Direct-Selling Industry Enjoys More Sales With Extra Salespeople
As more people look for ways to earn extra income during the recession, they are joining companies that sell products door-to-door or through home parties
LOIS BALLARD of Ogema, Minn., found she couldn't make a living as a dairy farmer. So five years ago she joined Watkins, a direct-selling business, and began peddling a diverse line of products ranging from spices to health-care products to barbecue sauce."We've just sold our dairy cows off the farm to work for Watkins's business. We made more money in Watkins than we did in milking cows," says Mrs. Ballard in a telephone interview. Using the sales method made famous by Tupperware parties, Ballard gathers a dozen or so people into a home, provides refreshments, and introduces them to Watkins products. Sales at a typical gathering average $150 to $200, she says. With a 53 percent markup on her sales, she made $15,000 on a part-time basis last year. Ballard is one of a growing number of Americans involved in direct selling, in which the individual seller acts as the intermediary between wholesaler and consumer, thus avoiding many of the overhead costs associated with a retail operation. Growing ranks The industry sales force has risen from 3.9 million in 1988 to 4.2 million last year, according to Neil Offen, president of the Direct Selling Association (DSA). Hard economic times have contributed to this growth, as more people try direct-selling as a way to earn extra income, Mr. Offen says. But he cautions that the direct-selling industry is not recession-proof. In the 1974-75 and the 1981-82 recession, the industry was adversely affected and sales were flat. Since 1987, however, the industry has grown 10 percent annually, Offen says. Industry sales reached $12 billion in 1990, versus $9.7 billion in 1988. William Nicholson, chief operating officer of Amway Corporation, credits the growth in part to corporate layoffs in 1985-86. Amway, one of the nation's biggest direct-selling companies, had $2.2 billion in sales last year, he says. Ronald Curhan, professor of marketing at Boston University, says he is not convinced that sales of the direct-selling industry are up. He notes that it is hard to verify sales figures of direct-selling companies, since most of them are privately held and do not issue quarterly reports. Mr. Curhan says door-to-door selling has become more difficult because people won't open doors to strangers for security reasons. "Fuller Brush men who knock on the door and sell you brushes - that might still work in Japan today but it doesn't work in the United States today." In Japan, automobile salesmen come to customers' homes, Curhan says. Some Watkins dealers sell door-to-door, but Ballard says that is not her favorite way of selling. She prefers to make a telephone appointment before visiting a customer's home. Ballard seeks new customers through her friends and family members, and through word of mouth. But not everyone is cut out for this kind of work, Curhan warns. Some people are extremely successful at this job, he admits, but thousands of others have held one or two home parties and then given up because they could not find new customers. Offen says the direct-selling industry has penetrated slightly less than 1 percent of the total retail sales market in the US. So he sees plenty of market potential. Typically, people enter direct selling by inviting close friends and family members to a home-party, and asking these friends for names of others who might be interested in the products. Each day, direct sellers give an estimated 50,000 in-house and workplace shows in the US. There are about 650 direct-selling companies in the US, the DSA says, of which 100 are members of the association. Offen says the DSA has lawyers screening potential members for ethical business practices. This is done in part to counter worries about "pyramid" organizations in which a company makes its money primarily by selling its products to a hierarchy of sales people rather than to consumers. Seller beware Dawn DiMartino, spokeswoman for the Better Business Bureau in Boston, says people thinking about joining a direct-selling business should be sure to get all the facts about the company, its managers, its products, start-up costs, and the company's policy on buying back merchandise that is returned or not sold. And the sales work is no cake-walk, Ms. DiMartino says. "It's not something that you can get rich [at] by allocating two or three hours a day," she says. "There is a lot more toil that goes into it." Marilyn Derrah, a mother of three who has been working for Lady Remington Fashion Jewelry for nine years, says there are about eight to 10 women in her home jewelry parties, and each guest purchases an average of $47 to $65 of jewelry. Last year she made $25,000 working on a full-time basis. She says some saleswomen for Lady Remington have made six-figure annual incomes. In addition to selling jewelry, she offers tips on how to wear jewelry and scarves. She has held sales parties in a half-million dollar house in Andover, Mass., and in government housing projects in Dorchester - part of Boston. During the recession, people "cannot afford a new home or new car, but they can afford a piece of jewelry under $50 - and it's going to make them feel better," Mrs. Derrah says. Her Bensenville, Ill., supplier of jewelry, Lady Remington Fashion Jewelry, experienced a sales increase of 28 percent in 1990 from 1989, says John Kiple, the company president.