Party Profits
Home-party sales have moved way beyond Tupperware. And now some big guns want in on this global business
It's good business, too. Just ask Tupperware. The Orlando company earned $90 million last year on $1.1 billion in worldwide sales. That's a lot of plastic containers, though a recent move into mainstream retailing at Target proved a misstep. And revenue at the Longaberger Co., a maker of handmade maple baskets and other home goods, was $906 million last year. "The financial profile of the direct-selling industry is superb," says Douglas Lane, a research analyst at Avondale Partners who follows Tupperware as well as Blyth Inc., the company behind PartyLite candle parties. "They don't have very high working capital needs, it's a cash business, and they get decent returns on capital."
While other companies sometimes wait 30 days or more before the retailer pays for a shipment of goods, party- plan companies deliver products only after they have the cash in hand for the order. The companies also avoid the high overhead of retail, including insurance, rent, and employee salaries and benefits.
Indeed, Tupperware learned the hard way the vagaries of the retail environment. Its venture into Target was billed not so much as a direct move into retail but more a parallel universe where local distributors would get a cut of its store sales and perform demos in a retail setting to broaden its reach. But Tupperware found out instead that customers went directly to Target and canceled home parties. That contributed to what the company has said will be a $20 million operating loss for 2003, and last month Tupperware pulled its wares off Target shelves, though it still sells some products through TV retailer QVC and in local shopping malls.
The upfront cash nature of the party business also appeals to entrepreneurs. "I never opened the doors of my business without having customers in front of me," says Doris Christopher, founder of the Pampered Chef. "That's such an advantage in direct selling." In 1980, Christopher launched her highly successful company with $3,000 borrowed against life insurance. Determined to continue spending time with her two young daughters, Christopher bought the bare minimum in inventory and started organizing parties. The company has not been in debt since.
Christopher is the first to admit there was no great secret to her success. All her original kitchen gadgets were available at various retail stores, but she brought them together in the home-party format where they could be demonstrated by kitchen consultants.
Although home-party lore is rich with stories of women becoming millionaires, making more than pocket money is the exception. The average American party consultant makes $2,500 a year, according to the Direct Selling Association. On top of straight commissions from 15 percent to more than 40 percent, most companies offer chances to recruit new consultants and move up a managerial ladder, as well as an elaborate system of gifts, all-expense-paid vacations, and grand celebrations. Longaberger, makers of baskets that range in price from $28 to $299, hosts visitors in a seven-story faux picnic basket that houses the company's main offices in Newark, Ohio.
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