The continuing financial crisis is causing people to go out to eat less, travel less, shop less and, yes, spend less. And study after study says they are doing more TV watching, net surfing, and hanging out with family and friends at home.
This might be just the beginning. A recent Booz & Co. study found that while one-third of consumers have made "substantial" cutbacks in dining out, driving and everyday shopping, 62% said they would make even more significant cuts if faced with a 10% decrease in disposable income. And two-thirds said that will likely happen, expressing a belief that the economy would worsen or stay the same in the next six months.
So, naturally, it's time to throw a party.
Luxury of convenience
The combination of time-crunched consumers and a need for inexpensive luxuries seems to create an ideal environment for in-home parties, with more and more marketers seeing an opportunity to target consumers in a recession with convenient, in-home, personal service for generally affordable products.
"Twenty or so years ago, it was thought that direct selling was countercyclical, that it did better when the economy was down and vice versa," said Amy Robinson, VP-communications and media relations for the Direct Selling Association. "Now we see that it tracks more with the economy -- with the exception of times when there is a true recession. ... We've seen anecdotal evidence for the third quarter that that bump is beginning to happen."
The direct-selling industry -- 67% of which is in home -- totals about $31 billion annually in the U.S. and employs an army of 15 million salespeople.
Tupperware, the king of the at-home-party industry, has seen an increase of almost 10% in new recruits in the past three months, as well as a 40% increase in directors and a 30% increase in the number of parties given in Hispanic regions.
Tupperware Brands CEO Rick Goings said part of the reason for the success is that Tupperware has transformed and modernized along with its customers and is no longer just about selling "milky-white burping bowls."
Life of the party
"Now, when the economy has pressures on it, the companies that are doing best are the one that really hit on what consumers want," he said. A Tupperware associate "will have a party here, say with a Mexican theme night, and they're not only making salsas, but they're learning how to entertain and how to save money. ... It's no longer a Tupperware party; it's a girls' night out."
Other potential benefactors of the Stay-at-Home Economy include traditional party companies such as Avon, Mary Kay, Tastefully Simple and Pampered Chef (the last of which is owned by Warren Buffett's Berkshire Hathaway) but also newer entrants and business models such as Dress Barn, Aerosoles, Jockey and House Party (which puts on parties for a variety of brands).
For all these marketers, the idea of in-home parties as an intimate way to introduce or reintroduce a brand is becoming a more acceptable and widespread strategy. "This is not new. Tupperware parties have been around since the '50s," said Robert Passikoff, CEO of BrandKeys. "But for the first time, we're seeing it institutionalized as a brand touch point. ... Whether it's a fusion of the bad economy and a desire for more personal and customized care by the brand, the fact is, it's starting to show up as a recognized and legitimate media platform."
What's making in-home parties work right now is a combination of factors. We took a look at some of those suggested by industry experts to see what all marketers can learn.
Return of the Tupperware party?
TIME-CRUNCHED CONSUMERSDress Barn began its "Very Indulgent Parties" more than a year ago as a way to help busy women reconnect with each other on their own time. Each of the chain's more than 800 stores handles the parties differently, but basically each throws a private party before or during store hours, offering a 25% discount to the hostess and a 15% discount for each of her guests, said Veronica Valladares, Dress Barn's assistant VP-marketing. The stores provide refreshments -- some mall locations even hook up with neighboring retailers for goody bags or door-prize donations -- while the women are "waited on hand and foot" by the store staff.
Ms. Valladares said the number of parties has taken off lately, with some stores having to consult calendars to fit all the requests in. The parties make sense for time-crunched women who can shop while they spend time with friends, with the added bonus of a discount in the wallet-pinched economy. "The parties were really born out of what Dress Barn is about," she said. "The economy now actually just plays a bigger role."
THE LIPSTICK FACTOREconomists have often referred to the theory that consumers will continue to purchase small indulgences as "the lipstick factor." While some dispute the validity of the theory, it is true that consumers are still indulging in some items, including many of the product categories popular at in-home parties, such as beauty care, clothing and accessories, as well as some specialty food items such as chocolate.
The Booz & Co. survey, for instance, found that only 6% of consumers have changed their choices of beauty products to cheaper versions, with a similarly low number cutting back on personal care such as massages, facials and nail treatments.
"People like to visit with their friends [at home parties] first, but that little extra purchase can also make you feel good," said the Direct Selling Association's Ms. Robinson. "When you attend a direct-sales party, you don't have to spend a lot of money to have a good time."
NEW RECRUITSWhile the national unemployment rate is hovering at 6%, the highest since 2003, many pundits expect it to go higher. Direct sales can be a beneficiary as newly unemployed people look for jobs.
"People turn to direct selling when they've been laid off and are looking for an immediate source of income," Ms. Robinson said. "But many continue it even after they get another job, finding that they really enjoy it and like that extra money in their pocket."
NESTING IS INThe stay-at-home trend isn't fueled only by economic worries and personal spending cuts, but also in part by a nostalgic longing for the good old days of simple fun with family and friends.
House Party, which arranges simultaneous parties on behalf of dozens of brands from Saturn and Ford (yes, the parties offer test drives) to Hershey and Alpine Lace, has felt that directly. Sign-ups to host parties went from 3,300 in August of last year to 12,300 in August 2008 and from 5,400 in September 2007 to 7,900 this September. For a recent Fisher-Price party, more than 22,000 consumers signed up to host one of 1,000 parties focused on several new kids' toys, said Terese Kelly, House Party's director-public relations and agency partnerships.
"Personally, I like it because it's a bit old-fashioned. It harkens back to the days of -- maybe not quite the door-to-door salesman but still an intimate way to reach people," said Robert Sprung, CEO and co-founder of brand consultancy TippingSprung. "Something about the return to home and the comfort of connecting with people there. ... There's just something logical about that."