Direct sales has grown since the days of Tup­per­ware

In­dus­try now in­volves sales in tea, cloth­ing, jew­elry, kitchen stuff

The Hamilton Spectator - - BUSINESS - ALEK­SAN­DRA SA­GAN

TORONTO — About three years ago, Diana Eves signed up to sell loose leaf tea and re­cruit sales­peo­ple for an An­caster-based com­pany called Steeped Tea on her mother’s in­sis­tence.

The Cal­gar­ian says she now rakes in about $1,300 monthly from com­mis­sion on her sales and those of some of her re­cruits. Within the next two years, she plans to leave her re­tail job.

“Be­ing your own boss is a huge ben­e­fit,” she says, rat­tling off a list of other ad­van­tages of her gig in­clud­ing flex­i­ble work hours and the ca­ma­raderie among her team.

This busi­ness model re­ferred to as multi-level mar­ket­ing or direct sell­ing is of­ten as­so­ci­ated with the hey­day of Tup­per­ware par­ties. It has since bal­looned to in­clude folks ped­dling jew­elry, hand­bags, kitchen gad­gets, makeup, leg­gings and more for com­pa­nies of­ten tout­ing a prof­itable side hus­tle, along with em­pow­er­ment to mostly fe­male re­cruits.

In Canada, nearly 800,000 peo­ple at­tempt to make money this way, ac­cord­ing to the Direct Sell­ers As­so­ci­a­tion of Canada. In the U.S., 20.2 mil­lion worked as con­sul­tants last year, ac­cord­ing to the Direct Sell­ing As­so­ci­a­tion, a jump of 11 per cent from the prior year.

But some say con­sul­tants don’t stand to profit much and the ar­range­ment can cre­ate pres­sure to sup­ple­ment a loved one’s in­come.

Multi-level mar­ket­ing struc­tures are prone to op­er­ate as il­le­gal pyra­mid schemes, said Wil­liam W. Keep, dean of the Col­lege of New Jer­sey School of Busi­ness, who stud­ies th­ese types of busi­ness mod­els.

Some of th­ese com­pa­nies re­quire con­sul­tants to pur­chase a min­i­mum amount of prod­ucts monthly and can’t show suf­fi­cient pub­lic de­mand for their goods, he said. The U.S. Fed­eral Trade Com­mis­sion re­cently or­dered one of them, Her­bal­ife, to re­struc­ture its Amer­i­can op­er­a­tions, in­clud­ing en­sur­ing that at least 80 per cent of its prod­uct sales come from re­tail cus­tomers.

How­ever, many of th­ese com­pa­nies main­tain they are not pyra­mid schemes. They can op­er­ate legally in Canada, ac­cord­ing to the Cana­dian Con­sumer Hand­book, so long as they abide by the Com­pe­ti­tion Act, which in­cludes not sell­ing oner­ous amounts of in­ven­tory to con­sul­tants.

Eves said she doesn’t stock up on Steeped Tea goods, and the com­pany is not a pyra­mid scheme be­cause it pro­motes a prod­uct and gives all re­cruits the same op­por­tu­nity to suc­ceed. She stressed she is not a Steeped Tea em­ployee, so her views don’t nec­es­sar­ily re­flect those of the com­pany.

Steeped Tea, which has its cor­po­rate of­fices in An­caster, did not make any­one avail­able for an in­ter­view or an­swer ques­tions via email prior to pub­li­ca­tion.

But just be­cause the com­pa­nies fol­low the let­ter of the law doesn’t mean mak­ing money is easy.

At Scentsy, a fra­grance com­pany, con­sul­tants fall into nine tiers, ac­cord­ing to a com­pany doc­u­ment posted on their web­site that shows av­er­age an­nual earn­ings as of De­cem­ber 2014.

Nearly 65 per cent of its con­sul­tants — more than 66,000 — sit on the sec­ond tier, where the av­er­age worker made US$463.34 in a year.

Top-level direc­tors, of which there are fewer than 200, earned an av­er­age of US$113,363.98. The high­est earner made nearly US$1 mil­lion, while its least prof­itable di­rec­tor took home just more than US$6,000.

Scentsy also did not make any­one avail­able for an in­ter­view or an­swer ques­tions via email.

The prob­a­bil­ity of suc­cess, Keep said, is not en­cour­ag­ing based on the limited earn­ings in­for­ma­tion avail­able from multi-level mar­ket­ing com­pa­nies.

Peo­ple look­ing for “sig­nif­i­cant fi­nan­cial gain” rather than so­cial ben­e­fits shouldn’t sign up, said Ela Vere­siu, as­sis­tant pro­fes­sor of mar­ket­ing at York Uni­ver­sity’s Schulich School of Busi­ness in Toronto.

“For the fun as­pect of it, for the free prod­ucts, to keep busy — sure,” said Vere­siu.

Eves says the amount of in­come one can earn boils down to one thing.

“The bot­tom line is the same: it’s your mo­ti­va­tion,” she said.

“If there’s six peo­ple on your block that sell Steeped Tea, I guess you’re just go­ing to have to try a lit­tle harder.”

But “un­in­tended neg­a­tive con­se­quences” of this sales model, said Vere­siu, in­clude strain­ing so­cial re­la­tion­ships through sales ef­forts.

U.S. hu­mour writer Rachael Pav­lik cap­tured this sen­ti­ment in a satir­i­cal rant pub­lished last Novem­ber on Scary Mommy, an on­line par­ent­ing pub­li­ca­tion, about why she’s no longer shelling out dol­lars for prod­ucts her friends sell.

In an in­ter­view, Pav­lik said at one point, she would re­ceive a cou­ple of in­vi­ta­tions a week to at­tend sales par­ties. She bought sev­eral things be­fore she stopped go­ing.

“It just feels very phoney to me and it’s like I’m just a prospect for you to make more money,” she said of re­cruit­ing friends to a sales force.

“A good way to lose friends is to push peo­ple into some­thing that they don’t want to do so that you can make money.”

JEFF MCIN­TOSH, THE CANA­DIAN PRESS

Diana Eves, a seller for Steeped Tea, pours tea dur­ing a home tast­ing party iin Ch­ester­mere, Alta.

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