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Published: Friday, 8/13/2004

Some direct-sales orders suffer but others boosted by economy

BY JON CHAVEZ
BLADE BUSINESS WRITER

When incomes get tight how badly do people need cosmetics, airtight containers, candles, and handcrafted baskets?

For those engaged in direct selling - the business of selling products through in-home parties, personal visits, or word of mouth - that's been the key question this summer.

While the nation's continued sluggish economy has frustrated big chain retailers, it's also been a huge mixed bag for those involved in the direct selling of products as consumers' discretionary income gets eaten up by rising energy, medical, and food costs.

Those direct-selling food and beauty products seem to be doing well while direct sellers of luxury items, such as kitchen items and handcrafted baskets, have seen sales drop.

"That's probably an accurate description," said Amy Robinson, a spokesman for the Direct Selling Association in Washington, D.C. "As an industry, we have seen 19 years of consecutive growth, but we do have a lot of companies that are in niche markets, so there's a lot of fluctuation in sales.

"Direct-selling is recession resistant, but it's not recession-proof," she said of the nearly $30 billion industry.

Toledoan Lori Reid, a consultant with The Pampered Chef Ltd., a company that sells kitchen utensils and other items ranging from 75 cents to $285, said her sales have declined this year.

"To be honest with you people are not buying as much," she said. Overall sales for the company fell last winter and spring.

Pampered Chef had record sales in June, but had to offer double the benefits it usually provides to those willing to host in-home sales parties, Ms. Reid said.

Karla Burroughs, a Longaberger baskets consultant, said her business selling handmade baskets and home decor items is markedly down this year, prompting her to wonder whether to ride out the slump or just quit.

"Sales are down, they really are. It's been a real sluggish economy for me," she said. "Even if people are OK, monetarily, I think they're holding off on purchases that they don't think are necessary," she said.

Mrs. Burroughs, who lives in Springfield Township, said her regular large-order customers haven't been buying as much and steady customers aren't buying at all.

In April, the Longaberger Co., based in Newark, Ohio, announced it was laying off 461 plant employees after laying off 900 workers two years ago. "They keep telling us that things are slow and they appreciate the efforts we're making, but they are asking us to do more home shows," Mrs. Burroughs said.

This month Longaberger added food items - sauces and preserves - to its products in an effort to prop up sales. The move may be a smart one, since companies selling food and cosmetics don't seem to be hurting much.

Dallas-based cosmetics company Mary Kay Inc. is booming, with record sales of nearly $1.8 billion in 2003. Others are doing well also.

Anita Williamson, of Waterville, a consultant for Tastefully Simple, a Minnesota-based firm that sells gourmet food products that are easy to make, said her sales are up and

her business is booked solid through October.

"I can't complain. In fact, I sort of have to slow down," said Ms. Williamson, who is expecting a baby any day.

The company's products, she said, appeal to men and women, which helps sales, she said. Also, no product is over $10. "It's not all gourmet stuff. Products include bread, soups, and spices.

Lower prices have helped Rick Phillips and Karol Gargac, who sell for the Avon Products Inc. organization. The Springfield Township couple relies exclusively on direct selling since Mr. Phillips took up selling Avon six years ago and his wife, Ms. Gargac, lost her accounting job in March. They fill about 150 orders a week.

"I think what's helped us is we are positioned wonderfully for the economy," Ms. Gargac said. "We've had a lot of people say they can't afford a new dress. But they can afford a $4 lipstick."

Avon also has helped its consultants by launching a national media blitz, getting its well-known brand name back into the public view."I think the products we sell are not for the most part, luxury items," Ms. Gargac said. "Women are going to cut somewhere else rather than not look good. If you can't have that new dress or feel good shopping item, we are an economic alternative. Avon is cheap, instant gratification."

Contact Jon Chavez at:

jchavez@theblade.com

or 419-724-6128



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