Get in on the party

Jan 01, 2007 10:30 PM  By

Much as the Internet was expected to cause the demise of the print catalog, about five years ago many were predicting that the Web would be the death knell for the home-party business.

But instead of crashing, the home-party business is booming. According to the Washington-based Direct Selling Association (DSA), home parties grew from $26.69 billion in 2001 to a $29.73 billion industry in 2004. DSA director of communications Amy Robinson says that 2005 sales broke $30 billion, with the association’s roughly 300 members accounting for about 95% of that figure. All told, Robinson estimates that there are about 1,500 home-party businesses in the U.S.

Traditional catalogers and retailers are among the companies contributing to the industry’s growth. Monroe, WI-based Swiss Colony, for one, launched a direct-selling arm, Swiss Colony Occasions, in February; agents use a 24-page Occasions catalog to help them sell food, serving bowls, and decorative items. Bristol, PA-based women’s apparel merchant Jones Apparel Group in March introduced Million Wishes, a party-plan program that sells accessories such as jewelry, scarves, and handbags that complement the company’s other product lines.

And in September, Las Vegas-based entrepreneur Lisa Hammond launched Barefoot Parties, which offers loungewear, accessories, and gifts for women. Barefoot Parties is a sister business to the Femail Creations gift catalog, which Hammond founded in 1997. Other recent big-name entrants into home-party marketing include Jockey, Crayola, Aerosoles, and Reader’s Digest’s Taste of Home division.

The DSA’s Robinson says growth in the industry has to do with several factors, among them the high cost of getting products placed in stores. “It’s so expensive for a seller to bring a product to retail,” she says. “If you are not advertising your product in the first place, most retailers won’t even let you be on their shelves.”

Another reason more companies are embracing home parties as a sales channel, Robinson says, is the implied endorsement of friends hosting parties for friends. In a sense, home parties are simply a traditional form of what’s now called viral or word-of-mouth marketing. But unlike virtual viral marketing, home parties enable prospects to taste, feel, or see the product first-hand.

Starting a home-party business requires an investment in the merchandise, the cost of producing and printing catalogs to be distributed at the parties, and the promotion expenses to attract salespeople, who generally have to invest a few hundred dollars for a starter kit. Typically the salespeople receive a commission for all sales generated at the parties they participated in, while the party hosts receive complimentary product or a discount based on the gross party sales.

Barefoot’s party path

Barefoot Parties’ Hammond became interested in launching a party-plan company soon after founding Femail Creations a decade ago. “So many women told me they wanted to work for or run a company like Femail Creations,” she says. “I decided a home-party business model would allow me to take the same passion and purpose of the catalog company and expand that into a new company that would allow others to start up their own business with a very small investment.”

Products sold at Barefoot Parties include bath therapy salts for $29, bunny slippers for $39, and decorative pillows for $36. The fee to start as a Barefoot Parties agent is $200. In addition to bonuses depending on the level of income generated, agents get a minimum base commission of 20% from the party sales. Hammond is using radio and print promos, events, trade shows, and a Website to recruit salespeople.

So far, Hammond says, Barefoot Parties is exceeding expectations. She’d estimated that the average party would bring in $400 in sales; it’s been closer to $1,000 per party. And the forecast was that one or two future parties would be booked at each party held, but hosts have been averaging three.

Party poopers

That’s not to say that home-party business will work for everybody. White Plains, NY-based Lillian Vernon Corp., for instance, failed with its home-party initiative. The gifts, home products, and toys merchant had launched Celebrations in October 2004. But citing “channel conflict” and a failure to develop a unique product line, Lillian Vernon shuttered the business in late September.

With its home-party venture, Swiss Colony is “still very early in the process, and we’re continuing to learn as we go,” says CEO John Baumann. “We’re trying to find different gifts for Occasions that you wouldn’t find in the Swiss Colony catalog, like different kids of relishes or salsas that can be used for entertaining.”

Indeed, says Hammond, not all merchandise will sell in a party-plan format. Products that are tactile, can be sampled, or have features that are easily demonstrated work well. And the merchandise must be distinctive. As Hammond says, “If the customers can buy the same products through your catalog, why come to a party?”