Direct selling punches above its weight in a tough economy
A 5% decline in growth when most other markets would see decline in double digits is ‘no train smash’, says the Direct Selling Association
The direct selling industry in SA, which comprises 31 companies, has seen a 5% decline in growth as cash-strapped consumers tighten their belts.
The industry includes brands such as beauty products maker Avon Justine; homeware group Tupperware; and health and wellness company Herbalife. According to the Direct Selling Association (DSA), the industry, which has 1.3-million distributors nationwide, made R12.8bn in 2018, down from R13.5bn in 2017.
DSA director Mthunzi Mbali says the main reason for the contractions is that “primarily, the economy is shrinking”, causing consumers to buy fewer items. “When consumers are hard-hit, people now buy less on the basket with the money they have, as opposed to two years ago when they could get more goods in a basket.”
Another reason for the decline is a lack of investment and the rand exchange rate which continues to affect member companies.
However, DSA secretariat Imtiaz Ebrahim says a 5% decrease is no train smash. “Most other markets would decline in double digits in the same period. And not every company [in the sector] declined by 5%, there are certain companies that actually grew.”
Despite increasing unemployment in the country, the industry has also seen a 4% decline in the number of full-time employees with more people gravitating towards part-time employment. Ebrahim says there is a valid reason for this.
“To become a permanent direct seller, there is a fair amount of commitment required because, effectively, what you are saying is that I am cutting off all other channels of income to become a permanent direct seller. If you think about people that have been retrenched, and are trying different things, they never want to close their avenues down to the extent that they have one source of income; as a result, they choose to not go permanent.”
A growing industry
The industry has moved from 34 companies in 2016 to 31 in 2019. Beauty and cosmetic group Avon Justine is the second biggest player in the direct selling industry after Unilever.
With hopes of fostering further employment among women — in an industry that already comprises 74% women — Avon Justine recently launched an initiative that aims to provide women with sustainable earning opportunities while curbing the unemployment crisis.
Avon Justine director Nishani Singh said, “Our initiative … has significant potential to create a ‘knock-on’ employment effect.” She said many of the group’s beauty entrepreneurs have managed to grow to the point where they are able to create additional job opportunities for others. “This creates a positive social impact at a time when SA needs it most.”
Avon Justine business leader Nomsa Mtsweni is one of many women who have enjoyed the benefits of dabbling in the industry, having been a direct seller for over seven years. She says the industry has the potential to put more money in one’s pocket more than a full-time job. “The salary I earn in my part-time job is equivalent to what many people earn while working on a full-time basis.”
Avon Justine MD Mafahle Mareletse said in a recent interview that employment figures in the industry are bound to soar despite current economic tensions, given that direct selling is relatively easy to join.
“The barriers to entry are extremely low. You don’t need a qualification; the capital outlay is extremely low. For our business, it’s less than R100 to join and become a representative. All it takes is the will for you to say I want an additional earning opportunity or full employment opportunity,” he said.
Since the industry consists largely of sellers under the age of 35, digitisation is fast becoming “a tool to enhance direct selling” rather than threatening jobs, said Singh.
“Due to increasing internet penetration and smartphone adoption, e-commerce is on the rise in SA. Consumers are becoming increasingly comfortable with buying beauty products online and this is opening up a world of new opportunities for beauty entrepreneurs.”