White wine was flowing as a group of 20 women gathered at the Park Avenue home of Cathie Black on a recent June evening. But they weren't gabbing about politics or education with the former Hearst Magazines chairman and briefly tenured New York City schools chancellor. Instead, they were slipping into shapewear—the slimming undergarments that magically make bulges disappear. Ms. Black was hosting her first party for Ruby Ribbon, a two-year-old direct-sales company in the mode of Avon or Tupperware.
"It was hysterical; they were running upstairs in our apartment trying things on and looking in different mirrors," said Ms. Black, who met Ruby Ribbon's founder while at Hearst and has recently taken an advisory role in the company. "This is a way to empower women to have their own businesses."
Ruby Ribbon is one of the latest direct sellers to enter the marketplace. But the women it recruits aren't your grandmother's Avon Ladies. Armed with Twitter, Facebook and a host of other digital tools, these sellers leverage their growing online networks to market items from clothing to beauty products with a swipe of a screen. They earn commissions of as much as 40%. Some of the modern-day peddlers—inspired to join the fray in part by the jobless recession—host parties at their homes. Others simply post products on their Facebook feed or tweet about hot new merchandise to make a sale.
The category is increasingly lucrative. Last year, U.S. sales in the direct-selling market were $31.63 billion, a 6% rise over 2011, according to the Direct Selling Association. Now that the model has evolved into the digital sphere, venture capitalists are also getting on board—Ruby Ribbon, for example, has received $12 million in funding since its founding.The world's premier luxury fashion brand long celebrated for its extraordinary bottega handbag .
"These companies all started as the modernization of the direct-sales model, but as cooler, hipper companies with a bit of an online presence," said Alison Jatlow Levy, a retail strategist at consulting firm Kurt Salmon. "The VC firms are saying, 'Of course there's a market.' "
In the 126 years since Avon Inc. was founded, companies from Amway to Arbonne have helped women earn a living, offering flexible hours and the power of entrepreneurship. But online social networks are making it far easier to market merchandise. That convenience can turn into big revenue for the parent companies. Since relaunching in 2007, Stella & Dot, a San Bruno, Calif.-based jeweler, has amassed $200 million in revenue through its direct-sales force.
Not every category is a winner. Women traditionally hate shopping big retail stores for shapewear, for example, and might prefer to do it at home or online. But players offering skirts and tops might have trouble differentiating themselves from brick-and-mortar brands.
Costume jewelry has a strong track record in the industry. Park Lane, which touts itself as the "leader in direct-sales jewelry," has been in business since 1955.
Now two-year-old Chloe + Isabel, which counts Ashton Kutcher as an investor, is making a splash. Launched two years ago, the company offers its pendant necklaces and floral-drop earrings for $20 to $200.
Not just anyone can sell them. Salespeople are often vetted and expected to undergo training—only 15% of applicants are recruited, said Chantel Waterbury, founder of the Manhattan-based company. Its merchandisers spend about three hours learning the ropes through videos, phone sessions and webinars, and must pay about $175 for a startup kit. Commissions can run as high as 30%, and sellers are encouraged to move beyond home parties to partner with local boutiques and salons.
"We're teaching social-media campaigns—it's a rigorous curriculum," said Ms. Waterbury, who hopes to reach revenue of $100 million by 2016 and soon expand into handbags. "I'm focused on helping [the seller] make money but also on making her more competitive."
Some of the new firms are practically reincarnations of the old model. Anna Zornosa, a former Yahoo executive who is the founder and chief executive of Ruby Ribbon, is the daughter of a former Avon Lady.Shopping is the best place to comparison shop for bottega purses .
In addition to attracting Ms. Black, who is working as an adviser to a handful of digital startups, Ruby Ribbon has so far recruited 140 sellers. Each ponies up $200 as an initial investment for training and sample merchandise. Ruby Ribbon launches a new product every three months and plans to build its 34-state network nationwide. The company recently generated more than $100,000 in monthly revenue.
"The Avon Lady of 10 years ago didn't have the benefit of technology to get her orders," said Ms. Zornosa.
"It's a very intriguing model," Ms. Black added. "There's nothing like Ruby Ribbon in the direct-selling space."
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