Direct-Selling Gains an Edge in Recession

As the economy shrinks and more Americans lose their jobs, some people are turning to direct selling to bring in a little extra cash. And, in this case, what's good for the consumer is very good for the seller.

"For most people, direct selling is a part-time endeavor, a supplement to an already existing income," says Amy Robinson, vice president of communications and media relations at the Direct Selling Association, a national trade group representing more than 200 companies. "It's a couple hours per month, and in a tough economy, it offers a little extra padding to their bank account."

Those couple of hours can add up. In fact, direct-selling revenue tends to reflect the economy, except during recessions. According to the Direct Selling Association, the direct-sales industry operates at 5% higher growth than gross domestic product when the economy contracts.

In 2008, companies like Herbalife, Silpada, Cutco, Immunotec, National Companies and Private Quarters all have generated growth despite the economic downturn.

One direct-sales company that has more than doubled revenue and the number of its consultants during 2008 is LMS Fragrances. The 4 1/2-year-old company is adding 100 to 150 consultants a month, bringing the number to about 2,500. LMS Fragrances aims to triple its consultant base in the next year.

LMS Fragrances' oval atomizers, which are filled with perfume.

LMS, which specializes in high-end perfumes, is different from larger rival Avon(AVP Quote). It doesn't do inventory or require consultants to buy a monthly minimum of products. Consultants sell based on a starter kit, and LMS ships the product directly to the buyer. This means LMS doesn't operate on credit risk. Products are shipped once it receives cash. And it's a commission-only business.