Developing countries and the internet drive global direct sales

By Simon Pitman

- Last updated on GMT

Related tags: Direct sales, Retailing

Global direct sales of cosmetic and toiletry products are growing
at a healthy 4 per cent, boosted by the opening up of the China
retail market and an increasing number of opportunities to buy
products over the internet.

Global sales stood at $15.4 billion (€12.7bn) in 2004, up by 4 per cent on the figure for 2003 that stood at $14.3 billion, according to a new report from Kline & Company. Entitled Global Cosmetics & Toiletries, says that the market accounts for approximately 10 per cent of the $150 billion world market.

With the rapid evolution of the direct sales market, tracking it has become a problem. This is mainly due to the rapid increase in the number of retail channels for the market that are constantly evolving.

Although the segment still chiefly concerns person-to-person sales, this is becoming diluted by a growing band of other channels that include informercial, catalogs and one the fastest growing channels, the internet.

The internet is encouraging all players to enter the direct sales channel, with some of the bigger names, such as the Body Shop, implementing successful internet sales programmes that are now making a significant contribution to global sales.

In both Europe and the US, the most established markets world-wide, big players such as Avon and Mary Kay have found it increasingly difficult to maintain their share of the market in the face of growing competition and choice.

Strong financial performances from Avon on an international level have been let down by falling sales in the all-important domestic market - a pattern that seems to have been repeated by all the major global players.

The solution to ebbing sales in the large established market has been to chase developing market. China has seen some of the biggest increases, as newly liberalized laws regarding direct sales kick in.

All the big players, including Avon, Oriflame and Amway, have been hovering in the wings, ready to pounce on the opportunity to resume door-to-door sales in China, following the opening up of direct sales trading laws on 1 December last year.

But despite the wait, direct sales still increased by 64.5 per cent between 2003 to 2004. Kline points out that this increase was because traditional retail channels are not so well developed for cosmetics and toiletries.

With retail outlets rapidly developing and the trade liberalisation, 2006 should prove to be a very interesting year for direct sales in this rapidly expanding market.

"In China, many consumers depend on direct sales as a way to get their beauty products because there may not be a store nearby,"​ says Carrie Mellage, industry manager for the Consumer Products practice of Kline's research division.

"Direct sales also allow people to socialize and have one-to-one contact, and this factor shouldn't be discounted,"​ she added.

Other developing markets where significant growth is being experienced include Brazil, Russia, Argentina and India.

"Especially in less established markets, direct sellers can reap the benefits of rapidly growing distribution without a bricks-and-mortar infrastructure. Since the number of sales representatives is a significant driver of sales, these marketers can generate strong growth through successful recruitment initiatives,"​ said David Vladyka, head of Kline's Consumer Products consulting practice.

But the report also points out that, despite opportunities existing for international direct sales players, the vast majority of sales are being generated by local players. With the exception of Avon, the world leader, most local players generate the majority, if not all of the sales, particularly in developing markets.

"Natura is strong in Brazil and is now expanding to other regions. And Jafra in Mexico; DHC, Pola, and Nu Skin in Japan; and Mary Kay and Proactiv in the US are all key direct sales companies in their local markets but are relatively smaller players abroad,"​ notes Mellage.

"With strong growth in direct sales expected to continue and opportunities booming in developing countries, these direct sales companies can reap the rewards,"​ she added.

Related news

Show more

Follow us

Products

View more

Webinars

Indie Pioneers Podcast

Indie Pioneers Podcast