Walmart, Amazon Affecting Direct Sellers’ Wellness Business?

Last month, in its annual “Growth and Outlook Report,” the U.S. Direct Selling Association reported that retail sales of $34.9 billion for 2017 were down 1.8 percent from 2016.

The wellness product category, which has been the channel’s strongest category for several years—and which accounted for 33.8 percent of all sales last year—also saw a slight decline. This marks the first time since 2010 that wellness sales have decreased year over year.

Yet, it seems that wellness products are doing well overall. A report released last week by Shelton, Conn.-based firm TABS Analytics reported that vitamin, mineral and nutritional supplement (VMS) sales grew by an estimated $500 million, or 3 percent, during the past year. The firm’s 11th Vitamins, Minerals and Supplements Study noted that growth in the $14 billion VMS market was fueled by the addition of new hair/skin/nail and melatonin offerings and an increasing number of consumers who purchased products occasionally. The growth was also driven by strong growth at both Amazon and Walmart—which could be having a huge effect on the direct selling channel’s wellness business.

“Walmart continues to hold its leadership position in VMS sales at its brick and mortar stores, and it is showing online growth while Amazon remains at the top and continues to extend is lead in the eCommerce space,” said Dr. Kurt Jetta, president and founder of TABS Analytics. “These trends counter conventional wisdom that online sales are coming at the expense of purchases in physical stores. These two types of outlets do not need to be mutually exclusive; rather they both can continue to grow sales with the right approach to marketing and product mix.”

Key findings from the study included:

  • VMS sales reach new heights: This category continues to grow gradually, with penetration reaching 78 percent in 2018, its highest level in the history of TABS’s survey. Purchasing by heavy buyers (those who purchase 3+ types of products), which typically drive penetration, were flat in 2018. Most of the growth this year is attributable to a 2 percent increase in occasional purchasers (1-2 product types). Purchasing dropped among women ages 55+, who have tended to drive sales in the VMS market. This 9-point drop was offset by growth in purchasing by men, both younger (ages 18-54) and those 55+.
  • Walmart was the clear winner among brick and mortar outlets, with 39 percent of survey respondents indicating that they purchased VMS products there, up 7 percentage points from last year. Food also saw gains, up 3 percentage points to 18 percent and the other major brick and mortar outlets (including major specialty stores like GNC and Vitamin Shoppe) remained stable. Losers included Club (Costco and Sam’s) and the natural food channel.
  • Amazon remains at the top in eCommerce. While Walmart grows its online VMS business consistently, Amazon grew from a flat base in 2017 as 10 percent of survey respondents noted they made purchases through the online retailer. Another bright spot was Puritan’s Pride, showing solid performance as #3 eCommerce retailer as it effectively converted catalog customers to the online channel.

TABS Analytics’ VMS study was conducted in April 2018 by Caravan, part of ORC International, and was developed to examine trends regarding what types of vitamins and nutritional supplements are purchased, how frequently they’re purchased and at which outlets they are purchased. The survey panel included 1,000 geographically and demographically dispersed consumers. To view the report, click here.

Throughout 2018, TABS Analytics is conducting six studies across the consumer-packaged goods industry including: baby care, vitamins, wine & liquor, candy, food and beverage and cosmetics. It will be interesting to see how cosmetics sales relate to direct selling’s numbers, which also slightly declined in 2017.