By Jay Leisner, President, Sylvina Consulting
As a consulting firm to direct selling companies, we have been asked many times over the last few years why direct selling companies (home party plan businesses in particular) are launching in ever increasing numbers.
While the Direct Selling Association reports 19 years of consecutive growth in sales revenues and numbers of sales representatives, there is more to the direct selling success story.
Direct selling today is fueled by factors influencing each of the three players – the end consumers, independent sales representatives, and the entrepreneurs - who create and launch companies.
Below I have listed the factors that I believe are contributing to the growth of direct selling companies that are using the home party plan approach.
The Internet has disrupted our traditional shopping patterns in a small but measurable way. As greater numbers of us have purchased items online instead of traveling to stores, we have also increased our consumption of items that are purchased in the homes of others. Nesting instincts have led us back to the roost. Our responses to 9/11 have been far reaching. While our country has gone to war in Afghanistan and Iraq, we have also retreated to our homes and the homes of our friends and acquaintances, where socializing is accompanied by purchase behavior in greater numbers.
Unemployment is elevating the direct seller opportunity to a higher status. The attractiveness of part-time income opportunities grows in reverse proportion to the number of traditional jobs available in our work force. Direct selling grows faster when unemployment is relatively high. The percentage of work-at-home businesses has reached new highs. The number of us who work from home, telecommuting or operating one’s own business, is at an all time high on a trend that appears to be continuing at a feverish pace.
The percentage of Americans who identify themselves as entrepreneurs has also reached new highs. Going into business for oneself has become an idea more often considered than ever before. Direct selling companies offer an opportunity to launch your own business with a relatively low cost of entry.
The secret is out. Large and small companies of all sizes with traditional business models are looking at direct selling as a vibrant new channel to drive the expansion of existing businesses.
Barriers of entry are low. While it certainly helps when starting a direct selling business to be fully funded, one can bootstrap-launch a direct selling business with as little as $20,000 or less, depending on the cash requirements for initial inventory.
E-commerce is mainstream. While just a few years ago, direct selling companies employed many people to process telephone, mail, and fax orders from their independent representatives, today most companies accept 70% or more of their orders online. Online order entry has improved the ease of order submission not only for direct selling companies, but also for its representatives. And, the cost of processing orders is less now than it was before, adding profits to the bottom line.
In 2004, our clients included companies who are or will be selling appliances, beading, clothing, candles, cosmetics, education, financial services, food, hair products, herbs, home décor, internet services, jewelry, nutritionals, personal care products, purses, scrapbooks, skin care, spa products, tea, and technologies.
Most of these companies are using the “home party” approach. In 2004, jewelry and spa products were the most popular. Gourmet food was third.
In 2005, we spoke at two industry conferences for startup direct selling companies in Las Vegas. Present were several companies in the mortgage, real estate, and utility industries.
Direct selling is a channel of distribution that is covering more and more industries every year.
Jay Leisner began working with direct selling companies in 1986 when he joined the staff of a DSA supplier software company. He held positions as a programmer analyst, project leader and business analyst while helping over 100 companies to define their unique business requirements to implement new software systems. In addition to his work with many startup companies, Jay also worked with larger multinational firms, including Creative Memories, Jafra Cosmetics, Herbalife, Nuskin and Shaklee.
In 1999, Jay launched Sylvina Consulting. His firm provides business development and technology consulting services to all direct selling companies, from startups at the concept stage to the large multinational firms. As of July 2005, Sylvina Consulting has assisted more than 130 companies.
Sylvina’s consulting services include direct selling strategy sessions, business plan evaluations, budgeting, sales forecasting, compensation plan and hostess program design, consultant manual development, pilot program construction, recruiting programs, software requirements definition and software evaluation consulting.
For further information, Jay can be reached at Sylvina Consulting (503.244.8787) or by email, jay@sylvina.com.
