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Door-to-door selling grows up.

Last year 32-year-old Aaron Ulysses Parnell shelled out more than $7,000 for air fare, plus another couple of thousand for spending money, and took his wife on a month-long tour of Yemen. The exotic vacation was made possible for Parnell, a physical fitness consultant who lives in San Mateo, Calif., by his part-time work in direct sales.

In 1991, Parnell earned an extra $7,000-8,000 by selling, and recruiting others to sell, personal-care products manufactured by Nu Skin International Inc., based in Provo, Utah. He considers the 15 to 18 hours a week time well spent. "I could work at a fast food restaurant and make maybe an extra 20% of my monthly income--and my life might not be better. With Nu Skin, I've been able to make an extra whole month's income, with fewer hours invested. And my family is closer."

Parnell is not the only one to turn to direct sales for extra income. At a time when the U.S. gross domestic product (GDP) is slogging along at a 2.6% annual increase, direct selling is a 9% growth industry. In fact, direct sellers accounted for $12.96 billion in 1991 retail sales (mainly household and personal-care products), up from $11.82 billion in 1990, according to the Direct Selling Association (DSA), a Washington, D.C., trade group representing 105 companies that manufacture and distribute goods and services sold directly to consumers.

However, only a lucky few make the fortunes promised in the promotional literature, however; most direct sellers use the extra money to supplement their regular income. And if you are considering the field, be wary. Most companies are reputable, but some are not. Check a potential employer carefully.

In 1991, some 5.1 million Americans were involved in some form of direct sales, up from 4.7 million in 1990, according to the DSA. A full 89% of direct sellers do sales work only part-time, which means they either are homemakers or have other jobs. (Women account for 90% of all sellers.) The DSA believes that the industry has grown because it offers consumers detailed explanation and demonstration, as well as convenient delivery, of the products being sold. Because of an unstable employment economy, the DSA also belives that direct sales provide people with an opportunity to make additional income on the side.

Black people in particular have found career opportunities in sales even when other doors have been closed to them. (About 12.5% of direct sellers are African-American.)

Newlyweds Shirley Bradley- and Delmar Carmack have found direct sales lucrative. They were attracted to Diamite Corp., headquartered in Milpitas, Calif., because the organization boasted a high percentage of African-American distributors. "I had been involved in several other direct sales companies prior to Diamite," says Shirley. "But I didn't feel that they really promoted the mental and social freedom that you needed. The opportunity to work with somebody of my own ethnic origin allowed me the freedom to help empower others." The Carmacks are now one of Diamite's leading success stories.

Structure Of The Industry

Direct sales is a general term that covers the methods manufacturers use to distribute their products to consumers without first shipping the products to conventional retail outlets. Indeed, almost all direct sellers are home-based business owners who are contractually prohibited from stocking products on retail shelves.

The industry is segmented three ways:

Direct selling, which usually means one-on-one, rep-to-consumer sales. That used to mean going door-to-door. Today, it may also mean setting up personal sales visits or product demonstrations by phone. Avon Products is the best-known example of one-on-one selling.

Multilevel marketing, now often called network marketing, involves selling both the products and the business opportunity associated with selling the products. In MLM, as multilevel marketing is often called, product sellers also make money through bonuses or commission overrides on retail sales made by additional salespeople they sponsor or recruit into the sales organization. Amway Corp., the MLM industry leader headquartered in Ada, Mich., accounts for $3.9 billion in annual sales. Diamite, the source of the Carmacks' success, also uses the MLM method.

Party plans, whereby groups of customers are treated to product demonstrations and invited to order products that have been demonstrated. Tupperware parties, for example, are a household word.

Of the three methods, one-on-one selling is the most popular technique for making product sales, and accounts for 70.1% of the industry's dollar volume. But, while all direct sellers make money on the difference between retail and wholesale product prices, most direct-sales companies also have a commission structure that rewards the "downline" recruitment of additional salespeople into their system.

George C. Hescock, executive vice president of DSA, says the multilevel segment of the direct sales industry has experienced the highest rate of growth in recent years. About half of all direct sales are made via MLM, and the "vast majority" of all new direct-sales companies have an MLM structure. The main reason for this trend, according to Hescock, is that "it gives people an opportunity to multiply their own efforts and make their own business grow."

The DSA and the Multilevel Marketing International Association (MLMIA) estimate that some 12 million people are engaged in multilevel sales worldwide. Doris Wood, president of MLMIA, based in Irvine, Calif., estimates a 30% annual growth rate for MLM sales in recent years. But precise measurements are difficult, because the industry is changing rapidly. "We also see many new start-ups that we haven't seen in the past," says Wood, who cites MLM programs started by Gillette Co. (via its Jaffra products), US Sprint Communications Co. and MCI (in a venture with Amway).

According to Hescock, the lines between direct-sales concepts "have become blurred. Party-plan companies are doing one-on-one sales, multilevel companies are doing product demonstrations and one-on-one sellers are recruiting."

The following are five leading companies that represent distinct approaches to today's direct-sales marketplace.

Avon Products Inc., 9 W. 57th St., New York, NY 10019; 212-546-6015. Started: 1886. Annual sales: $3.6 billion worldwide; $1.4 billion in the United States. Number of active distributors: 1.5 million; 425,000 in the United States. African-American representation: approximately 13%. Products: Mass-market women's cosmetics, fragrances, bath products, fashion jewelry. Start-up cost: $20 for appointment kit containing samples, training literature, brochure. Method: Principally one-on-one product sales.

Avon is a household word. "It's not like the rep has to introduce something that no one has heard of before," says John Fleming, vice president of sales support, New York. "We feel because we have been out here for so long there is value to our brand name. And because of the economy today, more people are looking for ways to earn a second income from home. Avon becomes a very appealing opportunity because many people do not have the funds to go out and invest in a traditional business."

In the spring of 1987 at Norton Air Force Base, Calif., pharmacy intern Terri Younger Kennar was looking at career burnout at the ripe old age of 24. She kept hearing herself referred to as "that little black girl" instead of Staff Sgt. Kennar. She also kept hearing that she had an attitude problem. "I started selling Avon for therapy," Kennar now says. "I wanted to improve my people skills. I said if I cannot sell Avon, then I will accept the fact that I have an attitude problem. If I find I can sell Avon, then they are the ones with the problem, not me."

At Avon sales meetings, Kennar found encouragement and support. "Our 2,000 district sales managers are really the heartbeat of Avon," says Fleming. "Reps come to these meetings to learn more about our campaigns and products, and also to be recognized for what they have done." Kennar says those meetings, which included sales training, helped build her self-esteem and confidence.

"Avon gives you a training program on how to deal with no," she explains, citing such overcoming-resistance statements as: "You don't have to order this time, but you'll at least have my number. Maybe you can get it on sale." Language like this hits home with the mass-market consumers Avon targets. In Kennar's first six months, she sold $8,000 worth of Avon at retail, and within 12 months she had sold $15,000. Avon reps get to keep half the retail price, so after expenses Kennar was looking at a net of nearly $7,000. By the time she left California in 1988 to attend the Philadelphia College of Pharmacy and Science, her steady customers included some of the military retirees who had once complained about her "attitude problem."

These days, Kennar is a full-time pharmacy student, part-time aerobics instructor and part-time hospital worker. She now has 170 regular Avon customers and spends up to 25 hours a week filling orders.

Kennar's biggest challenge is "serious time management"; it takes time to create the fliers, brochures, mailings and discounts that result in all-important repeat business. She gets hands-on help from her fiance and from 15 friends. (The friends get 10% of any orders placed with her.) Until 1992, she sold a minimum of $16,000 a year. "This year," she says, "I'm closer to $30,000. In the military you felt like you were being spied on all the time. But in Avon it's constant encouragement, constant recognition. After graduation, I'll probably go into pharmaceutical sales and still sell Avon."

Diamite Corp., 1625 McCandless Drive, Milpitas, CA 95035; 408-945-1000. Started: 1975. Annual sales: $50 million. Number of active distributors: 42,000. African-American representation: 55%. Products: Nutritional supplements, skin-care cosmetics, home-care supplies, and water-filtration systems. Start-up cost: $62 for training literature, product information and the company's bimonthly magazine. Method: Multilevel marketing.

Between 1975 and 1983, Diamite sold handcrafted jewelry products on the party plan. In 1983, Rudy Revak became its president and reorganized its products along contemporary-lifestyle lines, predominantly nutritional supplements. Of Diamite's 42,000 active distributors, 60% earn about $100 a month on its products, according to Willie Larkin III, vice president. Another 16,600 earn between $250 and $3,000 a month. Only a few distributors are taking in as much as $40,000 a month in product and sponsorship commissions. Senior-level directors, who coordinate representatives, can earn as much as $99,816 to $538,548 annually in commission overrides.

Perhaps Diamite's most striking feature is the high percentage of African-American distributors in the organization. This can be traced to the targeted marketing strategy of Larkin, who is black and made a point of recruiting blacks for Diamite. "In 1986," he says, "the first year of our significant growth, African-Americans did more than 75% of our volume. Today, they account for over half of the sales every month. This is the first time this has been done with people of color in this industry."

Larkin sponsored Shirley Bradley- and Delmar Carmack into Diamite in 1985. Shirley was sold on what she sees as Diamite's unique attitude toward reps in the field. "This is company that rewards all people, based not on color or whether male or female. They judge only by production. And the executive staff makes rounds in the field, helping to train and motivate their people. Diamite makes everybody feel important."

The newlywed Carmacks entered at what Diamite calls the manager level because of the amount they spent on their opening inventory: $1,500. The first year, they were underwhelmed by their $300 to $400 in monthly product sales. Their biggest hurdle turned out to be scheduling time for explaining product benefits to potential customers.

Things began to break when they focused time and energy not so much on product sales as on recruitment--motivating others to sell Diamite products, which Shirley calls sponsoring. "Recruiting," she explains, "is just a numbers thing. I sponsor people I'm willing to work with and help to reach their potential." Now in their 40s, the Carmacks have been with Diamite for seven years and are full-time motivators of the 8,000 independent Diamite distributors recruited into their Decatur, Ga., sales organization. They talk personally with 25 "key people," as they call them, every week, and hold meetings for some 300 reps in the Atlanta area on a regular basis. Most of their earnings come from commission overrides on the $12 million in annual retail sales generated by those recruits.

Mary Kay Cosmetics Inc., 8787 Stemmons Freeway, Dallas, TX 75247; 214-630-8787, 800-627-9529. Started: 1963. Annual sales: more than $1 billion. Number of active distributors: 230,000. African-American representation: approximately 13%; of the new recruits, 15% are black. Products:

Makeup and skin-care cosmetics. Startup cost: $95 for a showcase containing demonstrator samples, training materials, videotapes, date book, training literature. Method: Beauty-product demonstrations for groups of six, usually in homes.

The Mary Kay sales philosophy combines hard-hitting, aggressive selling techniques with immediate gratification. "Customers generally get the product right on the spot," says Curran Dandurand, senior vice president of Marketing. The company suggests that starting consultants maintain a minimum of $600 worth of inventory at wholesale and gradually accumulate $3,000 worth to support a customer base.

Dandurand emphasizes that the Mary Kay focus is on selling products, not business opportunities, and that 70% of all consultants have another job. The company describes itself as a direct seller, not a multilevel marketer. However, it still rewards recruitment efforts with bonuses, commission overrides, and Mary Kay's ultimate prize, the pink Cadillac.

Meet Sonja Hunter Mason, Atlanta resident, former real estate broker and driver of a pink Cadillac, who ventured into Mary Kay in 1982 after the Atlanta real estate market went south and after checking out Amway, Diamite, Tupperware and Avon. "Being educated, I thought that direct selling door-to-door and that kind of thing were beneath me," she says.

Mason was won over at a Mary Kay sales meeting. "Most of the opportunities I was checking out can show you one black person making it," she says. "But when I saw so many African-Americans walk across that stage and get awards, I thought it would happen to me, too." Within six months, Mason had qualified as a sales director, which entitled her to commission overrides on sales made by consultants she had recruited.

Cadillac ever after? Not quite. In 1986, Mason detoured back to real estate for a while, but now she works Mary Kay full-time (four days a week) as a sales director, managing and motivating a 96-woman sales unit that last year moved $250,000 at retail.

Mason's daily routine says much about what makes for Mary Kay success. "I touch base with unit members in the morning," she says, "and I'm normally out the door to meet new people by 10. Every day, I try to pass out 10 new business cards." This, plus an average of two demonstration classes and one facial every workday, brings her an annual gross of more than $50,000, divided evenly between product commissions and overrides. She picked up the keys to her pink Cadillac last summer. her goal for 1993: Mary Kay's $1 million Circle of Achievement, which includes a cash award of $5,000, a choice of diamonds or a fur and a Burmuda vacation.

Nu Skin International Inc., 145 E. Center St., PO Box 801, Provo, UT 84606-3134; 801-345-1000. Started: 1984. Annual sales: More than $500 million. Number of active distributors: 149,000. African-American representation: About 4%. Products: Personal-care products for face, hair, body; nutritional supplements; fitness equipment. Start-up cost: $35 starter kit includes distributor agreement, daily planner, product and training brochures. Demonstration samples purchased separately. Method: Multilevel marketing.

Nu Skin's products specifically exclude mineral oils, alcohols, potentially harmful chemical coloring agents, and lanolin derivatives, which the company calls counterproductive. This has attracted "several tens of thousands of distributors who are actively involved in the business," according to Executive Vice President Steven J. Lund. As is true of most MLM companies, Lund says profit-percentage breakdowns at Nu Skin can be complex: "Essentially, you generate income by selling products retail or secondarily by building a marketing organization and supporting the sales of other people." Initial retail markup for distributors is approximately 30%. Commission overrides based on sales by recruits range from 9% to 14%.

Scott Schwerdt, Nu Skin's director of distributor services, estimates African-American participation at between 3% and 5%. Lund notes Nu Skin's underrepresentation in the black community, but adds, "We also believe that our product line and business opportunity--our black distributors tell us this--are well suited to the African-American community."

Aaron Parnell felt that Nu Skin's good-for-you ingredient policy would complement his work as a health and fitness consultant. He says he tried the products and figured his clients would like them, too. "On top of that," he says, "it represented a viable financial opportunity because most boomers are still under 35 years old. The market that is going to buy products to keep them looking young will expand fivefold over the next 10 years. And I want to add that Nu Skin products work better on people of color than on people with white skin."

Parnell's group of recruits is made up entirely of part-timers and includes his mother (who runs a child-care center), a grocery clerk, a midwife, and a retired policeman. Parnell's Nu Skin time for 1992: four or five hours a week, which works out to about $100 an hour.

Tupperware Home Parties, Box 2353, Orlando, Fl 32380, 407-826-5050. Started: 1951. Annual sales: $1.08 billion. Number of active distributors: 126,849; 24,700 in the United States. African-American representation: About 13%. Products: Housewares, chiefly plastic food-storage and food-preparation containers. Start-up cost: $85 for the Opportunity Kit, contiaining samples, office supplies, sales aids. Method: Product demonstrations, primarily through home-party plan.

In 1991, a Tupperware party began somewhere in the world every 2.7 seconds, involving some 87 million people. Tupperware spokesperson Lawrie Platt Hall says that for consumers of housewares, Tupperware offers an alternative to the abandonment they often feel in conventional retail outlets. For the sales consultants who set up parties and demonstrate products--almost all of them women and 50% of whom have full-time jobs--the attraction is flexible hours and unlimited income potential. "With profits from sales varying from 22% to 35%, sales consultants in traditional distributorships can make from $7 to $12 per hour selling Tupperware products," Hall says. "They can also qualify for cash or gifts."

In 1987, Maxine Lewis was looking for a way to supplement family income without giving up quality time with her family. "When I started, it was not my intention to do Tupperware full time," she says. "I started just for something extra to do."

Party plans have come a long way since Tupperware's home parties began in 1951. Lewis' microwave cooking classes are among her most successful party formats. Whatever the format, Tupperware eases aspiring consultants into its system with six training demonstrations. Then comes the Opportunity Kit and what insiders call "dating" parties. Ongoing training consists of videos, monthly meetings held by managers, and "tip cards," which feature photographs and word-for-word suggestions of what representatives should say when talking about a product.

Lewis started as a consultant and within seven weeks had generated the $4,000 in monthly sales that qualified her as what Tupperware terms an executive manager, complete with Chevy Lumina. She personally made $96,000 in product sales that first year, mainly of modular food-storage containers called Freezer Mates and microwave cookware called TupperWave. She also supervised a unit that sold $300,000 worth of products.

Lewis now works Tupperware roughly 40 hours a week. But her operational focus has shifted toward motivation and recruitment. "In Tupperware," she says, "you don't have to be an excellent recruiter to be successful." Nevertheless, Lewis now spends less time moving products than managing her 50-consultant unit. "My personal sales for last year were down a bit, to $70,000." she says, "But my unit sales came up to $400,000."

Is Direct Selling For You?

Could direct selling be your big break? That decision, like any business decision, has to be based on careful though and good information. The industry has been plagued over the years by hype, controversy and mystery, particularly with regard to the commission structures of MLM companies. Some states specifically prohibit payment of bonuses based entirely on recruitment; in June 1992, Connecticut barred Nu Skin from making potential-earnings claims in the state without also emphasizing that not all Nu Skin distributors make money. It also required the company to place more emphasis on product sales than on recruitment. Similar rulings on other MLM companies have been made in other states.

There is no tried-and-true method of predicting how much one person can make as a direct seller or which company is the best one. Many successful sellers try several different companies before settling on one that pays off for them. As is true of other business opportunities, it's best to look for a company that's stable, that has a solid industry track record, and that can be checked out through trade associations or the Better Business Bureau. The BBB won't tell you the substance of any complaint, but it will tell you whether complaints against a company have been resolved. Publicly held companies, such as Tupperware (a division of Premark International Inc., in Deerfield, III.) or Avon, can be checked out in part through annual reports.

Choosing A Direct Sales Company

Although direct selling seems to offer all of the benefits and none of the pitfalls of home-based business ownership, the success of one distributor doesn't guarantee the success of others. DSA's Hescock offers these ideas for examining an opportunity carefully before buying in:

* Like and believe in the products you're selling. If you don't believe in what you're selling, you can't expect customers to believe, either. Top performers in a sales organization make the point that they are consumers as well as distributors of their products.

* Be comfortable with the philosophy that the company projects. The way a product line is presented may be as important as the product itself, from a business-opportunity point of view. "It doesn't have to be a 150-year-old business," says Hescock, "but when you look through the promotional materials, you need to feel comfortable about affiliating with the company."

* Be comfortable with the people sponsoring you into the company. "Chemistry" is especially important in a multilevel organization, where new recruits may be insulated from direct home-office contact by the person who recruited them. "The people in the local area," explains Hescock, "are the ones from whom you get initial training and whom you will go to for support."

* Be wary of substantial investments. What makes a direct-sales investment substantial is somewhat in the eye of the beholder, but (particularly if you're a first-timer) it's good business to stick with companies that don't require you to buy more than the start-up kit. Usually, that will mean spending less than than $100. Many companies offer increased discounts to distributors who purchase large blocks of inventory. But Hescock cautions against making any investment you're not comfortable making.

* Examine the company's buy-back policy. As of January 1993, all DSA members will be required to offer a written buy-back policy. If the company you're looking at doesn't have one, it might be better to look for a company that does. "The minimum," says Hescock," would be a 905 refund on products returned within 90 days. But we'd like to see it 90% for a year for resalable merchandise."
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:direct selling; includes related article
Author:Brown, Caryne
Publication:Black Enterprise
Date:Dec 1, 1992
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