I saw an interesting segment on the TODAY Show this morning – an interview with Wal-Mart’s new CEO, Mike Duke. Among other things he talked about various product categories that are doing particularly well during this economic period that has few bright spots. It caught my attention because many of these same products (or products that consumers are choosing as alternatives) make up a large percentage of products sold through direct selling – thus underscoring the reason why direct selling has historically performed well during recessionary periods.
For example, Mr. Duke said health and wellness products are a particular bright spot, he theorizes because people feel they need to take better care of themsleves as they can’t afford to be sick or miss work. Wellness products account for nearly a quarter of sales in direct selling. Let’s face it – people aren’t willing to give up their favorite vitamin, even if they are cutting back in other areas. Based on Mr. Duke’s experience, there are also many others who might be adding wellness products to their regular routine.
There may be a similar mindset when it comes to other products – “The Lipstick Factor” has become a popular buzz word, but it really applies to more than cosmetics. It applies to any product that a consumer views as a “little luxury” that makes him or her feel better but doesn’t put a huge dent in the pocketbook. In the case of direct selling, this could be cosmetics (which I’ll tell you would not be the first thing most women would cut from their shopping list!), costume jewelry, home decor or a variety of other items.
Mr. Duke also noted with some surprise that electronics were doing very well. He attributes this to the fact that so many families are opting to stay at home instead of going out so they tend to spend money on the latest video game as home entertainment instead of eating out or taking a vacation. The increase in the home products category underscores this observation and applies to direct selling in categories such as home decor, and food products and associated kitchen accessories. (Really, who wants the boring meatloaf grandma used to fix when you can have gourmet meatloaf made with a simple mix, accompanied by hand-smashed potatoes, covered with freshly grated cheese and twice-baked in an attractive stoneware dish? – still cheaper than eating out and you can feel good about the meal while spending quality time with your family.)
The one area cited in a Wal-Mart press release that does seem to be significantly different in direct selling is the jewelry category. The release states jewelry sales have been soft, but anecdotal reports from several direct selling companies in this category have indicated strong sales. This is likely do to consumers who are not stopping their spending altogether, but are instead making different choices. For example, a consumer might forego buying a new suit, but instead decide to accessorize the one she already has with a $25 necklace. That little luxury is enough to satify the consumer in all of us but keeps total spending in check.
Wal-Mart may be the biggest traditional retailer in the country (with about 1.4 million associates), but direct selling’s 15 million salespeople make up an important part of today’s economy and will play an important part in recovery. As people tend to stay closer to home, their buying habits shift and direct selling offers relevant and appealing products and services, a comfortable shopping environment with knowledgable salespeople, and even a brief escape from all the negative economic news. It’s only a matter of time before Americans are spending full-tilt again, but until then direct selling offers appealing buying options and a way to earn supplemental income at exactly the time when people need reasons to be hopeful.