By Emma L. Carew
Washington Post Staff Writer
Tuesday, July 28, 2009
Mary Kay, Pampered Chef and other direct sellers aren't just pushing people to buy these days. They're trying to get them to sell.
Even as the industry made famous by the Avon lady and Tupperware parties struggles with falling consumer demand, its best-known companies are actively recruiting sales representatives by offering the prospect of extra income during uncertain times.
The companies' efforts have had noticeable effect. Pampered Chef reported a 10 percent year-over-year increase in new sales consultants in the second quarter, while Mary Kay and Avon saw 22 and 20 percent increases, respectively, during the first quarter compared with a year earlier.
Concerns about job security led Carolyn Holcomb, a teacher at the private Visitation Academy in Frederick, to start selling Pampered Chef kitchen products in April. Holcomb said she was worried about looming college tuition for her three teenagers.
"If suddenly all the parents decide, 'We just lost our job and we can't afford to pay tuition,' there goes my job," she said.
Direct sellers' business models depend largely on sales representatives who host parties at friends' or clients' homes, demonstrating and selling products such as cosmetics and kitchenware. The companies have taken advantage of previous recessions to build their sales corps.
"One comment I continue to hear from our new beauty consultants is 'I can't get laid off,' " said Rhonda Shasteen, chief marketing officer at cosmetics maker Mary Kay. "I think that's something a lot of women are not feeling right now, they're not feeling in control of a lot of things."
Many recent entrants into the field have turned to direct selling because of a lack of traditional employment opportunities, according to David Koehler, a professor of marketing at the University of Illinois at Chicago.
"People are using this as a revenue stream that normally wouldn't consider this an option," Koehler said. "Because of the recession and lack of traditional opportunities for jobs, you're seeing direct-selling businesses taking off."
Starting a direct-selling business doesn't cost much, and representatives can work part-time, making it attractive to people who otherwise might have looked to now-scarce retail jobs to supplement their income. And the companies don't have to pay for office space, pensions or health benefits for these employees, meaning they're relatively cheap hires.
"The cost to add these additional sales reps is relatively low for both sides," said George Van Horn, a senior analyst at Los Angeles-based research firm IBISWorld.
However, additional sales representatives have not translated into increased revenue for the companies. The Direct Selling Association, a D.C.-based trade group, reported that industry sales were 5.8 percent lower in 2008 than in 2007. Avon said its revenue in North America fell in fiscal 2008, and Tupperware saw sales decline in the second half of last year.
Daniel Butler, vice president of retail operations for the National Retail Federation, said that while direct-selling businesses may have lower costs than retail stores, they have been impacted by factors such as fuel prices and marketing costs.
"I don't think any company is recession-proof," he said. But he added that all the newly recruited consultants do add to the businesses' growth potential.
Angie Sherman of Alexandria has had a Pampered Chef business for 10 years, and she said she frequently hears women at shows saying they can't afford the items on display.
"They all start dishing their dirt. I hear what's going on in their life," Sherman said. When she hears of troubles caused by unemployment, sick parents and divorce, Sherman suggests the women host their own shows. Hosts, she explains, can earn free products based on how much people buy at their shows.
Sales representatives earn a percentage of each item they sell (for Sherman it's about 23 percent), and the amount can increase over their careers. If they recruit representatives and become a manager or leader, they are eligible for a percentage of those representatives' sales as well. (For Sherman, it's 3 percent.) They can also earn commission by selling through the companies' Web sites.
Sherman has 10 to 12 shows a month, up from four to six a year ago. Her monthly income has grown to nearly $4,000 from $2,500, she said.
Sales associates also can earn more by recruiting representatives. Each company's practices differ, but recruiting and managing sellers can provide extra income through additional commissions, bonuses or increases in the manager's profit of her own sales.
Evangeline Young of Southeast Washington has been selling Avon products since 1980. After her sales dipped by as much as half in February, she stepped up her recruitment of sales force members and new customers. She used to leave catalogues outside her door for people to pick up, but now she hands them out and talks to potential customers wherever she goes.
"Some just say, 'Yeah, I'll take the book,' and the next thing you know, you'll get a call," Young said.