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The party that crashed retailing

Sex toys, saws, scrapbooks ... you name it, you can buy it in your neighbor's living room.  Direct sales racked up $30 billion in 2003, and has seen strong growth over the past ten years.
/ Source: Forbes

Giggles. Titters. Squeals of naughtiness. “All right, girls, I want you to play a little game: ten points if you've ever put an edible topping on your man!” a woman says.

It's a direct sales party in a living room in Cincinnati. The hostess is not selling plastic bowls with tops. No, this is more like Shtupperware. Along with ticklers, twin-engine vibrators and other goodies are the aforementioned toppings. Before the party ends at 9:30 p.m., 11 women in their late 20s and early 30s will have laughed themselves silly and shelled out a total of $1,200 for the potions and nighttime power tools offered by a distributor for Pure Romance.

The sex-toy purveyor, with sales of $30 million last year, is one of a large and varied collection of vendors who sell through multilevel marketing in private homes. Pâté, pet food, saws, scrapbooks, air filters, legal services, expensive apparel, wine and golf clubs are being sold the same way as Mary Kay cosmetics.

While retailers try all sorts of tricks to lure people into stores, direct selling is on something of a tear, outpacing retail sales by an average of one percent a year over the past ten years. In 2003 direct sales hit $30 billion. Of that, party plans accounted for 28.5 percent, up from 26.3 percent five years before, says the Direct Selling Association in Washington, D.C.

Some companies, such as the Pampered Chef, a cookware vendor owned by Berkshire Hathaway, use in-home parties as their sole sales channel. Pure Romance turned to in-home sales because its founder, Patricia Brisben, a former nurse, knew women didn't want to buy vibrators from pimply-faced kids in porn shops.

But traditional companies also view peddle parties as a way to supplement in-store and catalog sales. The Body Shop, with $712 million in fiscal 2003 sales, three years ago started signing on individual distributors and urging them to throw in-home parties as a way to market its soap and cosmetics — and distributorships — in the United States. Cataloger Lillian Vernon now has a party operation. Even publishers are catching on. Southern Progress Corp. of Birmingham, Ala. created Southern Living at Home in 2001 as a way to market pottery, glassware and other knickknacks, including a $50 cake stand and $25 wine glasses — as well as subscriptions to Southern Living magazine.

Tupperware, meanwhile, is going back to its roots. It recently pulled its plastic wares from Target. Avon and J.C. Penney parted company after a brief fling in 2002.

Products best suited to the party circuit are those that need explanation. Case in point: Tomboy Tools for women. Company President Sue A. Wilson knows women often feel uncomfortable buying hammers, drills and the like from huge hardware stores. “It's intimidating to go in there and say, ‘I don't know how to put a bit in a cordless drill,’” she says.

Tomboy's in-home consultants demonstrate how to use the 50-plus types of tools and tool kits the Denver company sells. It works, apparently. Wilson expects 2004 sales to rise 15 percent from last year's $500,000. Creative Memories, which sold $400 million in photo albums and scrapbook supplies last year, holds parties where attendees learn how to preserve photos on acid-free paper.

Women aren't the only folks who like to schmooze while they shop. ProShopathome is a two-year-old company that markets golf equipment to guys through 45 salesfolk. At gatherings golfers quiz the sales representative about $500 drivers and an $1,100 computerized putting green. There's lots of time for grilling — literally and figuratively — since sessions often take place over a barbecue. “It's about camaraderie,” says founder Gregory Qualizza of Orland Park, Ill.

Procter & Gamble in September held a “pajama party” in a ballroom at New York's Plaza Hotel to introduce a new version of Tide laundry detergent. Amazingly, 1,200 p.j.-clad women showed up. P&G isn't looking for individual distributors, but it is hoping to boost sales and awareness of signature brands. “We looked at this trend where women are bonding in their houses, having these parties,” says Randall Chinchilla, spokesman for Tide. “We're getting the benefit of that.”

Gathering with friends — or even strangers — to discuss products of interest is just another way to socialize. Angela Ferriell, 25, has been to five Pure Romance parties in the past year, shelling out a total of $600 for the goods. "I love it," the Charlotte, N.C. resident says. “It's a lot of fun.”

Despite the markups, a Pure Romance product that costs $1.50 to manufacture is sold to one of the 6,200 party consultants for $6.50. She marks it up to $20 and keeps the profit, less 10 percent that goes to the party hostess. She also gets up to a 3.5 percent commission on the products sold by the consultants she has recruited. And still the toys are flying off the shelves of the company's 10,000-square-foot warehouse in Cincinnati. Boasts Christopher Cicchinelli, executive vice president of the company his mother founded, “We've got $700,000 to $1 million in inventory. Last year we turned the inventory 27 times.”