By Dr. Robert A. Peterson

Direct selling is a business model that offers entrepreneurial opportunities to individuals who, as independent contractors, market products and services to consumers, typically outside of a fixed retail establishment through one-to-one selling, in-home product demonstrations, or online. Direct sellers are called distributors, representatives, consultants, associates, or various other titles. They may participate in direct selling in various ways, including selling products and services themselves or through their sales organizations, providing training and leadership to their sales organizations, referring customers to their company, and purchasing products and services for personal use. Compensation is ultimately based on sales and may be earned through personal sales and/or the sales of others in their sales organization.

In 2022, direct selling generated $40.5 billion in retail sales in the United States—the second-highest in direct selling history—and involved an estimated 6.7 million individuals who were actively engaged in building their own direct selling businesses and/or earning supplemental income.

Despite its ubiquity and contribution to the economy, the full economic impact of direct selling in the United States has not been formally or comprehensively assessed for nearly a decade. Therefore, the purpose of the present analysis was to estimate the economic impact of direct selling activity in 2022 through the application of an input-output economic model. Given the retail sales generated by direct selling (i.e., its Direct Effect), the model (implemented by means of IMPLAN^® software and data) estimated the:

• Indirect Effect (upstream or supply chain sales) due to direct selling and
• Induced Effect (downstream sales due to household spending) associated with the Direct and Indirect Effects.

These three effects—Direct, Indirect, and Induced—collectively represent the economic impact of direct selling activity on the nation’s economy. In addition, the analysis estimated the fiscal (tax) implications of direct selling activity in the United States.

Executive Summary

An input-output economic analysis of 2022 direct selling sales activity was undertaken using IMPLAN^® software and data obtained from the federal government.^[1] Direct selling (retail) sales data were provided by the Direct Selling Education Foundation. The purpose of the analysis was to estimate the economic impact of direct selling activity in the United States in 2022. To provide a context for interpreting the 2022 economic impact of direct selling activity, the economic impact of direct selling activity in 2004, 2010, 2015, and 2016 was also investigated.

Results are reported in terms of Direct, Indirect, and Induced Effects using a measure of gross economic output sales dollars. Gross economic output refers to the cumulative value of production. Unlike Gross Domestic Product (GDP), gross economic output includes intermediate goods and services. (GDP is synonymous with total output less intermediate inputs.)

Using the Direct Selling Education Foundation estimate of $40.5 billion in direct selling (retail) sales in 2022 as a starting point, the total economic impact of direct selling activity in the United States in 2022 was estimated to be $111.4 billion. The $111.4 billion economic impact consisted of:

• The Direct Effect of direct selling, $40.5 billion
• The Indirect (upstream or supply chain) Effect of direct selling, $31.0 billion, and
• The Induced (downstream or household) Effect of direct selling, $39.9 billion.

Because of (1) the analytic approach and (2) the nature of the industry (i.e., the widespread use of independent contractors), the total estimated economic impact of $111.4 billion should be considered conservative.

The derived multiplier emanating from the IMPLAN^® analysis was 2.75. This multiplier means that nationally $1.00 in direct selling (retail) sales produced an economic impact of $2.75 in 2022. The 2022 derived multiplier is 18 percent larger than the 2016 derived multiplier (2.34) and 24 percent larger than the 2010 derived multiplier (2.21). These increases were primarily due to increases in the Induced Effect across the respective years.

In 2022, the economic impact of direct selling activity produced an estimated $9.5 billion in federal taxes and $6.0 billion in state and local taxes, or $15.5 billion in total taxes. This represents an increase of $4.9 billion (a 46% increase) in tax revenue from 2016. The total value of direct selling activity (i.e., the Direct, Indirect, and Induced Effects) added to the nation’s Gross Domestic Product in 2022 was estimated to be $111.4 billion, which represents an increase of $28.3 billion from 2016 (a 34% increase). Read full paper →

^[1]  IMPLAN® is widely used in industry and government analyses. See www.implan.com.