|BUSINESSWEEK ONLINE : NOVEMBER 1, 1999 ISSUE|
|BUSINESS WEEK E.BIZ -- MANAGEMENT
Is the Bell Tolling for Door-to-Door Selling?
Trouble for Avon, Tupperware, and Mary Kay?
Cindy C. Neff is a loyal seller of Avon Products Inc. (AVP), skillfully pitching such favorites as Naturals bubble bath and Skin-So-Soft bath oil to friends in her Birmingham (Mich.) neighborhood. Now, Neff, a six-year Avon distributor, is afraid she could be toiling for a company that may not be so loyal to her. The $5.2 billion cosmetics giant has begun to use the Internet to go to customers directly. That isn't a problem today, but Neff worries that it could soon diminish--if not wipe out--the role of Avon's 465,000 independent U.S. sales reps. ''This takes away what Avon has been for many years,'' says Neff. ''We feel we're such a small voice.''
Neff's lament highlights the tensions building in any number of industries, from medicine to microchips, that support sprawling sales organizations. Giant direct sellers like Avon, Tupperware (TUP), Mary Kay--built on the backs of millions of believers like Neff--are the latest to endure dot.com dissonance. After years of indecision, they're now building spiffy new Web sites, or in the case of Amway Corp., an entirely new spin-off, called Quixtar.
WALKING A FINE LINE. In the New Economy, where many traditional businesses are being turned upside-down, few industries hang in such a precarious balance. For decades, direct sellers--which have no stores and limited retail distribution--have relied almost exclusively on the enthusiasm of door-to-door sales reps. But now the Internet looms, with its ability to reach millions of buyers instantly, anywhere. And with the Internet come online rivals, such as Procter & Gamble Co.'s (PG) Reflect.com and eve.com, that stand ready to cater to customers once wooed by the Avon Lady. ''The rep's relationship with the company is an emotional one. It's one of trust,'' says Glenn Scuteri, head of the Direct Selling Assn.'s Internet council. ''If we started selling on the Web against the representative, that would violate the trust.''
For now, keeping that trust means walking a fine line between a tried-and-true past and an uncertain future. Direct sellers call it a ''high-tech, high-touch'' approach that blends the personal contacts of door-to-door sales agents with the convenience of the Web. Avon, for example, vows to keep 95% of its sales with Avon Ladies. Reps will create home pages on Avon's Web site so that when an order is placed online, they get the commission. Ditto Amway and Mary Kay. ''We'd be naive to think there won't be some conflict out there,'' says Len Edwards, president of avon.com. ''But it won't be as strong as some people suspect.''
For some, tiptoeing onto the Net is just what the rep ordered. ''This is a touchy-feely kind of business,'' says Paulette Noyes, an eight-year Mary Kay Inc. veteran. But the Mount Laurel (N.J.) resident has watched her customers' buying habits change over the years: ''They don't have enough time to visit,'' she says. Nowadays, Noyes estimates 10% to 12% of her 400 customers send in product requests in late-night e-mail.
And that's bound to grow. Online health-and-beauty sales are pegged to jump from $509 million this year to $6 billion by 2003, according to Forrester Research Inc. As more buyers flock online, the efficiency of the Net could further strain relationships. While direct sellers may want to nurture their salespeople today, in months to come they may feel pressure to pare back, especially when it comes to the thousands of lower-volume agents who can take up to 33% of a retail purchase in commissions.
Consider that 52% of reps put in less than 10 hours a week, according to the Direct Selling Assn. On average, reps gross less than $12,000 per year, and many end up selling only to a few friends. Trying to remain loyal, especially to low-volume reps, could prove expensive in a future where snazzy Web multimedia might all but duplicate in-home demonstrations.
''They're loyal to their distribution channel as opposed to their end customer,'' says David Siegel, president of Web-strategy firm Siegel Vision. Already, Tupperware is changing the rules of its game. In January, it will begin paying representatives less for sales referred to the Net than for those made directly at a party. And while Avon says it is committed to its Avon Ladies, it will offer a full catalog to those who prefer to shop without a representative's intervention. ''The world has changed,'' says Tupperware Corp. CEO E.V. ''Rick'' Goings.
One argument that direct sellers offer their salespeople is that the Net can make their lives easier by doing away with scut work. Reps spend, on average, 25% of their work time on administrative tasks (consider Avon's hefty, 53-page order form, for instance.) Back-end Web ordering systems should cut the hassles. ''If I can make it easier for her to work with us, then she'll spend more time working for the customer,'' says Avon's Edwards. And this new rep will cost Avon less: Processing an Internet order costs just 40 cents, vs. $3 for a telephone order and $1 for mail.
SEEKING SOCIAL STIMULATION. And they hope to use the Net to attract new, higher-income shoppers. Putting those electronic leads in the hands of salespeople could develop long-term relationships that are more profitable than simple one-time Web purchases. ''The Web is the biggest relationship-building tool ever,'' says Ashok Pahwa, Mary Kay's senior vice-president for global marketing and sales promotion.
So why would customers even use a rep if they can order online? As Tupperware executives explain, the best-designed Java code will never duplicate the warmth and trust inspired by personal selling. ''We ask people why they go to Tupperware parties,'' says Goings. ''A great deal say social stimulation.''
Still, with the Web handling more of the administrative load, the average representative's role will likely be transformed. ''Customer service will become a bigger issue,'' says Pahwa. That puts additional pressure on direct sellers to better educate their sales force about the merits of their products. Pahwa foresees a day in the not-so-distant future when online videos and training will replace the company's now constant barrage of educational booklets.
There's also the matter of getting reps wired. At Mary Kay, Avon, and Quixtar, reps must first create an internal Web page before online sales can be credited to their account. While it's a simple process, some 40% of Mary Kay and nearly 60% of Avon reps don't have Web access. Both companies, however, have signed deals with PC makers to help get discounted computers to their reps.
Cyberspace will never eliminate the need for friendly, chatty sellers, but it could reshape the industry's fundamental structure. ''They become beauty consultants, not order-takers,'' says Warburg Dillon Read analyst S. Melissa Grant. Now comes the hard part: transforming the direct-selling industry without toppling it.
By DENNIS BERMAN
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
BACK TO TOP
Is the Bell Tolling for Door-to-Door Selling?
TABLE: Keeping the Channel Static Free
E-Mail to Business Week Online