'Shopping party' sales expand
By Ylan Q. Mui
By Ylan Q. Mui
WASHINGTON —Retailing's biggest names are throwing a party and it's BYOW: Bring your own wallet.
That's because it's a shopping party, better known in the industry as direct selling and once the sole province of Tupperware and the Avon lady. But recently, established brands have rediscovered the concept as they search for ways to connect with busy, and often fickle, customers.
Crayola jumped into direct selling two years ago with a division called Big Yellow Box. Jockey's Person to Person launched last year. And in March, Jones Apparel Group, which owns Nine West and Barneys New York, started Million Wishes to sell fashion accessories at home shopping parties.
"A growing number of companies recognize the benefits associated with direct selling —low overhead, robust cash flow, a highly motivated workforce and loyal customers, among others — and are diving into the direct-selling market," said Neil Offen, president of the Direct Selling Association.
According to the trade group, membership last year was 265 companies — up from 204 five years ago. Members include other brands such as the Body Shop and the Pampered Chef. The industry racked up $29.73 billion in sales in 2004, the last year for which data are available. In 1994, sales were at $16.55 billion.
Several retailers said direct selling is attractive because parties can be as much about socializing as they are about connecting with brands.
Often, established companies will create separate, higher-priced lines of merchandise for their direct-selling divisions to avoid competing with their products sold in stores. Direct-selling lines can include merchandise that may be complicated to use and require a trained salesperson to demonstrate.
At Jockey, the direct-selling division carries fancy undergarments that didn't fit the brand's traditional comfort-first image, said Kim Gentile, vice president of sales. The Person to Person line allows Jockey to branch out into silky microfiber and rayon fabric made from bamboo — and charge 15 percent to 20 percent more for it.
"This is a chance for us to offer fine fabrics, wonderful details, laces on the bras," Gentile said. "A lot of times, people will look at our products and say, 'Wow, that's Jockey? I had no idea.' "
Jones Apparel Group is using its Million Wishes division to target women in the 30-55 age group, an underserved demographic, said division President Betty Palm. The merchandise follows trends, such as "global village," with spice colors, and "nautical prep," which emphasizes gold chains and red, white and blue.
Some products created for the Million Wishes line require a tutorial to use, such as a multi-strand necklace that can be taken apart or a black belt with several buckles. Direct selling allows product demonstration, Palm said. But most important, a salesperson can help translate fashion trends for the customer. And the likelihood that the two are often at least acquaintances may help clinch the deal.
But that same element has also given direct selling a bad reputation, as friends can sometimes feel pressured to buy or, in some cases, start selling products themselves. Sales representatives typically are paid by commissions; some may get perks for signing up new representatives.
That structure makes it an easy mask for pyramid schemes, which focus on recruiting rather than selling products. It is illegal to pay a representative for recruitment.
This month, three executives of Boston-based World Marketing Direct Selling Inc. and One Universe Online Inc. were charged in federal court with operating a pyramid scheme that preyed on Cambodian immigrants. China recently reopened its doors to Avon after banning direct-selling companies in 1998 after a rash of pyramid schemes.
Industry growth peaked in the mid-1990s but has trailed total retail sales growth for several years, according to data from the Direct Selling Association. Still, the volume of direct sales has increased every year for the past decade, and the entry of well-known brands into the industry has helped restore its credibility.