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International Expansion Fuels Growth of Network Marketers
You won’t find their products on store shelves. Yet their sales account for a surprisingly large and rapidly growing chunk of the nutrition industry pie. They are network marketers (the politically correct term for multilevel (MLM) marketing companies such as Amway, Shaklee and Nu Skin),and they are expanding internationally at a rate any retail competitor would envy.
"Network marketers do a tremendous amount of education of consumers. It’s a very powerful distribution channel," said Loren Israelson, president of the LDI Group, a Salt Lake City-based consulting firm specializing in the nutrition industry. "They are obviously contributing to growth of the supplement sector.... but because they are not on the retail shelf and there isn’t a lot of national advertising, they are probably under-estimated and under-appreciated in terms of the size of their market, nature of the market, and growth potential." Israelson predicted, "It’s going to become an even more important distribution channel in the future."
In the United States alone, network marketers overall generated more than $16 billion in sales last year, accounting for 72.4% of all direct sales nationwide. Of the 700 to 1,200 direct sales companies in the United States, an estimated 79% are network marketing firms, according to the Direct Selling Assn (DSA, Washington, DC). Amway’s Nutrilite division, which generates more than a billions dollars in sales, is now the largest manufacturer of branded nutritional supplements on the planet.
Worldwide, direct sales companies raked in $80.3 billion last year in U.S. dollars, with network marketers accounting for perhaps $55 billion to $60 billion or more. "It’s growing faster than all other forms of retailing," reports Neil Offen, president of the DSA. Over the past five years, direct sales have risen 57.5% in the United States compared to 48.6% for mail order and 29% for non-store retailing such as telemarketing. Retail sales from fixed-store locations grew just 6.5% during the same period, according to the DSA.
According to the biennial survey of network marketing, Nutrition Business Journal sizes sales of dietary supplements and NPC products through the network marketing channel at $7.1 billion (global). Compared to international markets, the U.S. market is pretty saturated, and most companies have taken to quoting their global sales figures as U.S. sales stay flat and in some cases have eroded.
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