Door-to-door selling grows up - direct selling; includes related article

Black Enterprise, Dec, 1992 by Caryne Brown

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."