December 01, 2014
Party Plans on Fire
by Andrea Tortora
Ignited by emotional connections forged with customers, access to products once only available at expensive salons and an embrace of social media, a handful of party plan companies are seeing their business boom—with no signs of a slowdown.
Nail wrap creator Jamberry, beauty products firm Younique, personalized jewelry maker Origami Owl and two newcomers—jewelry boutique Chelsea Row and nontoxic cosmetics maker Beautycounter—are experiencing significant advances in profits and popularity at a time when overall growth for the party plan model is stuck in a plateau.
Data from the U.S. Direct Selling Association’s 2014 growth and outlook report reveals that between 2008 and 2013, party plans dropped from 26 percent to 23 percent of market share as a direct selling platform.
“Home parties in terms of their success are fairly cyclical,” says DSA President Joe Mariano. “When we think it is hitting a low point that is when we see a rebirth.”
These five standout companies are evidence of that resurgence. Two of them—Jamberry and Younique—are in the Top 10 six-month trend rankings at HomePartyRankings.com and MLMRankings.com, which track public interest and Internet popularity of most party plan direct sellers.
Jamberry reports revenue is more than $10 million a year. Younique’s distributors have said the company sold more than $25 million in September, up from $1 million in December 2013.
Origami Owl is consistently listed in the Top 5 for overall rankings at both sites. It posted 2013 revenue of $233 million and grew by 870 percent for the year. As a reflection of this growth it was ranked at No. 50 on the 2014 DSN Global 100 and received the DSN Bravo Growth Award Based on Percentage this year.
Chelsea Row, launched in September 2014, is too new to have its own rankings. A spinoff of e-commerce selling platform company Kitsy Lane, Chelsea Row is turning the traditional home party on its head with vParty—a truly immersive, real-time virtual party that lets guests shop together online while being connected on audio and video.
Beautycounter launched in March 2013 and offers a safe and nontoxic line of skincare products that work. The company now counts 4,000 consultants in more than 44 states, with 23 percent average monthly revenue growth. Between January and October 2014, Beautycounter posted 424 percent sales growth.
Embracing Social Media
The founding philosophies of these companies are rooted in a desire to better the lives of women by empowering them with products that aid self-expression and by providing the flexibility, resources and training needed to build a career. Each utilizes social media such as Facebook to drive sales, although the strategy is different for each business.
To maintain growth, diving deep into social media selling is likely to yield even larger dividends. Here’s why: An analysis by marketing firm Vocus projects that by 2015, half of all web transactions will occur through social media, accounting for an estimated $30 billion in sales. While 40 million business-related fan pages exist on Facebook, only 17 percent are equipped to sell directly through the social media channel. This is where direct selling has an edge.
The Power of Virtual Parties
Jamberry, Younique and Origami Owl use the Facebook event model to host virtual parties.
Younique sells almost exclusively on social media. Jamberry and Origami Owl independent consultants use Facebook events to supplement the home party experience. Origami Owl Chief Sales Officer Sandy Spielmaker says the technology “extends the reach of the home party.”
Best known for its 3D fiber lashes, Younique built its selling model on virtual parties for two reasons, Co-Founder Melanie Huscroft says. “The overall feeling among women was they are so over the traditional home party and having to clean the house, make the food and send their husband and kids away,” she says. “The virtual platform allows the invite list to be limitless, and location doesn’t matter.”
Virtual parties typically run for seven to 10 days, with independent consultants making frequent posts to encourage interest and spotlight products. Consultants do not carry inventory. They sell through their own branded e-commerce websites.
Many consultants also create videos or use those provided by Younique, Jamberry or Origami Owl to explain how to use the products and suggest ways to mix them up to create new styles. Guests link to these videos through the Facebook event page for their specific party.
The model is working for Younique. In the near future, its virtual party model will also work on other social media platforms, such as Twitter and Pinterest. At 2 years old, Younique now counts 121,285 presenters in five markets. When it entered the U.K. on Oct. 1, 999 presenters signed up within 26 minutes.
Huscroft says people want to sell Younique because of its “simple and generous” compensation plan. Younique pays presenters within three hours of making a sale. Each presenter receives a bank account and a Younique debit card.
“It doesn’t matter what the compensation plan is from a corporate perspective. Everyone pays out 42 to 45 percent,” Huscroft says. “We are paying out the same amount as other companies. Ours is just structured in a way that benefits a larger amount of people.”
Home Parties Find Their Niche
For some brands, home parties still reign supreme as the best way to experience the products.
Jamberry was founded by three sisters—Lyndsey Ekstrom, Christy Hepworth and Keri Evans—who wanted to recreate the group salon experience in a more affordable, accessible way. Jamberry and its customizable nail wraps are hugely popular. They are an alternative to nail polish, and they come in 500 colors and patterns. Customers can also create their own designs.
At Jamberry parties, consultants demonstrate the nail wrap application and help guests try one-finger samples. These parties make having stylish nails a simple at-home application for women who do not regularly frequent salons but still want to look polished.
What women say they like about the nail wraps is how easy they are to apply and remove and the fact that they last. The wraps are sold in $15 sheets, with enough for two to three applications.
In less than four years, Jamberry Nails has grown 2,700 percent and exploded into a network of more than 20,000 independent consultants in the U.S., Canada, Puerto Rico and Guam.
Origami Owl capitalizes on the more traditional home party because “it’s really about how we make people feel,” Spielmaker says. “Our products help you express a vision for your future, or a piece of your family history.”
Origami Owl uses a “jewelry bar” concept that allows party guests to see and touch some of the 350 charms for their personalized lockets. This enables every guest to take part in storytelling and make connections.
Customers keep coming back because they expand to different looks or decide to honor a different season in their lives, Spielmaker says. It could be the mom who creates a Living Locket for each sport her child plays, or the daughter who builds a locket of memories with her grandmother.
Origami Owl now works with more than 70,000 independent designers in the U.S. “It really is all about emotions,” Spielmaker says. “You feel this connectivity because it is personal.”
Retail entrepreneur Gregg Renfrew launched Beautycounter in March 2013 after watching a documentary about the many toxic products included in today’s cosmetics. She has said from that point forward she made it her mission to do something about it and work to get safe products into everyone’s hands. Consultants sell cleansers, moisturizers, oils and sunscreen on personalized websites and at “socials.”
Renfrew brings vast experience to Beautycounter. She sold her startup bridal registry The Wedding List to Martha Stewart Living Omnimedia and is a former CEO at the Best & Co. children’s retail group. She has consulted for high-profile clients such as Bergdorf Goodman, Ann Taylor and Jessica Alba. And she says that Beautycounter’s story “is best told person to person” through direct selling.
Consultants buy an $85 starter kit that includes marketing materials and training guides, a 25 percent discount on personal purchases, and a personal website where clients can shop. From that initial investment, $10 is donated to one of three nonprofit charities that Beautycounter supports: EWG, Safe Cosmetics Campaign, or Healthy Child. Prices for skincare products and sunscreen start at $18 and run to $75.
Consultants must make $150 a month in sales to remain in the network. They can earn up to 35 percent commission on sales, as well additional bonuses as they build their teams.
Independent consultants pay $99 for a starter kit with catalogs, brochures, order forms, nail tools, sample cards, product samples, and three months’ use of a personal website. Nail wrap sheets are $15 each.
Consultants earn 30 percent retail commission on their personal sales, plus additional commission on downline sales if they recruit others. Earning potential increases as they achieve higher pay ranks.
KITSY LANE/CHELSEA ROW
Boutique owners can create an online storefront for free. Kitsy Lane provides step-by-step assistance and social media marketing tips. Jewelry prices range from $20 to $250.
Boutique owners earn 25 to 35 percent commission on every sale, including their own purchases, plus a percentage of the commission from other boutique owners they sponsor.
Independent designers can start with the Basic Business Package for $149.99, which includes four lockets, 48 charms, jewelry supplies and one month’s use of a personalized website. The company also offers the Holly Jolly Box of Happy for $199, which has the added bonus of 15 new holiday charms plus other jewelry supplies. More extensive packages are available, from $399 to $2,599. Most items are priced at under $25.
Designers earn 50 percent on charms and 30 percent on all other jewelry. Designers can buy jewelry from the company at 30–50 percent off. They can earn more by mentoring a team.
Younique presenters log into their Facebook account and sign up through Younique’s Facebook application. The starter kit is $99 and includes social media tools, a personalized website, a startup manual, 100 product cards, 250 business cards, a Younique presenter status charm, pens, and a bank account with a debit card to easily access their earnings.
Presenters earn personal sales commissions and sponsorship bonuses when they welcome someone into the company. Commissions start at 20 percent and grow.
After achieving quick success with a low-touch social marketing e-commerce platform at Kitsy Lane, CEO Andy Fox wanted to find a way to enable his wife, Amy, to hold jewelry trunk shows online.
The Chelsea Row vParty launched in September. It is like a Skype call on steroids. Kitsy Lane and Chelsea Row boutique owners build their own online storefronts with jewelry items they select from the companies’ offerings.
The patent-pending vParty allows a Chelsea Row boutique owner, the hostess and party guests to connect by computer (and soon by tablets and mobile devices) to an online party where everyone can be seen and heard.
The boutique owner shows off different pieces of jewelry. Guests play online games in real time and they can shop together no matter where they are physically located. Before the party ends, guests buy a shopping voucher at different pricing levels, and they finalize their purchases online later. Most guests buy four pieces.
“We are taking this women’s entrepreneurship thing that is happening, and we are making it real,” says Lauren Nagel, Senior Vice President of Marketing. Fox adds that Kitsy Lane shows that anyone can be an online retailer. The company has registered 220,000 boutique owners since 2012.
“We hold daily flash sales and constantly come up with new things to say to customers,” Fox says.
Chelsea Row empowers a charismatic direct seller by removing geographic barriers. A vParty includes all the elements of a home party minus the food. They last about 45 minutes, and sales average between $500 and $800. That compares to average sales of $200 for a Facebook event party, Nagel says. “When you shop with someone you know and trust you buy a lot more.”
And in the time it usually takes to conduct one traditional home party, a Chelsea Row boutique owner can complete three vParties. Top salespeople bring in $900 per party. Nagel says the income potential is equivalent to a full-time career.
Though anyone can buy a startup kit, Chelsea Row is handpicking boutique owners for one-on-one sales mentorship and training, Nagel says. While Kitsy Lane owners earn 25 percent of sales, Chelsea Row owners make between 25 and 35 percent of sales.
Party Plan Growth on the Horizon
The power of social media to influence purchases and reach costumers can’t be denied, especially in direct selling. A party plan company can use its social base to understand emerging trends and shifts in its markets. Social media can help package customer-relationship marketing, SEO, and back office functions all in one place. And by building relationships with customers, companies like Chelsea Row, Jamberry, Origami Owl, Younique and Beautycounter can send targeted communications about the issues and products they know matter most to their customers.
At Beautycounter this approach attracted $15 million in funding. What makes Beautycounter such a hot commodity? It’s the game-changing focus on ingredients. Renfrew and her team painstakingly researched thousands of ingredients as they developed their nontoxic yet effective line of skincare products. Along the way, they created a “Never List.” This is “a robust roundup of ingredients that you will never find in Beautycounter products,” according to the Beautycounter website. Many are known or believed to cause irritation, allergic reactions or cancer.
With its work, Beautycounter also hopes to change the way the cosmetics industry is regulated in the United States. Renfrew said in an Oct. 2 interview on Bloomberg TV’s Market Makers that she wants to see Congress take action. She says that the last U.S. law regulating the cosmetics industry was passed in 1938. Today about 80 percent of the ingredients in U.S. beauty products are not tested for safety. In fact, there are only 11 toxic ingredients banned for use in the U.S. That contrasts with Europe, where more than 1,300 harmful substances are banned.
For other party plan companies, connections with customers are strengthened with an emphasis on a philanthropic effort, such as the Younique Foundation’s focus on helping women who were sexually abused, or Origami Owl’s partnership with Childhelp. Women love helping other women, Younique’s Huscroft says. “There is nothing more empowering than feeling like you are making a difference in the lives of others,” she says.
There is no doubt that there are obvious benefits to using social media to convene people, whether they gather at a traditional home party or through an online event, DSA’s Mariano says. “I think that the integration of technology and the party plan concept, however it is done, will be responsible for further growth of this segment.”