Whereas once homemakers hosted Tupperware parties or sold Avon cosmetics to their neighbors to supplement their family income, today their granddaughters are adopting the direct marketing model to sell to their middle school classmates. An expanding roster of retailers is pulling its products from traditional store shelves and relying on young fans to sell products to their friends, as well as recruit other tweens to sell even more.

At Willagirl parties—held either at friends’ houses or online—young teen salesgirls encourage their pals to try face creams, lip glosses, and acne washes. The nearly 50 Willagirls—as the company calls its adolescent sales representatives—currently working for the firm earn 25 percent of any sales they make. Girls whose parents host parties earn free products worth the equivalent of 15 percent of the sales completed during the parties.

Other companies use similar models but sell other products, such as jewelry and accessories. Stella & Dot relies on more than 20,000 sales reps, and Origami Owl boasts approximately 60,000 sellers in its network.

Unlike their parents’ or grandparents’ parties though, these direct sales models make extensive use of modern communication technologies. Party invitations speed through text circles because, as one 13-year-old Willagirl scoffed, “nobody uses email anymore.” This same Willagirl makes great use of her smartphone to recruit and coach other Willagirls as well, because the structure of the sales organization encourages multilayer marketing. For every new sales rep a Willagirl recruits, she earns 5 percent of that rep’s sales.

Critics contend that such multilayer marketing practices are risky and dangerous for rational adults, much less children. Some analyses indicate that only the top 1 percent of the participants in such hierarchical sales organizations actually earn profits; the others tend to lose money, because of the outlays they must make in purchasing products to sell.

Willagirl notes that its adolescent sales reps are not required to maintain inventory on hand. Rather, the company ships sold products directly to buyers. However, working as a sales rep requires a functional sales kit, and the introductory version of this kit costs the seller $199.

Discussion Question:

What is Willagirl’s retail strategy, that is, its retail format, target market(s), and bases for sustainable competitive advantage?

 

Source: Angus Loten, The Wall Street Journal, June 16, 2014