May 7, 2006
The Home is Their Store
'Shopping Parties' Entice Hosts' Freinds to Spend
By Ylan Q. Mui
Washington Post Staff Writer
Sunday, May 7, 2006; Page F01
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 by the more mundane name of 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 the company recently hired a "comfort specialist" for the Washington area. 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. All of these companies have recruited teams of representatives, a la Tupperware and Avon, to push products in home settings.
"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. That number includes other well-known 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 it helps customers connect with their brands in a positive way. The parties, usually thrown by a company's female sales consultants for their friends and acquaintances, can be as much about socializing as they are about shopping.
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 has become a home for 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 more for it. The line costs about 15 to 20 percent more than its regular label.
"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 between the ages of 30 and 55, an underserved demographic that fashion retailers have just begun to tap, said division President Betty Palm. The merchandise follows fashion trends, such as "global village," which employs spice colors, and "nautical prep," which emphasizes gold chains and red, white and blue.
"Women are often overwhelmed by the breadth of product choices out there," Palm said. "They were really looking for someone to help edit."
Some of the 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 such product demonstration, Palm said. But most important, a salesperson can help translate fashion trends for the customer. And the fact that the two are often at least acquaintances may help clinch the deal.
"A lot of honest feedback that they got from their friends . . . made the experience more fun," Palm said.
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 the products themselves. Sales representatives typically are paid by commissions, and some may get perks for getting new representatives to sign up.
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 multimillion-dollar pyramid scheme that preyed on Cambodian immigrants. China recently re-opened its doors to Avon after banning direct-selling companies in 1998 following 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.
Binney & Smith Inc., which owns Crayola, launched its direct-sales division Big Yellow Box by Crayola in 2004 and has about 1,500 sales representatives across the country. The division sells craft kits featuring Crayola products that can be done with kids at a shopping party.
One of its most popular kits is the Dream Pig. The kit comes with a ceramic pig, Crayola paint, sponges and other art tools "to make him have all kinds of personality," said Sue Rusch, vice president and general manager of Big Yellow Box. The project is designed for parents to do with their children and sells for $39.95.
"We've already been in homes," said Rusch. "Parents just want more of Crayola in different ways."
Still, direct selling remains largely the province of small start-up businesses hawking sex toys or shampoo.
Andrew Shure, founder of Shure Pets, started his company in 2003 and decided to use the direct-selling model because of the passion -- some call it obsession -- pet owners have for their animals. His product line includes a dog stroller, car seat, even perfume. The average party sale is $400.
"My experience walking in these big-box stores is that the people may not be that knowledgeable about the products that are on the shelves," he said. "When I look at the party format, it's a fantastic opportunity for people to sit down and discuss the products."