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Party Model Delivers for Some Direct Sellers

Stocks in this article: TUP

The gloomy employment situation has also meant that there are more people out there looking for alternate sources of income. The vast majority of sales consultants (about 90%) work part time, spending less than 10 hours a week on their business and making a median annual income of $2,400 a year. The goal is not to support the whole family (although some super-sellers do), but to pay for the kids' summer camp or a vacation.

For some struggling families, though, those few thousand dollars can mean the difference between making a car payment and having that car repossessed. Sales consultants whose spouses are out of work, or whose children have moved back home after college because they can't find jobs, may find that friends and neighbors are happy to buy their products because they want to help out. In a recent survey conducted by the Direct Selling Association, respondents said the highest motivator for buying products through direct sellers was to support a small, local business.

The direct-selling start-ups that have thrived over the past few years are those that sell affordable luxuries: treat-yourself items that can be bought on impulse but also have a practical function. Idaho-based Scentsy, which specializes in wickless candles, was founded in 2004. Since then, it experienced explosive growth, with revenue climbing to more than $500 million last year. That continued growth has been driven by the company's expansion into other scent-related products, such as bath gel and laundry fragrances.

Thirty-One Gifts was founded in 2003 by an Ohio mother who began sewing purses in her basement. The company now has more than 60,000 consultants, who sell a range of bags and home organization products in bright, stylish patterns. The company's name refers to a Bible passage that describes a hard-working, well-respected wife and mother, and the company's roots in the Christian community has helped it spread through church-based social networks.

Another recent start-up has grown despite the relatively high price of its products: the skin-care line Rodan + Fields, started by the two dermatologists who created the anti-acne treatment Pro-Activ, was launched in 2008. The line is definitely high-end; a four-product anti-aging regimen costs almost $200. But even in tough economic times, there are plenty of women willing to pay for better skin.

It's also been easier to recruit consultants with high-level sales experience. A look at the top consultants profiled on the company's website shows that many came from industries that have been hard-hit by the recession, such as real estate and public relations.

We may get fewer invitations to Tupperware parties these days, but jewelry parties, handbag parties and candle parties continue to take place across the country. For some people, Robinson says, the idea of buying from and selling to friends will always be appealing. "People tend to go out less now, but they still want to see their friends," she says. "They are looking for an escape."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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