The winter season is a critical time of year for retailers as performance during this time determines how healthy the concluding year will be and sets the tone for the upcoming year. According to recent data from the Federal Reserve Bank of St. Louis, consumer confidence is on the rise. Even more, the U.S. economy is continuing to slowly rebound from the recession and this year’s holiday sales are expected to be strong and show continued growth. However, recently released retail sales numbers over the last few months show a somewhat surprising overall decrease in sales of 0.4 percent from December to January.
One of the main reasons for this decline could very well be the weather, according to Harm Bandholz, chief economist at UniCredit Research: “Today’s data unequivocally show that the unusually cold winter weather is weighing on economic activity.” Many cold weather records were broken in January and consumers’ reluctance to venture out and buy discretionary retail items during these extremely cold and potentially dangerous conditions has taken a toll on the overall economy. As a result Bandholz adds, “Consumer spending has literally frozen.”
In fact, Evan Gold, senior vice president at Planalytics, a business weather intelligence company, estimates that the polar vortex that occurred in the first week of January cost the U.S. economy an estimated $5 billion. Ongoing cold weather and blizzards across the country since the first week of January are likely to have added much more to the impact. Furthermore, Richard Curtin, Director of the Thomson Reuters/University of Michigan Surveys of Consumers, said, “The not-so-good news is that the full impact on household budgets from the harsh winter has yet to be registered.”
That said, there is a silver lining. Gold notes there have been beneficiaries of this weather, including on-demand cable TV, restaurant delivery services and convenience stores, which indicates consumers are interested in being active, albeit closer to home. Curtin added, “The good news is that confidence proved resilient to recent government reports of weak growth in income and employment.”
This statement can be viewed optimistically for direct selling as historically direct selling has been particularly resilient to these types of economic hardships, as well as weather conditions. One of the main reasons for this is direct selling’s evolving sales methods. In DSA’s recent Sales Strategy Survey, 82 percent of respondents said they expect online sales to increase as a percentage of overall sales over the next five years. Similarly, 71 percent expect an increase in the sales percentage accounting for autoship over the next five years. These growing strategies for distribution, in addition to in-person sales, provide reps with a full arsenal of options that keep the sales coming in, despite adverse weather conditions.
Another important factor is that during hard times, people are more likely to stay with family and friends close to home, and extreme cold weather and blizzards are certainly no exception. The social element of direct selling makes it convenient to have parties and interact with reps close by.
How macroeconomic trends like adverse weather affect the direct sales channel is a crucial part of understanding the industry. Participating in DSA’s Growth & Outlook Survey will help DSA demonstrate many key industry dynamics including:
- Industry performance over time and within the context of the overall economy
- Overall industry size in terms of estimated retail sales and number of direct sellers
- Operating benchmarks
- Underlying socio-economic impact factors that will help uncover how the industry’s overall contribution to the U.S.
The quality of the results reported out from this year’s survey are completely dependent on the level of participation we get from member companies. Please work to ensure your company completes the Growth & Outlook Survey by the fast-approaching March 7, 2014, deadline. Contact DSA Market Research Manager Ben Gamse with any questions regarding the survey.
Source: Direct Selling Association