Direct sales becoming a booming business

Brenda Koppy first became a Pampered Chef consultant to earn some fun money.

Less than five years later, she’s bringing in $3,000 to $4,000 a month on average. Koppy has more than replaced her full-time social worker’s salary, and she’s doing it in 15 to 20 hours a week.

Koppy is one of an estimated 15 million people in the U.S. involved in direct sales totaling more than $30 billion annually, according to the Direct Selling Association, a national trade association located in Washington, D.C.

Worldwide, more than 66 million people are tied to direct sales, generating more than $100 billion in annual sales, the association says.

Direct sales involves selling products person-to-person, away from a fixed retail location and often through in-home product demonstration parties.

Consultants, regardless of education or employment background, can generate incomes ranging from a few hundred dollars a month to six-figure annual salaries.

After about a year and a half with Pampered Chef, Koppy decided to make direct sales her full-time job.

“As a social worker, I was on call 24 hours a day, seven days a week, pretty much,” Koppy said, adding that now she is in charge of her own schedule.

Even though the economy has suffered, her business has thrived.

Koppy is recruiting more consultants as people look for ways to make extra money during tight economic times. She’s also selling more products – kitchen utensils, spices, rubs and sauces – as consumers realize they need to eat at home instead of going out to restaurants, she said.

“I sell something that people need. It’s not a want,” Koppy said. “You need to have good products or you’re not going to cook.”

Many direct sales companies that use the home-party format, like The Pampered Chef, give hosts free and discounted products based on the amount guests spend at their party.

A DIVERSE BUSINESS

People join direct sales companies for a variety of reasons: to receive discounted products, extra cash, or for the intent of making it their career.

“We’re also hearing stories from people who have lost a job and they’re looking at The Pampered Chef as a way to contribute to their family income,” said Rochelle Mangold, director of corporate communications.

During the first half of this year, the number of consultants joining The Pampered Chef increased 8 percent, Mangold said. Typically, direct sales consultants have to buy into the company before earning a paycheck. The median cost for starter kits needed to launch a direct sales business is $99, said Amy Robinson, Direct Selling Association vice president of communications and media relations.

Salaries are determined by how much product consultants sell and how big of a sales team they build.

Koppy, for example, has recruited 50 sales consultants. She earns 3 percent commission of their sales.

She’s a member of Julie Bohn-Geiselhart’s team. Bohn-Geiselhart, of Wahpeton, N.D., has been with The Pampered Chef for 20 years, has 200 consultants on her team and earns an average $7,000 monthly. “Unlimited income opportunity is definitely attainable,” Bohn-Geiselhart said. “You get out what you put into it.”

STRONG AND GROWING

In 2008, more than 74 percent of the American public purchased goods or services through direct selling, according to the Direct Selling Association.

During the recessions of 1990 to 1991 and 2001, direct sales significantly outperformed retail sales, Robinson said.

Sales dipped slightly last year, but the overall sales force increased, Robinson said, anticipating both will grow this year.

Tastefully Simple, a direct sales company that offers seasonings, soups, breads, sauces, snacks, dressings, desserts and beverages, changed its recruiting message earlier this year to reflect workers’ economic concerns.

“Our message was one of, ‘You have control over your income and your life, and with Tastefully Simple, you can achieve some pretty cool things for you and your family,’ ” said Darrin Johnson, vice president of sales.

It seems to have worked. Last week, the company hit its goal of reaching 30,000 consultants in 2009.

“Tastefully Simple over the years has seen really explosive growth in its consultant base,” Johnson said.

Jill Blashack Strahan, Tastefully Simple founder and CEO, started the company in a 1,200-square-foot shed in Alexandria, Minn., in 1995.

With seven consultants, the company posted $100,000 in sales that first year.

Last year, Tastefully Simple’s team of 28,344 consultants turned $144 million in sales.

TIME-TESTED SALES

Tupperware, one of the first companies to adopt the home-party model, opted for the direct sales approach as a way to let customers try its products.

The first Tupperware home party was held in 1948. The demonstration method worked so well that Tupperware took its products off store shelves and began selling them directly to customers.

As when it started, the industry continues to be dominated by women, who make up about 88 percent of direct sales consultants, according to the Direct Selling Association.

Products seem to be geared more toward women, and women tend to be more social, Robinson said.

Janelle Kistner of Sabin, Minn., became a part-time consultant for Bagolitas, a direct sales company that offers handmade products like handbags, diaper bags and aprons, after her friend started the company.

“I’m not exactly a salesperson, but I just have a passion for the product and what the company is about,” Kistner said.

Janice Baldes, a Minnesota State University Moorhead graduate, founded Bagolitas in North Liberty, Iowa, in 2005.

“She decided to go the direct sales route to give women the opportunity to own their own business,” Kistner said.

The company reached $4 million in cumulative sales in March and has more than 200 consultants in 37 states.

Over the years, new direct sales product lines like wellness products and financial services have emerged to attract men, Robinson said.

Female predominance is why Nick Beste, an East Grand Forks, Minn., native, launched ManCave with business partner Kevin Carlow this year.

The new direct sales company sells meats, grilling accessories, and in-home bar and poker supplies at sales parties called “MEATings.”

“It’s been proven that this model works,” Beste said. “But nobody’s doing it for men.”

The company has more than 50 consultants so far, most of whom are men. Beste said the economy is helping recruiting efforts.

“A lot of our (consultants) are looking for extra work,” he said. “Some of them don’t have a job, and so they’re able to devote full-time efforts to this, which is huge.”

ManCave consultants are generating average monthly salaries in the high hundreds, some earning a couple thousand dollars a month, Beste said.

The Direct Selling Association has 200 active member companies with about 100 more awaiting approval or considering the direct sales approach.

“Many will come and go before anybody even really knows about them,” Robinson said, adding that the association’s members account for about 95 percent of generated sales.

Tags: direct sales, tastefully simple, daily updates