Direct selling usually a supplemental living

With her son in elementary school during the day and her daughter getting ready to start day care a couple days a week, Tracey Finn was starting to think about going back to work part time.

Before having children, she had worked as a social worker. Her parents were happy to have her join them part time in their family business. But when a friend told her about Crayola’s Big Yellow Box, something clicked.

“I got online and the minute I pulled it up, I’m like, ‘I’m doing this,’ ” she told guests at her Monday night Big Yellow Box party in her Bethel Park living room.

In March, Mrs. Finn held her first party. With her 3-year-old daughter, Gracie, still at home for now, Mrs. Finn has started out somewhat slowly, averaging three parties per month.

For direct-selling companies with a party plan model, there are usually two main players: “host” who holds a party at her home, often inviting guests, providing food and beverages or distributing products; and a “consultant” who is a trained employee of the company and usually runs the parties, discussing and demonstrating the products. Hosts usually are compensated in free goods or merchandise credits depending on how much is sold at the party, while consultants typically earn a percentage of all the goods they sell.

In Crayola’s case, commissions start at 25 percent and build as consultants hit bonus targets or recruit other people to work as consultants under them. For Jockey’s Person to Person line, consultants earn 3 percent commissions on any sales by consultants they have recruited and sponsored.

Because financial rewards increase as salespeople recruit others to work for them, direct-selling companies are sometimes derided as pyramid schemes.

It’s a charge that the Direct Selling Association vigorously denies — and prominently addresses in its bylaws. To join the association, companies cannot pay their consultants solely for recruiting people, and must allow consultants to sell unused items from startup kits back to the companies for at least 90 percent of their value. “You are compensated on sales,” said Amy Robinson, spokeswoman for the Direct Selling Association. “Not on just bringing people into the business.”

Thus far, Mrs. Finn hasn’t recruited anybody to work for her as a consultant. But she’s still extremely pleased with her results thus far: Her most recent party yielded about $400 in sales.

Since she held her first party in March, Mrs. Finn said that she’s recouped her initial $199 investment in the starter kit, and then earned double or triple that amount in profit.

“What I’m getting out of it now just supplements our income,” she said. “It’s free money throughout the month that we wouldn’t have otherwise.”

Most people doing direct selling (about 80 percent of whom are women) work 10 hours or less per month, and average about $200 per month, according to Ms. Robinson.

Others turn it into a career — something Mrs. Finn is considering when her children get older.

“I could do it so much more than I do now,” she said. “I love that, because I can make my own choices.”

Direct selling certainly can be a successful business, said John Tubridy, who runs a FranNet consulting office on the North Shore. But he cautioned that since many of the companies involved in direct selling are startups, the failure rate might be higher than other industries.

Also, he said, the networking and training required to start hosting parties might not bear immediate results. “The ramp-up on it is longer than normal,” he said. “They have to be ready and willing to do that and have the staying power.”

Ms. Robinson agreed that inflated expectations might doom some beginning sellers.

“It’s those people that think they are going to get into direct selling and not work and make thousands of dollars that have problems,” she said. “It’s not easy money.”