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Party Model Delivers for Some Direct Sellers

Stocks in this article: TUP

CHICAGO ( MainStreet) -- Is it possible to mix business with pleasure? Tupperware (TUP) built a multinational company based on that very proposition. By calling their sales events "parties" and distributing their products through pre- Facebook-era social networks, Tupperware pioneered the business model known as direct selling.

Today, when more and more consumer products are bought online or at discount megastores, direct selling may seem like a holdover from the pre-digital past. But some small retail start-ups continue to choose direct selling as their distribution model. And in certain cases, the tough economic times actually helped fuel their growth.

Tupperware built a multinational company based on direct selling. Does it work in an age of digital social media?

For a new business owner, direct selling has clear cost benefits. You don't need to lease retail space or pay employee salaries. Independent sales consultants, who work on commission, market your products through word of mouth, which saves on advertising costs.

But the party model rests on the assumption that consultants will be able to attract potential buyers to their sales events -- buyers who will become so attached to the products that they convince their friends to buy as well. At a time families are worried about unemployment or being underwater on their mortgages, aren't they less likely to show up to a "party" where the central focus is on spending money?

That depends on what's being offered. American consumers are still willing to spend on smaller, "treat" items, especially if they feel their purchase is making a positive difference in someone else's life. Buying a necklace at a jewelry party may be a relatively affordable way to update an outfit, but the purchase can also be a show of support for the sales consultant and her family.

"People like to associate with companies that have a broader mission," says Amy Robinson, senior vice president and chief marketing officers at the Direct Selling Association, which has 200 active members. "Almost all direct sellers started with a single entrepreneur at home, with a very specific reason for why they started. One of the first things you learn in Direct Selling 101 is that people are attracted to that story. You have to give them something to relate to."

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