Sunday, August 22, 2004

Direct effect

Direct sales continue to climb

Howard Ludwig
Business Writer

Pet owners respect the opinion of Judy La Fave of Merrionette Park.

La Fave operates Missing U House & Petsitting, a home-based company which walks dogs while their owners are working or vacationing.

So when La Fave recommends a dog shampoo or a pet multivitamin, customers tend to follow her advice. After all, they already trust her with their pets and their house keys.

For these reasons, La Fave makes the perfect saleswoman for Chicago-based Shure Pets, a direct-selling firm which sells everything from pet shampoos to doggie sweaters.

La Fave became a Shure Pets saleswoman about two months ago. She sampled the products and then passed out the company's catalogs to her clients.

"I tried the shampoo, and I was so impressed because they (the pets) stayed nice and soft," La Fave said. "I am not going to sell something to my friends and clients that I don't like."

On La Fave's recommendation, most of her customers purchased something from the catalog, earning the pet sitter a 25 percent commission.

La Fave is one of 13.3 million people in the United States participating in direct selling, a category which includes person-to-person sales and in-home parties.

The $29.55 billion direct sales industry has seen 19 consecutive years of growth, according to the Washington, D.C.-based Direct Sales Association.

A number of new companies - including some in the south suburbs - have sprouted up with dreams of duplicating the direct-sales success of well-known businesses such as Tupperware Corp. or Avon Products Inc.

"There are a lot of companies that are trying to get into this method of product distribution, because it can really start out very small," association spokeswoman Amy Robinson said.

Shure Pets is among the start-up companies attempting to break into the direct sales industry, debuting its concept on Sept. 1, 2003, said founder Andrew Shure.

He believes many new companies are pursuing direct sales as opposed to lobbying for shelf space with established retailers such as Wal-Mart or Target.

"The retail business has changed. There has been a tremendous consolidation in retail," Shure said.

Large retailers rarely afford start-up companies an opportunity on their shelves and often demand rock-bottom prices from suppliers, he said.

Direct selling allows for more of a grass roots campaign.

Shure Pets has already recruited 270 salespeople, called "pet consultants," from 42 states. Shure predicts the company's sales force will be 500 strong by the end of the year.

JoAnne Dykhuizen of Tinley Park became a Shure Pets consultant on July 1 and has been busy handing out catalogs to family and friends.

Dykhuizen is planning a "pet party" in the near future, where potential customers and their pets are invited into her home to try out the Shure Pets products.

"It is fun. People love their pets," Dykhuizen, who has a golden retriever, said.

An opportunity to earn some extra cash motivated Dykhuizen and is also a motivation for most of the 35 salespeople with The ProShop@Home Inc.

The Orland Park-based company, launched in April 1999, sells golf equipment at backyard parties known as "invitationals."

Greg Qualizza started his home-based company after noticing a disproportionate number of direct sales companies focusing on female buyers.

The Direct Selling Association's research finds 79.9 percent of all direct salespeople are women. Cookware, cosmetics and jewelry are among the most popular products.

The ProShop@Home seeks to recruit men into direct selling by offering products aimed at male buyers as well as enticing party hosts with a free putter and a 7 percent commission on all sales.

"Initially, I just thought men never had a reason to go to a (direct-selling) party," Qualizza said.

He credits much of the company's initial success to a weak economy, leaving many men searching for ways to bring extra income into the household.

Each of The ProShop@Home parties average about $600 in sales. Companywide, Qualizza posted $27,000 in sales in 2003 and expects sales to double this year.

Chicago-based Entertain With Ease also seeks to involve men with their in-home parties selling specialty food and decorative tableware for at-home entertaining.

"Because of chefs like Emeril (Lagasse), men are willing to come to these parties," company founder Jodi Rosen Ablin said.

She launched Entertain With Ease on April 1 and has since recruited 16 consultants to sell her private-label products, which range from salad dressing to chip-and-dip bowls.

"Gone are the days of people pulling out their fine china for a dinner party. Today, it is more about just getting together for a barbecue," Rosen Ablin said.

She initially sought to debut her line of products with a storefront in Chicago's Lincoln Park community but instead decided to pursue direct sales.

However, she soon realized her tableware sold better once customers were given a demonstration on its uses. Foods also sold better after a taste test.

"I began to scratch my head a little bit and ask, 'Do I really need a store?'" Rosen Ablin said.

Further research from the Direct Selling Association found about 80 percent of people who attend a direct-sales party make a purchase, she said.

"I think at the moment, this (direct sales) is a really growing trend," Rosen Ablin said.

Tupperware found similar success back in 1948. After two years of disappointing sales at retail stores, the company debuted the first Tupperware home party.

Once consumers understood how to "burp" the airtight seal, sales soared and eventually the products were taken off store shelves entirely.

Today, Tupperware boasts 1 million salespeople in more than 100 countries. The company posted profits of $23.7 million, or 40 cents per share, in the second quarter, up from $14.1 million or 24 cents per share a year earlier.

However, sales for the latest quarter fell three percent, to $302. 1 million from $310 million for the same period last year.

Ted Allrich, founder of The Online Investor, said an increase in direct-sales companies may be cutting into Tupperware's business. He gives online financial advice.

"My speculation is there is a saturation point," Allrich said.

However, he also believes established direct sellers such as Tupperware and The Longaberger Co., a vendor of hand-crafted baskets, face increasing competition from traditional retailers such as Wal-Mart and Michaels.

Donna Hushka of Tinley Park has been selling Tupperware for 19 years. She hosts about three parties each week, including a monthly Tupperware bingo party.

The bingo parties are held at the American Legion hall in Tinley Park, where descriptions of the newest products are given between games of bingo.

"It (Tupperware bingo) offers people a chance to have a party, but they don't have to do it in their home," Hushka said.

She earns an annual salary of roughly $40,000 working about 25 hours each week for Tupperware. The company also pays for her car and insurance.

"It is a great job, and the money is so good," Hushka said. "Basically, it is a home-based business."

Hushka saw a surge in sales immediately after the Sept. 11 terrorist attacks when many Americans were staying home "cocooning." However, sales have slumped over the past two years.

She blames the many newcomers to direct sales for stealing some of Tupperware's customer base, but expects the established company to outlast many of the upstart direct sellers.

Hushka also believes that many of the Tupperware party attendees are as interested in socializing with other partygoers as they are in the products.

"A lot of the people don't get to see each other that often so it (the Tupperware party) is kind of like a girl's night out," Hushka said.

Noah's Ark Animal Workshop has amassed 69 salespeople in 15 states since its debut in March. Most of the direct sellers, called "crew members," are stay-at-home moms.

Many of these women are looking for an opportunity to get out of the house for several hours each week, as well as earn a few extra bucks, said Dina Amico-Kriescher, founder of Noah's Ark.

Crestwood-based Noah's Ark sells unstuffed animals at children's parties. Each kid selects an animal and fills it with handfuls of cotton stuffing - an in-home version of the Build-a-Bear Workshop stores found in area malls.

A party hostess can earn a 45 percent commission on all sales, which translates to about $100 for smaller parties and $400 for large groups.

Amico-Kriescher, a resident of Palos Heights, has been satisfied with the company's performance thus far, saying direct selling has exceeded her expectations.

"There is something to be said about doing business over the kitchen table," Amico-Kriescher said.