The other social network boom

While bricks-and-mortar retailers lose market share to more nimble online stores, old school direct 'party plan' sellers enjoy the spoils.

Quizzed on a fresh business idea back in the '90s, the late founder of The Body Shop Anita Roddick memorably answered: “The greatest sickness in our society is loneliness and if any one of us has a product or a store that counteracts loneliness, then we will have a business that will last forever.”

Mark Zuckerberg sure paid attention.

And over in retail, direct sellers -- sometimes known as party plan sellers – were also on to something.

As department stores and other traditional retailers battle with the price transparency, lower overheads and convenience offered by internet stores, brands with a sales strategy championed by the likes of Tupperware and Avon decades ago are booming.

The direct-sell method brings the retailer and physical product right into the home of the buyer and his or her friends.

This shopping experience is akin to a small party, usually complete with platters of food and, more often than not, some bubbly. The representative makes a sales pitch, and you watch your friends spend away. After the second glass, that eco-friendly mop for hundreds of dollars seems an essential purchase.

It wasn’t the usual dull and solitary shopping experience. You had fun.

Worldwide, direct selling turnover is estimated at over $191 billion a year, up from $147bn in 2012. Here in Australia, its market share in complementary healthcare, for example, is an eye-catching 23 per cent.

Seemingly vulnerable to competition from online sales, the party plan method has defied the doomsayers, with brands such as Tupperware and Thermomix thriving.

Direct-selling whiz Vorwerk, maker of the aspirational German-designed kitchen appliance Thermomix, sold 50,000 units in Australia last year, opened a state-of-the-art head office and warehouse in Perth, and upped its consultants by 30 per cent. At almost $2,000 a pop, that’s annual sales of $100 million.

Howards Storage World began its bricks-and-mortar franchise in the 1970s and moved online in 2008. And now, Howards has launched a new sales channel via direct home selling called 'Howards at Home,' its website promising "We will ensure that you have fun with your friends."

“It’s actually entertainment. There’s no question about it. It is often a catch up as much as anything else,” says Mark Kindness, senior manager at Howards at Home. Direct selling will increase Howards' brand awareness by capturing customers otherwise missed, such as families reluctant to bring young children instore and older buyers. For consultants, "It’s a social outlet but it’s also lucrative,” Kindness says.

The most recent estimates peg more than 96 million people involved in direct selling globally, with the US and China the biggest markets.

Sales by members of the Direct Selling Association of Australia (DSAA), which estimates two million home and office visits by direct salespeople each month, reached $1.5bn in 2013, via around 500,000 independent sales people. Women account for 80 per cent of salesforce, most working part time.

A quarter of DSAA members deal in complementary healthcare products, another quarter deal in cosmetics and personal care products, and a fifth sell household goods.

The touchy-feel style of a party plan business is not wasted on employees. Rewarding staff, a practice often neglected by store owners, is prioritised. Commissions of around 30 per cent are commonplace, and other perks include annual holidays, extensive training and product discounts.

Linen retailer Lorraine Lea says its consultants can earn up to $750 a week from three parties and say it has a party sales average of $1,025. Lorraine Lea holds over 40,000 parties and sells to over 300,000 customers in Australia and New Zealand.

As rents rise and sales flatline for the likes of Myer, direct selling offers a low barrier to entry for small and medium-sized businesses, and the web makes processes more efficient. An iPad ordering app saves consultants 30 per cent of their time per party, Lorraine Lea says.

While direct selling may be regarded as only a notch up from the travelling salesman in terms of cachet, that hasn’t hurt the bottom line.

“Retailing is one of the oldest professions. There has never been a historic respect for it. Yet it can be one of the most exciting because it is often dealing right at the community level,” noted The Body Shop’s Roddick.

Related Articles