Sales Report Once tainted by get-rich-quick schemes, the direct-sales industry is changing its image. See what experts and business owners have to say about going direct.

To buy and sell in the comfort of a home setting--that's theheart of the direct-selling industry. From kitchenware to vitaminsto cosmetics to stamps--if it can be made, it can likely be soldvia the direct-sales route. Today, direct selling is usuallycharacterized by an independent consultant with a portable kit ofwares. The sellers visits people's homes by appointment to havehome shows where items are displayed; customers invite family andfriends to share in the demonstration. The latest available figuresfrom the Direct Selling Association (DSA) show retail sales of morethat $28 billion for the direct-selling industry in 2002-and anestimated 13 million independent direct salespeople across thecountry. This is an increase from about $22 billion in 1997, with9.3 million salespeople.

How has this industry evolved? "There are five elements Isee," says DSA president Neil H. Offen. "We have a lotmore people involved, we're more sophisticated as an industry,we have more college graduates [as consultants], we're veryglobal and international, and we're [now] very attractive toWall Street investors and VC groups."

Direct-sales consultants, though still primarily made up ofwomen, are becoming more diverse. Offen notes that the malecontingent is steadily growing; 25 percent of consultants are men,compared with 10 percent in 1990. Offen attributes this change tothe pervasiveness of new products on the market--vitamins, foodsupplements, long-distance telephone service, etc.--that are notseen as typically female-centric products like cosmetics orhousewares.

The Stigma

Even with all the growth, entrepreneurs in direct sales oftenhave to deal with the stigma that direct-sales opportunities arelike pyramid schemes. Pyramid schemes require participants to layout cash for the right to recruit others. Usually, no product isinvolved, and profits for those at the top levels of the pyramidcome solely from new recruits who join at the bottom. Direct sales,on the other hand, involves selling legitimate products orservices, the profits from which go to the seller and his or herrecruiter. At the higher levels of a direct-sales company,consultants usually have a group of recruits selling below them,from which they receive commissions--also known as a downline.

Savvy direct sellers would benefit from distinguishingthemselves from pyramid schemes. The DSA can help them do this:According to Offen, the DSA acts not only as an industry advocatein Washington, DC, but also as a watchdog. It helps set thestandards by which direct sellers should abide, from instilling a90 percent inventory buyback clause for all DSA members (meaningconsultants don't lose huge amounts of money on unsoldmerchandise if they choose to leave) to issuing warnings abouthigh-pressure selling and pyramid schemes. The result is moreentrepreneurs coming into the direct-selling fold.

Leslie Caperton, an executive-director-level entrepreneur withThe PamperedChef in Gainsville, Virginia, entered the direct-selling fieldpart time in 1994. Selling specialty kitchen and cooking aids,Caperton, 40, came from an insurance background. After attending aPampered Chef home show in 1994, she was impressed by the array ofproducts as well as the discounts and rewards she received as ahostess a few months later. "That got my attention," sherecalls. "I said, 'I think I'm going to dothis.'"

Wanting to try something with a flexible schedule, thedirect-selling avenue seemed to be a perfect fit forCaperton--though she confesses that, at first, balancing her timebetween planning, doing home shows, and recruiting and training newconsultants was a big challenge. Since her business is equallyinvolved with selling directly to customers and recruiting newconsultants, she has been able to go from merely supplementing herincome to grossing a projected $3.7 million in sales with her groupof consultants this year. And she debunks the notion from outsiderswho think only a few people at the very top levels of the companymake money: "The first month I was in [the company], I madeour [monthly] car payments."

To alleviate customer concerns and distance her business fromany possible stigma, Caperton emphasizes customer satisfaction andproduct warranties. "In selling something," she says,"I want the [parent] company to back that product."

That's key in whether or not a company is legitimate, saysOffen, DSA president. Ask them what kinds of warranties andprotections they offer; ask their current consultants and customershow their problems and issues are treated. And even if a companyhas a good track record, make sure you absolutely love the productor service you'll be selling, because that will determine howsuccessful you are.

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Loving the Business

It was after falling in love with the decorative baskets fromThe Longaberger Company that Lisa Lashley decided to become aconsultant. She started collecting the baskets from home shows sheattended in 1995 and took the leap into her own business in1998.

All the research Lashley did on the company, and her years ofbeing a satisfied customer, helped her make the decision. Today,she recruits and trains consultants working under her supervisionto grow her Salisbury, Maryland, business--in addition to workingfull time as a social worker for the state of Maryland. Lashley,44, says the fun, warm atmosphere of selling Longaberger basketsand home decor is a pleasant contrast to the gravity of her dayjob.

Her biggest challenge, though, is expanding her client base andintroducing Longaberger to more people. How does she preventnegative impressions about direct selling? "I try to head thatoff before really getting started--to share information and toestablish [good] customer service," she says. "To reallyease someone's mind by not being a pushy salesperson, youestablish a rapport and trust with your customers." The focuson customer service has helped Lashley and her consultants grow thebusiness to $100,000 in projected sales for 2004.

Though sales estimates range widely within the industry--becauseof varying products and work scenarios (being part or full time, ormanaging consultants and receiving a portion of their sales)--Offennotes that the average annual sales figure falls at about $13,000.But he says that figure encompasses the highest earners with largefull-time businesses and a bevy of consultants as well as peoplewho only do it for a few months out of the year to earn extraholiday cash. Be wary of inflated earnings claims fromdirect-selling companies, though, says Offen. Be sure that thecompany and consultants are upfront about how long it took them toreach a certain selling point.

Reaching on of the highest levels in Mary Kay Cosmetics tookLiseClark of Greenwood Village, Colorado, nearly 20 years. Shestarted her business in 1984, when she was 26. Initially, she onlyplanned to sell Mary Kay products over the holidays; but as shestarted to sell, she saw her income outstripping what she wouldearn working several jobs at once. She soon went into the businessfull time and, today, expects her area unit sales to hit nearly $2million by the end of 2004.

Organizing the needs of her business is her biggest challenge,says Clark. "You have to set yourself up to have a checklistof what you're doing. If you have to [take] a 'powerhour' to make calls, [then do it]," she says. Today, shecoaches the sales directors who work under her (who are all overthe country) via phone, e-mail and conference calls.

Despite any negative associations consumers might have withdirect selling, the entrepreneurs we've spoken to attest thatthe industry is alive and well. Find the right company with a greatproduct or service and the highest ethical standards, and thiscould be just the opportunity you're looking for.

Truth or Dare

Get the facts before deciding if your direct-sales opportunityis legitimate.

According to Neil H. Offen, president of the Direct SellingAssociation (DSA), there are a few questions you can ask to findout whether a company is shady or just plain wrong for you.

• Is the money you're going to make primarily fromrecruiting or from selling the product? Recruiting is generallya part of direct selling; but your primary income as a beginningconsultant should come from sales of the product or service. If thecompany is only discussing recruiting--or discussing it overeverything else--be suspicious.
• Do you risk financial loss by being involved with thecompany? "Almost all direct-selling companies requireminimal starting costs," says Offen. "It's usually$500 maximum." Watch for schemes where people make moneysolely (or primarily) from selling startup kits.
• Would you buy the company's product if you weren'tinvolved with the company? If you don't see a compellingreason to be a customer (a superior-quality product, good customerservice, a good price, etc.), you probably don't want to sellthe product, either.
• Does it sound too good to be true? As with any businessopportunity, be wary of get-rich-quick schemes, such as promisesthat you'll make millions of dollars in six months. Investigatethe company literature, reputation, consultants and customersbefore you get involved with any opportunity.
• Is the company a member of the DSA? The DSA has aone-year application process for new direct-selling companies aswell as ongoing regulations for all members to ensure good businesspractices. Check out the DSA website for more industry information.