The Modern Face Of Door-to-door Sales

21 Feb, 2012

Benly Sritoomkaew has been through a few recessions in her time. The 37-year-old was looking for work in Bangkok in 1997 when the Asian financial crisis hit and "even graduates from the top universities couldn't get jobs".

So she did what an increasing number of men and women do when recession hits: turn to direct selling, marketing products such as mops, protein shakes and lipsticks to friends and family.

Reasons for the popularity of the $114bn global industry vary according to region. In emerging markets, shops are few and transport is rudimentary. In Mexico direct sales account for nearly a quarter of cosmetics, fragrance and toiletries sales, according to Barclays Capital. In Brazil the figure is close to a third.

In the UK, money is the spur. "As soon as credit-card bills start dropping we see a lot of people joining to pay off Christmas [bills]," says Roger Fiddle, chief executive at Findel, which sells everything from school books to cutlery, and has its best months between January and March.

Direct selling has moved on from its 1950s roots, when suburban housewives flogged Tupperware containers over vol au vents and cups of tea. Today's agents are harnessing social media and operating out of offices, spas and cafés. They are grouping together into teams, encouraged by new remuneration structures.

The UK's Direct Selling Association says there were 26 per cent more men involved in the sector in 2011 than in 2010, and 29 per cent more over 50s.

These agents are increasingly supported by the sort of advertising and promotion once reserved for the traditional retail trade. In 2007 Avon , the cosmetics company, appointed actress Reese Witherspoon as its first global ambassador. Herbalife, which makes diet and nutrition aids, is nutrition sponsor to Barcelona football club.

Ms Sritoomkaew personifies the new breed. Now based in London, she is one of Herbalife's top sales agents. She earns about £20,000 a month before tax and operates from commercial premises rather than her home – though the room where she works just off bustling Fulham Broadway, with its squishy sofas and wooden Buddhas, is far from office-like.

But while her business card identifies her as a "distributor", she describes her role as more akin to a dietary consultant: taking client's measurements, discussing their eating habits and running weekly classes complete with a weigh-in, where those who have shed the most pick up a modest prize.

She leads a team of 800-1,000, all of whom can use the premises for a token fee. "When you're working at home all day on your own, motivation can be an issue," she says. "So if one distributor is having a bad day, they can prop each other up."

Bad days are not unknown in direct selling, both for representatives and their companies. Avon, the world's biggest direct retailer with more than $10bn in annual revenues, last week reported a fourth-quarter loss on the back of falling sales and rising costs

Natura, the Brazilian beauty products company that sells mainly in Latin America, recently reported margin erosion in its home market. And in the UK two direct retailers – Jo Magdalena and Creative Memories – are closing their operations in the country.

The survivors are the ones that have adapted. In recent years, direct-selling companies have overhauled their commission payment structures. Many have lowered the entry price for would-be sellers. They also allow "leaders" to earn a slice of the sales from reps they bring on board and train – fostering the development of entrepreneurial sub-businesses.

In the UK, where the industry is regulated under a voluntary code of practice, the entry cost is capped at £200, and in many cases signing up is free.

This, says Paul Southworth, director-general of the Direct Selling Association, is one of the factors behind the boom. By contrast, he says, setting up a franchise business would cost an initial £5,000 to £10,000.

But even far smaller sums can act as a deterrent, as Findel discovered. Kleeneze, its household goods arm, launched its "Breakfree" structure in January last year after realising that would-be agents were put off by the £80 entry charge "the cost of buying sufficient catalogues to push through letter boxes. By switching to a system whereby agents can be sponsored by an existing distributor, they no longer need a stash of 50 catalogues but can get away with just five, which they use to show clients. "That's brought significant volume in," says Jamie Stewart, managing director of Kleeneze. "So far we have brought in around 8,500 people by this method." However, he acknowledges the flipside: because it is free to join, some people sign up and then do nothing.

Newcomers to direct selling are also reaping the rewards of these new models. Neal's Yard Remedies, the UK-based organic skincare range that began supplementing its shops and online distribution with direct sales called NYR Organics in April 2009, garnered 18 per cent of group sales through direct channels in 2010 and a quarter of sales in 2011. The system the company has chosen is one that it says uniquely rewards every sale made by a leader's team members, no matter how far down the ladder. Denise Bonner, head of the home-selling channel, says this "prosperity bonus" encourages senior leaders to nurture and train all members – as well as to keep recruiting.

Social media has also transformed the industry. Agents are now able to corral a whole new set of physical and virtual tools into the way they sell, and many are establishing new ways to blend the two worlds.

Thus Stella & Dot, a San Francisco-based purveyor of jewellery and other accessories, has established "trunk shows" – exclusive fashion previews that are publicised online – to display its wares. The company's website forwards customers to their nearest "hostess". Agents signing up are also offered full training in setting up on social media.

Since setting up in the UK just five months ago, the company says it counts grandmothers, students, solicitors, midwives, doctors and teachers among its 540-strong team of sales agents. Kathleen Mitchel, who runs the UK operation, tells of a graduate in Liverpool who was on unemployment benefits. "She held a trunk party and made as much as she would on three weeks' allowance – so came off [benefits]," she says.

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