Darren Dahl

Taking the Direct Route to Sales Growth

That's why it's no accident that selling through parties can be more appealing than selling through a traditional retailer like Wal-Mart, says John Rochon, the former chairman and CEO of Mary Kay. "If you want to put your product on shelves of a major retailer, you have to pay placement fees, which can be huge barriers to entry especially to start-up companies who are trying to introduce a disruptive product that competitors would rather not see on the shelves," Rochon, who also helped build the Avon and Dirt Devil brands, points out. Not only can selling in the home save a company countless dollars in marketing and distribution fees, it brings results. "A typical closing rate for a consumer in a store is about 2 percent," says Rochon, who has started a new company that employs direct sellers to pitch a disinfectant product called IV-7. "In the home, on the other hand, the closing rate is just about 100 percent. Once someone decides to attend the party, they have already agreed to buy something."

Direct selling is also particularly effective when it comes to any product that could benefit from a demonstration. "Many products can be more appealing to people when they get to see or touch them in person," says Robinson from the DSA. There was a trick to snapping on a lid to a Tupperware container, for instance, something that a seller could easily demonstrate. The 75,000 active sellers for Scentsy (No. 19), an Inc. 500 company based in Meridian, Idaho, for instance, get to show off how quickly the aroma of their wickless and flameless scented candles can fill a room. "We keep things simple, which allows our consultants to just be themselves, which enhances the authenticity of the product," says Orville Thompson, who founded the company with his wife Heidi in 2004.

A party approach also lends itself to having a good time, which can help both sellers and buyers relax and enjoy the product. That's part of the appeal of selling jewelry made by Stella & Dot (No. 67), an Inc. 500 company based in Burlingame, California. "I always tell my stylists that it's not like you're going on Hardball with Chris Matthews," says founder Jessica Herrin. "You're going into a room full of friendly warm people who are happy and relaxed and want to see you succeed."

Working for a direct sales company has obvious appeal to someone looking for work or even someone looking for extra income. At Stella & Dot, for instance, the average stylist earns 30 percent from their sales and gets a ton of free jewelry to boot. Leslie Montie, who founded Wildtree, a Cranston-Rhode Island based business that sells healthy herb and spice blends that earned a spot on the 2010 Inc. 5000, says that one of her representatives will earn some $300,000 this year. "Our company offers a great opportunity for unemployed or underemployed men and women looking to add to their family's income," says Montie. "It's a great solution because its very marketable and everybody eats."

Salt Lake City resident Leann Garms, 48, was turned on to Arbonne International, a Swiss cosmetics company, by her brother's girlfriend three years ago. Now, she sells their botanically-based products in addition to running her own public relations and fundraising consulting company. "I know at least 15 people who have replaced six-figure incomes by selling these products," she says. "But even for those who are not top producers, an extra $300, $400, or $500 a month can make a world of difference."

But direct selling also has its detractors, especially when it comes to the idea of multi-level marketing, or MLM, through which people can earn a percentage of the sales brought in by anyone they recruit into the organization. While there are many reputable companies like Stella & Dot and Ambit Energy that use MLM effectively, there are many horror stories of pyramid schemes designed to simply rob sellers of their money – where the fees paid by new recruits simply get funneled to higher-ups in the organization. "Anytime there is a decline in the economy or a high unemployment rate, MLM schemes can seem attractive," says Allison Southwick, a spokesperson for the Better Business Bureau that works with the DSA to track reputable organizations. She points to one such scam, NarcThatCar.com, that reportedly paid sellers money for tracking license plate numbers through an online database. To head off scams, Southwick suggests working with members of the DSA, which employs a rigorous one-year application program, and to check www.bbb.org for a company's reliability report. For what it's worth, www.narcthatcar.com currently has an "F" rating.

Jere Thompson of Ambit Energy, which has earned an "A" rating from the BBB, acknowledges that scams have been a problem for the direct sales industry in the past, but that largely by policing itself, the majority of direct sales and MLM companies are legitimate. He also believes that direct selling is here to stay for the long term. "You're seeing more and more companies use direct sales as a way to start a business or to test a product," he says. "I think you will see more and more people selling from their homes and that it will remain popular for a long time to come both here in the U.S. and around the world."