DOOR-TO-DOOR NO MORE
Avon and Mary Kay aim to adapt to how millennials purchase products,
‘Social selling’ model looks to adapt to how younger generation shops
Jaci Tischler applies her Mary Kay lipstick in her Mary Kay T-shirt behind the wheel of her pink Mary Kay Chevy Cruze.
She’s come a long way from her freshman year at Texas Tech University, when she’d mark the days she was free to give her classmates facials on a dry-erase calendar on her dormroom door.
“That’s really how I started my business,” she says. “We sell the most product and make the most income whenever we are at a party or a facial.” That was three years ago. Today, the 21-year-old, who graduated in December, leads a group of 50 women as a sales director for Mary Kay Inc. Her business funded her tuition and living expenses.
Tischler is one of 3.5 million sales representatives worldwide who sell cosmetics for the company that Mary Kay Ash founded in Dallas 54 years ago. Those reps get paid when they sell products; they earn an additional commission when each rep they’ve recruited sells something. Some reps have large groups of recruits working under them and earn commissions from them all.
That system, known as multi-level marketing, is the backbone of a $36-billion (U.S.) American industry, from cosmetics purveyors Avon, Arbonne and Rodan and Fields to nutrition-supplement companies such as Herbalife Ltd. and relative newcomers like charm-jewelry company Origami Owl LLC.
And, increasingly, these companies aim to use it to recruit millennials.
That has meant ditching door-todoor sales in favour of parties like Tischler’s — often in the form of online gatherings, hosted on Facebook Live — where reps’ friends can try, buy and maybe even sign up to sell products. In this new world, Avon ladies no longer must ring doorbells and, with a model dubbed social selling, the industry hopes to adapt to the harsh reality of how millennials buy things.
The effort makes sense: Millennials are used to the gig economy, and selling jewelry and makeup on the side isn’t really so different from driving an Uber.
But even as more millennials sign up as sales reps, that doesn’t mean others aren’t skeptical.
In 2015, more than 20 million Americans worked as direct sales reps, according to estimates from the Direct Selling Association, the industry’s lobby. Such companies made less than 1 per cent of all American retail sales that year — but more than 8 per cent of American adults were involved in the industry, a Bloomberg analysis of industry and retail sales data shows.
Millennials have an annual spending power of $600 billion, a number expected to grow to $1.4 trillion by 2020, according to market research by Accenture.
But they’re also indebted and underemployed, and 62 per cent have considered launching their own business — although 42 per cent say they don’t have the financial means, a survey found last year.
Their entrepreneurial dreams and shallow pockets make them perfect sales-rep recruits.
“At that particular point in life, you get a little impatient about what you’d like to see happen next,” says Bill Keep, the dean of the College of New Jersey School of Business and one of the few independent academics who studies multi-level marketing companies. He suspects most millennial recruits were targeted by age. More bluntly: “You fish where the fish are.”
Becoming a sales rep can cost as little as a few dollars, but the commit- ment quickly grows. And few are anywhere near as successful as Tischler.
Marian Bull tried selling Rodan and Fields skin-care products last winter and chronicled her experience. The 28-year-old New York writer invested about $300 in a starter kit and set about messaging Facebook friends to hawk her wares.
“Young people can be very skeptical buyers,” she says. “That sort of compounds the difficulty of trying to sell things to your friends.”
“In order to sell to millennials, you need millennial sellers,” says Bank of America Merrill Lynch research analyst Olivia Tong.
In 2015, millennials accounted for more than 40 per cent of the sales reps who joined Mary Kay, bringing their share of the company’s entire sales force to a quarter.
Millennials make up a third of sales reps for Arbonne International LLC, where they’re the fastest-growing chunk of its sales force, the company says. They’re also a third of the roughly 40,000 sales reps for Origami Owl. New Avon LLC — formerly the North American unit of Avon, spun off from its struggling parent company last year amid falling sales — declined to say what share of its reps are millennials.
Even as the industry aggressively courts millennials as sales reps, it faces challenges in trying to win them over as customers. Most purchase online and are more likely to be influenced by product reviews.
A quarter of them go straight to Amazon, while just 7 per cent seek friends’ advice, according to a recent ComScore shopping report.
“You’re dealing with a generation that is exposed to so many brands,” says retail analyst Candace Corlett, president of WSL Strategic Retail. “Avon and Mary Kay would have to do some very viral magic in order to catch up.”
That, she says, requires a focus on social media — rather than parties and in-person sales, which still account for most sales — and an online shopping platform with a seamless user experience. But that can be a tricky proposition for multi-level marketing companies, which risk undercutting their own sales reps with online sales.
“If you look at our successful millennials, they aren’t having in-home events,” says Brett Blake, Origami Owl’s chief executive officer.
“They’re having online events. They have VIP groups. They have Instagram followers.”
To become an Origami Owl rep, the typical buy-in starts at $159, depending on the size of the starter kit; the cheapest is most popular.
In October, the company tested a discount sign-up program: For $2, a rep could sign up, create a webpage and sell jewelry to friends without keeping any physical inventory — an attractive option for millennials with little money to invest. About 5,500 people signed up.
For those sales reps in the industry who do have to keep an inventory, however, doing business is considerably more expensive — and should they choose to close up shop, they can be saddled with dead stock.
Mary Kay says keeping inventory isn’t necessary and its buy-in is currently just $100. But many reps have invested far more. Tischler keeps about $6,000 worth of inventory on hand. Rachel Gildea, another Mary Kay rep, bought $1,600 worth to get started.
Arbonne, whose buy-in is $79, and Avon also say they don’t require reps to keep inventory on hand — but Andrew Sussman, a 24-year-old Arbonne rep, spent about $1,000 on inventory to start.
Arbonne offers 100-per-cent buyback, meaning it gives any sales reps who want out a total refund for any inventory they bought in the past year.
The Direct Selling Association requires that all its members offer at least 90-per-cent buyback.
Both Mary Kay and Avon offer that 90 per cent, which Mary Kay considers “one of the strongest selling points we have for new and tenured” reps.
Avon also accepts returns within 120 days of purchase.
“You’re dealing with a generation that is exposed to so many brands.” CANDACE CORLETT WSL STRATEGIC RETAIL