launched in the fall of 2009, Joy Life became a runaway success in China, bringing in $156 million in sales by the end of its first fiscal year.
Pace says, “Asia will continue to grow dramatically, and I expect we will see existing companies grow significantly, even in markets where they have a strong presence now.” He goes on to explain that some of that growth will be due to the increase in purchasing power of these markets, but he also notes that Asian cultures tend to be more receptive to the opportunities offered by direct selling.
Penetration of Direct Selling
According to the WFDSA Global Statistical Report for 2010, the salesforce in the direct selling industry for the Asia/Pacific region stood at about 47.3 million people. Compared to the global salesforce of 87.7 million, that’s right at 54 percent of the total. While that percentage alone is impressive, if looking at the chart, that’s far from the whole story. If China’s salesforce numbers were available—well, one can only imagine what that percentage would be!
Yes, Asia is home to much of the world’s population, so clearly part of these statistics are due to the sheer volume of people in that region. However, as Pace points out, the penetration level of direct selling—or the percentage of the total population associated with direct sales companies—is also much higher. For a number of reasons that will be discussed below, direct selling seems to be a great fit for the Asian markets and cultures.
To get an idea of what could be possible in China, Pace suggests examining the penetration levels of Taiwan. This island alone accounted for almost $2 billion in retail sales and reported a salesforce of about 4.6 million in 2010. When the salesforce is divided by the total population of Taiwan—about 23.162 million people in 2010—that amounts to over 19 percent of the population involved in direct selling. If mainland China, with currently over 1.3 billion people, achieved a penetration level of even half or a third of that in Taiwan, it’s easy to see how the Chinese salesforce could match or even exceed that of the entire rest of the world.
Multiple other factors should also continue to contribute to the growth in the Asian markets, and Pace elaborates on several:
- Because the U.S. has already served as the testing ground for direct selling concepts, the models and sales methods actually arrive in foreign markets much more polished than they were originally. Foreign markets benefit from the U.S. lessons learned.
- As companies put in place the means for distributors to create successful businesses, these economic success stories will continue to attract people in large numbers to network marketing around the world. “The model works,” Pace says. “It is a vehicle for wealth creation.” And because direct selling is profitable, it has become increasingly legitimate to choose it as a potential career—not as a fallback position, but as a first choice of a career.
- As mentioned earlier, when the incomes of the people rise, this increases their purchasing power. Not only are they able to buy more, but they also can afford higher and higher priced goods and services.
- The direct selling companies and DSAs have worked to create appropriate policies, put controls and ethical standards in place and foster government understanding of the industry. “The abuses are curtailed, and legitimate energies are channeled in legitimate paths,” Pace says.
- There’s a very strong work ethic in Asia. With few government security nets, the people often want multiple jobs and multiple income streams. “The people are anxious for the freedom to bootstrap themselves up to raise their standard of living,” Pace says.
- Their entrepreneurial spirit and their desire to have their own business are also strong. While in the Western world one goes to college and then gets a job, the preferred path in Asia is to start a business. “The culture fosters that in a more aggressive way than in the West,” Pace explains. Direct selling offers them this entrepreneurial fulfillment. Their association with a quality company allows them to become business owners at a very low cost.
- The Asian cultures are very comfortable with purchasing from friends or on the recommendation of friends or family members. In the U.S., people are a little less comfortable doing this. As Pace points out, “It maybe shouldn’t surprise us that Amway’s early success was in Malaysia.”
For these reasons and more, the Asia/Pacific region will likely continue to experience significant growth in the foreseeable future.
A Snapshot Look Around the World
The direct selling industry has benefited from the country’s continued growth, and Peru’s retail sales, coming in at No. 21, surpassed the billion-dollar mark in 2010.
Peru: Newcomer to the ‘Billion Dollar Markets’
While the recession of the last few years has managed to inflict economic pain in many countries around the world, some have suffered less than others. The Peruvian economy, while not unscathed, has fared better than most in the Latin American region. Although its Central Bank has lowered its forecast somewhat, Peru’s economy is still expected to grow in excess of 5 percent during 2012.
The direct selling industry has benefited from the country’s continued growth, and Peru’s retail sales, coming in at No. 21, surpassed the billion-dollar mark in 2010. With the 2011 data still in the process of being compiled, Cinthia Ramirez Santillana, Administrator of the Peruvian DSA, reportes that the growth is continuing. She also notes that for the almost 400,000 people involved in direct selling in Peru, it offers them the opportunity for personal growth and profits—in effect, the opportunity to develop their own future.
The UK Direct Selling Association has been able to significantly influence the media interest with positive press in all the major daily newspapers—including the Financial Times.
United Kingdom: News from Across the Pond
The United Kingdom now ranks as No. 15 in the “Billion Dollar Markets,” down somewhat from its No. 11 spot last year. The Direct Selling Association of the United Kingdom provides further insight through its report:
The direct selling market in the U.K. remains buoyant in spite of the economic climate, with many companies reporting increased recruitment to offset any reductions in the average spend.
Some interesting major trends are emerging that reflect the economy:
- There’s an increase of 29 percent in people over 50 joining direct sales companies.
- There’s an increase of 24 percent in men joining.
- The average number of hours worked by distributors has almost doubled.
- More students are taking an interest in the industry.
As a result of these trends, the UK Direct Selling Association has been able to significantly influence the media interest, and positive press in all the major daily newspapers—including the Financial Times—is now almost a weekly occurrence. This, along with radio and television interviews with Paul Southworth, Director General of the UK DSA, has definitely raised the profile of direct selling in the U.K. A lobbying effort to convince the government that the industry is the only one delivering their agenda of entrepreneurship, creating micro businesses, and generally getting people back into the workplace, is also well underway.
The outlook for the next few months remains challenging, but there is a strong feeling that direct selling will continue to hold its own and build for the future.
If the Thai salesforce is divided by the country’s population of 69 million, direct selling enjoys a participation rate of over 22 percent!
Thailand: Helping Fuel Asia’s Growth
Few countries of the world appreciate the opportunities of direct selling more than does Thailand, ranked No. 14 on the Billion Dollar list. With over 15 million people involved in the industry, this country sports a salesforce almost as large as that of the United States. Its numbers alone account for almost a third of those who sell in the high-growth Asia/Pacific region. In fact, Thailand has more people involved than does the entire Europe/Africa region, with over 14 million, and all of Latin America, with over 9 million. If the Thai salesforce is divided by the country’s population of 69 million, direct selling enjoys a participation rate of over 22 percent!
What makes direct selling so appealing? Montita Pranitipong, who serves as a sub-committee member for the Thai DSA, believes it goes well beyond the earning opportunities and the freedom in lifestyle that direct selling offers. The Thai people also see direct selling as a means to support themselves when the economy faces crises. She specifically notes that when the horrific floods of 2011 left thousands of people across the country jobless, many turned to direct selling in order to provide for themselves and their families.
A newcomer to the “Billion Dollar Markets,” South Africa weighed in at No. 20 on the 2010 list.
South Africa: World-Changing Innovation
Also a newcomer to the “Billion Dollar Markets,” South Africa weighed in at No. 20 on the 2010 list. However, unlike Peru, South Africa’s economy has taken more of a hit during the recession. Caroline Tointon, who serves as the Public Relations Officer for the Direct Selling Association of South Africa, reports that the country has an enormous unskilled workforce and job creation has been difficult. The unemployment rate overall is roughly 25 percent, and for those who are aged 15-25, it’s currently closer to 50 percent.
Reaching Out to the Students
Many of the job creation initiatives have been aimed at South Africa’s young people, with entrepreneurship being of particular interest—and with good reason. As Richard Clarke, Chairman of DSA South Africa, notes, “Of the 900,000 young people who enter the job market each year, scarcely 10 percent find employment in the formal sector.” Direct selling offers a low-cost way for them to make their own jobs.
“Direct selling is a huge industry around the world,” Clarke continues, “the growth of which is outstripping economic growth in most countries. It has yet to reach its full potential in South Africa. The opportunities are, therefore, enormous.” But, as he goes on to explain, one of the major challenges has been to persuade young people to give it a try. Toward this end, the DSA, in conjunction with the University of Johannesburg (UJ), created what is now referred to as the DSA-UJ Africa Development Plan.
Launched in 2002, the project represents a collaborative effort between the direct selling industry and the University. As Marcus Wait, Deputy Chair of the UJ Marketing Department and National Manager of the project, explains, “This project is a component of the National Diploma programs, which are designed to be more practical and specialty oriented than degree courses; the project is also in line with the government’s policy of Work Integrated Learning (WIL), where textbook knowledge is tested in a real-life environment.”
In this unique program, students sign up with a DSA member company. They then represent the company and sell its products during the following eight months. In return, the participating companies must come to campus once a week and provide product and sales training. In order to successfully complete this Personal Selling and Sales Management module, students must reach their specific sales targets. Not only do the students earn course credit with this program, but they also earn commissions from their sales.
Currently, about 2,000 students enroll in this program annually. Their participation makes it possible for them to go on and develop their own full-time businesses if they so desire, and in turn, create employment for others. Even while they are still in the program, they can actually start building their sales team and create the potential for passive income.
“Nowhere else in Africa or the world is such a program offered,” says Tointon. “Together with UJ, we are setting a trend, a trend that has been successfully adopted by our colleagues at the Durban University of Technology and Tshwane University of Technology. We have great support from the WFDSA, who sees this as true innovation and a template for other interested countries.”
The vision for the DSA-UJ Africa Development Plan is to implement it at tertiary education institutions throughout the country and into Africa over the next 10 years. Such direct selling programs are expected to be instrumental in creating a brighter economic picture, not only for the country of South Africa, but potentially the rest of the continent and other countries of the world as well.
An Overview of the Direct Selling Industry
The World Federation of Direct Selling Associations (WFDSA) is a non-governmental, voluntary organization globally representing the direct selling industry as a federation of national Direct Selling Associations (DSAs). Its membership currently consists of 60 national DSAs and one regional federation, the Federation of European Direct Selling Associations, now known as Seldia.
An organization known for keeping its finger on the pulse of direct selling around the world, WFDSA’s Executive Director Tamuna Gabilaia, provides an overview of the global state of the industry. Here’s her take:
“In today’s fast changing global marketplace where every economy tries to meet varied challenges, direct selling is gaining momentum throughout the world as a legitimate and profitable way of doing business,” Gabilaia says.
“The three-year compound annual growth rate of the industry (from 2007 to 2010) was 5 percent. Direct selling has shown a steady upward growth trend over the past 5 years (from 2006 to 2010) of nearly 20 percent!” [Note: actual percentage equals 19.4 percent]
She continues, “Over the next several years, I see the industry continuing in its rapid expansion worldwide. I believe we will see more and more markets further embrace direct selling. I believe we will also see how the Internet has become an important element of direct selling.
“Direct sellers have been empowered by use of the Internet and find direct selling to be a rewarding way to improve their quality of life, reaching specific earnings objectives, facilitating social contact and selling products they love,” Gabilaia says. “The World Federation, local DSAs and their member companies are also keenly watching the trends in social networking. The proper use of this new medium will enhance and complement the personal contact that direct sellers give their customers.”