Amid rising unemployment, more Americans are selling cosmetics, vitamins, kitchen knives and other goods to their friends and neighbors. Or trying to, anyway.
Industry figures suggest that as the ranks of salespeople grow, the increased competition is making it harder for many to move merchandise. That has left people like Lisa Wilson stuck with closets full of unsold inventory.
"You get pity purchases from your family, who feel guilty if they say no or they want to support you in your new endeavor. So you think it's easy," said Wilson, a graphics designer and advertising saleswoman in Austin, Texas, who sold Mary Kay cosmetics for about a year. "But once that dries up, you go out and get a big slap in the face."
The number of people selling for Mary Kay, Avon, Tupperware and other direct-sales companies swelled 47% this decade, many lured by the prospect of earning a good income at a time when regular jobs can be tough to find.
But sales grew by just 21% over the same period, to $29.6 billion in 2008, according to the Direct Selling Assn. Last year, sales dropped by 4%, even as the industry grew slightly, to 15.1 million sellers.
Retailers of all stripes have been suffering from the economic slowdown, as consumers rein in spending. But the direct-sales business model poses additional hurdles, experts say.
Direct-sales companies typically require their representatives to pay their own start-up costs, which can mean hundreds if not thousands of dollars in upfront expenses before the first sale is ever made.
Then comes what for many is a surprise: Often the only way to earn big money is to become a distributor -- enlisting others to sell and taking a percentage of their revenue.
"It's not just about selling the product -- it's about recruiting other people to sell and become part of your lineage of sales reps," said Brent Schoenbaum, a retail partner at Deloitte & Touche. "If you're not good at recruitment and you're just selling the products, you're not going to make enough money."
That's also one of the issues in a Los Angeles federal court battle between Herbalife International of America Inc. and a group of its former distributors.
Herbalife fired the first volley, suing Robert Ford of Georgia and seven other distributors on grounds that they allegedly stole the company's trade secrets and solicited Herbalife's distributors after they left Herbalife for a rival direct-sales outfit, Melaleuca Inc.
