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Direct sales popular to fill income void

August 11, 2009 9:47:23 AM PDT
For millions of women, chatting about jewelry, shopping, clothes and even scrapbooking, isn't just fun with friends. It's serious business.Between the economy and unemployment, more people are taking the direct approach.

Direct sales translate into selling products to customers without having a retail store and the large inventory that goes with it.

And while the potential for big profits are there, so are some pitfalls if you don't do your homework.

When Shannon Bambara was laid off earlier this year, she polished her silver and her sales pitch.

She became a direct seller with a jewelry company called Silpada Designs, selling their products at house parties, then taking a cut of the proceeds.

"An average Silpada party retails about $950, which means I take home 30 percent of that, which would be around $285. And typically, that's only in a two-hour period," Bambara said.

History has shown that in bad economic times, more and more turn to home parties as a way to fill in the income void.

"Some of the things that are sold through direct selling that you might not initially think of would include pet supplies, scrapbooking supplies, organic gardening," said Amy Robinson from the Direct Selling Association.

One appeal of selling makeup is the low price point on many items.

"A woman may not be able to go out and spend $100 on a new dress or a new leather handbag, but she can certainly afford and will spend $13 or $14 on a lipstick that will help brighten her day," said Rhonda Shasteen from Mary Kay Cosmetics.

Nicole Robinson is a pharmaceutical sales representative, but wanted to pad her savings. She says she loves the flexibility of direct selling.

"I decide when I'm going to hold appointments, when I'm going to make my extra money, how much I want to make," Shasteen said.

But before you sign on, experts say you need to investigate the company thoroughly.

"What does it cost to get started? Is there a buy back policy if you decide the business isn't for you?" Robinson said.

Bambara says she's been offered some part-time work, but her home sales profits will help pay for things like daycare.

"The extra money that I'm making will go to that but also for things like car payments and credit card payments," she said.

Some direct sales programs have hidden costs, like brochures, display products and other things you'll be expected to pay out of pocket, so ask about all costs up front before you lay out any time or money.

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