How Seasonal Is Your Business?
Managing a business with strong fluctuations due to seasonal factors is not an easy thing. The highs and lows during the year have serious impacts. Lean months mean running at lower capacity and peak months getting out-of-stock or providing poor services. Neither is desirable.
Direct selling industry is not known to be immune to seasonal fluctuations. We tend to accept that summer and severely cold winter months as generally low in business, mild winters months, autumn and spring as high. But does this coincide with the reality or is it an over-generalization?
Below is a chart that shows the quarterly sales volumes of eight direct selling companies: Avon, Herbalife, Nature’s Sunshine Products, Natura, Nu Skin, Oriflame, Tupperware, and USANA. The data here represent the averages of the last five full years (i.e. 2009, 2010, 2011, 2012, and 2013).
Here are the outcomes of this analysis that I find interesting:
Among the eight companies, there are three that seem to have not felt any serious impacts: Herbalife, Nature’s Sunshine, and USANA. Nature’s Sunshine stood out in this analysis as a unique case with no differences in its quarterly sales, on the average.
As the figures show, Natura is being impacted by the seasons the most. The difference between the averages of the highest and the lowest quarter is nine points (29%-20%) for Natura. The leanest quarter for Natura is Q1 which is summer in South America, where Natura’s huge chunk of business comes from. So, this also tells us Natura gets the hardest hit in summer months as compared to the other eight.
As far as the difference between the best and the worst quarters, Nu Skin follows Natura with a variance of eight points (29%-21%). In fact, Natura’s and Nu Skin’s quarterly sales distributions follow almost the same trend. A very interesting observation as these two companies’ markets are quite different (Natura=Brazil, Nu Skin=Asia).
Oriflame’s obvious weakest quarter is Q3. This was the same in all of the five years under analysis. Oriflame could produce, on the average only 21% of its yearly volume in these three months.
And last but not least, we can easily say Q4 is the strongest quarter for all but Nature’s Sunshine.
So, how seasonal is your own business? If your business is getting undesirable winds, what are you doing to counter them? Have you considered launching other product categories or launching your business in markets that have different trends?