According to an article at Reuters.com last year’s big surge in the number of new direct sales consultants did not translate to more sales. Hopefully the 2009 figures, which aren’t yet available, will show better results, but direct sales revenues have been dropping over the past couple of years according to DSA reports. In 2006 direct sales were $32.18 billion; in 2007 the figure was $30.8 billion, and sales dropped again last yer to $29.6 billion.

The full article, “Avon calling: More workers try direct sales” can be found at
http://www.reuters.com/article/idUSTRE5BF55A20091216

Does that mean people shouldn’t start a direct sales business or should drop the one they already have? I don’t think so. What I think it means is that direct sellers should adjust their marketing and their approach. Market what your customers are want to buy and focus on providing extra customer service and amenities. When you can’t compete on price, compete on a more personal level.

People would still rather buy from someone they know and trust. When you go the extra mile to provide personal attention they can’t get elsewhere you often gain a customer for life.

If you are thinking of starting a direct sales business or you are already a consultant and wondering what to sell during a recession, here are some tips.

First are the bare necessities of course… food, clothing, shelter, basic personal care (toothpaste, soap, etc), health care, and utilities (heat, electricity, etc). Then there are other items that people are slow to give up such as education and television and Internet. Additionally, consumers will show increased interest frugal living and in do-it-yourself products and information.

However, while consumers will continue to buy food for example, they are cutting back on higher priced organics, choosing budget family dining instead of fine dining, and are more likely to choose a less expensive generic over their usual brand. Some adjustments to your marketing message may be necessary to meet customers’ current preferences. Market gourmet food mixes as a less expensive alternative to eating out. Or sell spices and recipes that make budget meals more appealing. Demonstrate how your cooking tools can be used to preserve the nutrient value of foods and how storage products prolong self life.

Think about why people don’t give up television during hard times. Perhaps it’s because they give up other forms of entertainment like going out to the movies or skiing. Since the family is staying home more, they rely on television for entertainment. But other inexpensive family entertainment products such as board games and movie rentals may be good sellers now too.

As mentioned in Recession Proof Your Business Using the Lipstick Theory the best positioned companies in a recession sell what economists refer to as “inferior goods” – products that people substitute for their favorites that they can no longer afford. So again it follows that if you focus on selling your less expensive product line as an alternative to the more “luxury” products they’ve been buying, your customers are more likely to continue buying from you.

It’s really a lot of common sense – think about what people will continue to buy when they are being very budget conscious and sell those items.

There’s also a major advantage direct sellers have during a recession that makes customers want to buy from you – personalized customer service. While the department stores are probably cutting back on personnel, you can go the extra mile to provide the attention your customers want.

It’s not the time for business as usual, but if you make adjustments you may be able to maintain your usual amount of business.

If you’re looking for a company to join, be sure to also read, How to Choose a Direct Sales Company During a Recession.

Like many other people in the US right now, you may be looking to start a home business to replace a lost job or as some insurance against a possible job loss. If you’ve decided to become a direct sales party plan consultant, here are some factors to consider when choosing a company during a recession.

1 – What type of products are your target market going to buy? Carefully consider who you are going to be selling to and find out what they are buying and what they have given up because of the economy. Keep in mind that many of us are cutting back to necessities, choosing less expensive alternatives for items we have to buy, and being more careful about getting value for our dollar.

Within the next few days we’ll talk about what to sell during a recession in more detail. In the meantime, there is some information about it in our post, Recession Proof Your Business Using the Lipstick Theory.

2 – Is the company positioned to weather this economic storm? Of course there are no guarantees, but determine what factors you think improve their chances.

Companies that have been in business for a longer time have endured more economic ups and downs. The early 2000′s saw some problems because of 9/11 and accounting scandals as did the early 1990′s and 1980′s. Companies that launched before those dates have a proven track record. There are even a few companies that made it through the Great Depression and are still in business today.

Financial information that can give some indication of their ability to withstand a recession is readily available for publicly traded companies. For privately held companies there are some questions you can ask to try and get an indication of their financial stability. Helpful information includes knowing how they are financed, whether or not they are debt free, and whether they are backed by a stable parent company.

For more on evaluating a company’s financial stability read, Evaluate This Often Overlooked Criteria When Choosing a Business Opportunity.

3 – How do product prices compare with other companies selling similar products? Pricing isn’t always a factor when purchasing from direct sales consultants, but it is more of a factor during a recession.
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In recent weeks I’ve come across number of articles and blog posts claiming that direct sales is recession proof. Some have gone as far as saying that consultants who admit their businesses are struggling are just using the recession as an excuse to give up.

Fact is… the current state of the US economy, the recession, affects your direct sales business. Sugar coating it, ignoring it, or denying it won’t change it.

I don’t think anyone should give up because of the recession, but I believe that it’s important to operate from a position of knowledge and acceptance of the facts. If you don’t recognize how your business is affected, you can’t adjust for it. Now is not the time for business as usual.

Fact is… in order to survive a recession, all businesses need to make some adjustments.

Some who are claiming that direct sales is recession proof are using a video clip from Jim Cramer’s “Mad Money” show as further evidence of that claim. A closer look at the information presented in the video may produce some doubt about whether it’s clear evidence that direct sales consultant businesses are recession proof.

First it’s important to note that the video is from a show that was produced nearly a year ago, in mid-March, 2008. A lot has changed in a year, including the price of the company stocks mentioned in the video.

In the video, Cramer is offering advice and opinions about investing in the company stock. He’s not making any recommendation about becoming an independent sales representative. The information speaks to the likelihood of success of the company, not direct sales consultants.
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Image courtesy of pink_raindrops.

While many of us are very optimistic that President-elect Obama will lead us out of this economic mess, it’s clear that we will start 2009 with rising unemployment and a continued slowdown of economic activity. Take steps to recession-proof your business.

Direct sales consultants may already be seeing a dramatic increase in team member sign-ups and inquiries about joining their company. Many people will be looking to replace lost income by starting a home business, and others will be thinking about adding a home business as insurance against a possible job loss. While adding team members is always worthwhile and can temporarily increase your income because of sales to new consultants, keep in mind that what drives direct sales income is sales.

But just when you need more sales, your customers, and your new recruits’ customers are likely to be cutting back on “extras” and spending just for necessities. Now is the time to identify and focus on marketing products that will sell despite customers’ shrinking budgets.

The Lipstick Theory, or lipstick effect, suggests that there is a category of products that will show increased sales during times of economic uncertainty. After the terrorist attacks in 2001, the chairman of Estée Lauder, Leonard Lauder, noticed that lipstick sales increased. He theorized that women were buying inexpensive indulgences like lipstick to treat themselves, instead of buying more extravagant luxuries like designer clothing or expensive jewelry. The Lipstick Theory remains unproven, and in fact, recent sales figures for lipstick suggest it’s not accurate, but I think there is merit in considering it when deciding what to sell during a recession.

In tough economic times, it stands to reason that people will at least cut back on spending for non-essentials. When we buy, we’ll be looking for lower priced alternatives for our purchases. During a recession or depression, the best positioned companies sell what economists refer to as “inferior goods” – products that people substitute for their favorites that they can no longer afford. The lipstick effect may in fact be due to “inferior product” substitutes for things that have been given up.

By focusing your promotions on your less expensive products and services, you may be able to sustain your direct sales income. Promote lipstick instead of spa treatments, costume jewelry instead of precious metals and stones, and toys and games to entertain the kids at home. Focus on budget meals and meal-stretching foods like pasta and rice. Teach your customers how to accessorize to make an outfit look new without actually buying a new dress.

Anything related to frugal living and do-it-yourself should be popular. Re-using and re-purposing household items saves money. People will be looking for coupons, discounts, and money back guarantees.

By thinking about how people spend and what they do to try to save during hard economic times, you can focus your marketing and continue to contribute to your family income.