To buy and sell in the comfort of a home setting--that's the
heart of the direct-selling industry. From kitchenware to vitamins
to cosmetics to stamps--if it can be made, it can likely be sold
via the direct-sales route. Today, direct selling is usually
characterized by an independent consultant with a portable kit of
wares. The sellers visits people's homes by appointment to have
home shows where items are displayed; customers invite family and
friends to share in the demonstration. The latest available figures
from the Direct Selling Association (DSA) show retail sales of more
that $28 billion for the direct-selling industry in 2002-and an
estimated 13 million independent direct salespeople across the
country. This is an increase from about $22 billion in 1997, with
9.3 million salespeople.
How has this industry evolved? "There are five elements I
see," says DSA president Neil H. Offen. "We have a lot
more people involved, we're more sophisticated as an industry,
we have more college graduates [as consultants], we're very
global and international, and we're [now] very attractive to
Wall Street investors and VC groups."
Direct-sales consultants, though still primarily made up of
women, are becoming more diverse. Offen notes that the male
contingent is steadily growing; 25 percent of consultants are men,
compared with 10 percent in 1990. Offen attributes this change to
the pervasiveness of new products on the market--vitamins, food
supplements, long-distance telephone service, etc.--that are not
seen as typically female-centric products like cosmetics or
housewares.
The Stigma
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Even with all the growth, entrepreneurs in direct sales often
have to deal with the stigma that direct-sales opportunities are
like pyramid schemes. Pyramid schemes require participants to lay
out cash for the right to recruit others. Usually, no product is
involved, and profits for those at the top levels of the pyramid
come solely from new recruits who join at the bottom. Direct sales,
on the other hand, involves selling legitimate products or
services, the profits from which go to the seller and his or her
recruiter. At the higher levels of a direct-sales company,
consultants usually have a group of recruits selling below them,
from which they receive commissions--also known as a downline.
Savvy direct sellers would benefit from distinguishing
themselves from pyramid schemes. The DSA can help them do this:
According to Offen, the DSA acts not only as an industry advocate
in Washington, DC, but also as a watchdog. It helps set the
standards by which direct sellers should abide, from instilling a
90 percent inventory buyback clause for all DSA members (meaning
consultants don't lose huge amounts of money on unsold
merchandise if they choose to leave) to issuing warnings about
high-pressure selling and pyramid schemes. The result is more
entrepreneurs coming into the direct-selling fold.
Leslie Caperton, an executive-director-level entrepreneur with
The Pampered
Chef in Gainsville, Virginia, entered the direct-selling field
part time in 1994. Selling specialty kitchen and cooking aids,
Caperton, 40, came from an insurance background. After attending a
Pampered Chef home show in 1994, she was impressed by the array of
products as well as the discounts and rewards she received as a
hostess a few months later. "That got my attention," she
recalls. "I said, 'I think I'm going to do
this.'"
Wanting to try something with a flexible schedule, the
direct-selling avenue seemed to be a perfect fit for
Caperton--though she confesses that, at first, balancing her time
between planning, doing home shows, and recruiting and training new
consultants was a big challenge. Since her business is equally
involved with selling directly to customers and recruiting new
consultants, she has been able to go from merely supplementing her
income to grossing a projected $3.7 million in sales with her group
of consultants this year. And she debunks the notion from outsiders
who think only a few people at the very top levels of the company
make money: "The first month I was in [the company], I made
our [monthly] car payments."
To alleviate customer concerns and distance her business from
any possible stigma, Caperton emphasizes customer satisfaction and
product warranties. "In selling something," she says,
"I want the [parent] company to back that product."
That's key in whether or not a company is legitimate, says
Offen, DSA president. Ask them what kinds of warranties and
protections they offer; ask their current consultants and customers
how their problems and issues are treated. And even if a company
has a good track record, make sure you absolutely love the product
or service you'll be selling, because that will determine how
successful you are.
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