Known as Willagirls, the teens and tweens host Tupperware like get-togethers at home, school or just about anywhere eight- to 13-year-olds hang out. Invites typically are extended via text message, since nobody uses email anymore, Ms. Messner says. So far Willagirl, which doesn't disclose annual sales, has recruited 42 sellers in New York, Miami, New Jersey, California, Colorado and Maryland, among other states.
For Willagirl's young sales reps, the company offers 25% of total sales, for a potential monthly income of $320 to $3,500, according to a pamphlet sellers distribute at their parties. Party hosts also receive 15% of retail sales from the party in free products, plus one half-price item if party sales exceed $400.
There are all these hidden costs that are tied to brick-and-mortar retailing, says Willagirl founder and chief executive Christy Prunier, and besides, tween girls aren't going to malls anymore. The company, based in Riverside, is currently building out software, which by September will allow the girls to host virtual parties online, she adds.
Willagirl is one of a handful of startups that in the past few years have turned to business models combining e-commerce and social media with the traditional direct-sales tactics pioneered by Tupperware, Mary Kay and Avon. Most are aimed at young women. The direct-sales industry generates $32.67 billion a year in U.S. business, the Direct Selling Association estimates.
Stella & Dot, a San Francisco-based direct-sales jewelry and accessories company started in 2007 today has more than 20,000 sales reps. Origami Owl, founded in Arizona in 2010, sells jewelry through a network of some 60,000 sales reps.
But incentives to recruit other sales reps—a staple of larger players in the direct-sales market, such as Herbalife HLF +1.40% —can raise red flags among critics of the model, also known as multilevel marketing.
It all depends on the incentives in the compensation plans, says Douglas Brooks, a Boston, Mass., lawyer who has represented dozens of sales reps in lawsuits against direct sellers. Many of the plaintiffs built up inventories of unsold products trying to qualify for a recruiting bonus tied to sales—what Mr. Brooks and others liken to a pyramid scheme of endless recruiting: If you make people buy a certain level of inventory to qualify as a recruiter, you're creating an artificial demand for the products, he says.
In a white paper released in March, Mr. Brooks, along with two co-authors, estimates that up to 99% of sales reps of large multilevel marketers lose money, while the top 1% earn an average income of about $128,000.
Chantel Waterbury, the founder of Chloe & Isabel, a New York-based direct-sales jewelry company launched in 2011, said her company doesn't offer a bonus or commission for recruiting new sales reps. Her roughly 4,500 U.S. sales reps—with a median age of 26—can earn anywhere from $50 to $400 in an hour during sales events on cash commissions ranging from 25% to 40%. Chloe & Isabel backers include venture capitalists such as General Catalyst Partners and First Round Capital.
A former Hollywood producer, Willagirl founder Mrs. Prunier says she was inspired to launch the brand six years ago by her daughter, Willa Doss. Then 8 years old, Ms. Doss complained about having to use her baby sitter's skin-care products, because there were no lotions in the marketplace for girls her own age.
Mrs. Prunier says Willagirl's sales reps don't buy their own inventory in advance. Instead, they take orders from customers, which the company fulfills itself, as orders come in. They're never sitting on products, she says. It's not work. It's what these girls like to do and their moms are thrilled that they're saving money and developing important skills.
They do, however, earn money by recruiting other sellers.
On top of her own sales, Hartley Messer has recruited seven other Willagirls, earning an additional 5% of each of their sales as well, under the company compensation agreement.
She's recruited a team of girls and loves to coach them with sales tactics—she paces back and forth on her cellphone talking to them, says her mother, Neile Messer.
Hartley Messer, one of Willagirl's top sellers, says she has hosted four Willagirls parties since February, earning roughly $1,000 to date. Under a pact with her parents, who put up about $199 for an initial sales kit, half of her earnings go into a college fund, according to her mother. Nearly all the rest is spent on clothes, Hartley says.
By the end of the party, Hartley had collected about a dozen orders for a range of products. Most were filled out by the girls themselves, but paid for by their parents' credit cards. She also recruited at least one new Willagirl ? her 13-year-old neighbor, who tried out the face mask and filled out an order form for roughly $60 of face cream, sunscreen, body lotion and lavender face towels.
My friend bought me one of the bags and I really liked it, said Olivia Wise, the new recruit.
Source: Wall Street Journal
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