SAN BRUNO, United States — The words "direct selling" have long been associated with Tupperware parties and Avon ladies. But that's not quite what Jessica Herrin had in mind when the Stanford business school dropout and co-founder of WeddingChannel.com started Stella & Dot, a direct sales company reimagined for the age of e-commerce and social media that enlists thousands of women (and a few men) to sell its chic but affordable jewellery and accessories to their network of friends and acquaintances via in-home trunk shows and personalised websites.
In 2011, Stella & Dot attracted $37 million from famed Silicon Valley venture firm Sequoia Capital. The transaction valued the company at $370 million, no doubt a reflection of the firm's belief in both Herrin's personal drive and the growing opportunity in direct sales, created by the sluggish economy, in which more and more people are looking for ways to supplement their incomes; the rise of social media, which enables people to more easily maintain a far greater number of "weak ties," significantly extending their reach; and the rise of tablet computers, which can display limitless inventory, take credit card payment directly and run easy-to-use enterprise resource planning (ERP), customer relationship management (CRM) and sales force automation (SFA) software, dramatically improving a seller's productivity.
According to market sources, in 2012, Stella & Dot surpassed $200 million in annual revenue and, as of June 2013, has paid out a total of over $150 million in commissions to its army of approximately 14,000 active sellers, who the company playfully calls "stylists."
BoF spoke to Jessica Herrin about the genesis of Stella & Dot, empowering women entrepreneurs and reinventing direct sales for the digital age.
BoF: Let’s go back to the beginning. What were you doing before Stella & Dot?
JH: I grew up in LA, then went to Stanford undergrad to study economics. It's a magical place that breeds entrepreneurship, probably because it's rooted in Silicon Valley. But when I finished college, I had a massive amount of debt, so I thought I had to go to Wall Street and take up investment banking or consulting. I actually had an investment banking job all lined up, but on a lark my friend saw this ad in the student paper that said, "Get $1,000 if you refer a friend" to work at this software start-up, and submitted my resume!
I never thought I would do it, but I did the interview anyway and it really changed the trajectory of my career. It was this enterprise software company called Trilogy that was so not sexy and based in Austin, Texas, but it ended up being a phenomenal growth experience and ultimately led me back to Stanford for business school, which I left a year early to start the business that would become Wedding Channel. At the start-up in Austin, I was aggregating price and availability for computer parts and Wedding Channel is really just aggregating price and availability for wedding guests who want to buy a gift, so it’s the same technical approach for a completely different market, one that was ripe for disruption back in 1999.
BoF: Why did you decide to found Stella & Dot?
JH: Wedding Channel was a great experience for me. It was a commercially successful company and was great for the four years that I was there. But I realised that, ultimately, I didn’t want to dedicate my life to the wedding business. Plus, all these women would reach out to me and say: "I want to be an entrepreneur, what’s your advice?" And I remember thinking to myself, "I honestly can’t recommend what I’m doing right now, because I work all the time." I had just gotten married and I was thinking about becoming a mother, but I was dedicated, day and night, to this business. I realised, I wasn't running the business, the business was running me.
Around that time, very fortuitously, I went to a conference about the women who pioneered the work-from-home model and I was so intrigued, because I knew it was such an important chapter in the story of women in the workforce. You know, when people think of the most disruptive thing to have changed the economy, they often think of the Internet, but I think it’s the role of women in the workforce. So, I thought to myself, "We haven’t changed the old role for women in society, which is having babies. That’s never going to change. So, we need more ebb and flow. We need to be able to let women seize the opportunity and be whatever we want to be professionally and still be happy [in terms of family life]."
Creating Stella & Dot was not just about going into jewellery and accessories. It was about creating an entrepreneurial platform for women — and then marrying that with my love of design and fashion.
BoF: What was the opportunity you saw in direct sales?
JH: When I looked at what was going on in the realm of home-based business opportunities for women, it felt like the 1950s — not remotely geared for the modern woman or today's digital world. Nobody was using e-commerce, and certainly not social or mobile. The idea of being flexible, yes. The idea of a community of women, yes. The idea of personal service, yes. But everything else felt antiquated. So, we decided to start with a blank piece of paper and asked ourselves, "How can technology improve that experience?"
BoF: You prefer the term "social selling" to direct sales. What's the difference?
Social selling is flexible entrepreneurship reinvented for the modern woman that leverages technology like tablets and social commerce. Our stylists, when they sign up and buy a starter kit, get their own website in a couple of clicks. They also get access to a virtual business centre, where they can get online training, as well as access to a community platform where they can get support from people nearby. We also use game mechanics: there are trackers for things like time management and they get badges when they do activities that help them grow their businesses. One of the most revolutionary things we just introduced is our new iPad app for stylists that we call Dottie, which we found raised their earnings by 20 percent because it enabled them to show the product in this really amazing way, supported by video, gives them tips on how to finish the look, and suggests other products that their customers will love.
BoF: What made you think the jewellery market was ripe for this approach?
JH: First of all, accessories are so critical to a woman’s style and they’re simple; they always fit and flatter. I often joke that from the beginning of time, if men had animals, then women had jewellery made from the bones. Specifically, we thought there was a very big opportunity in mid-market accessories. There’s was a lot on the high end and a lot on the low end, but not a lot in between. So, we felt there was an opportunity to create an affordable luxury line, with amazing design and amazing quality.
Plus, the traditional retail environment for buying accessories was not great. At traditional department stores, all the jewellery is locked up in glass cases, otherwise it would walk out of the door. So women don’t have the chance to pick it up, play with it and touch it, the way they do with apparel. There’s this barrier.
As for social selling, accessories are things that people can easily see when a stylist is wearing them. So a stylist is naturally going to be able to sell her jewellery on the go. She's walking around with our jewellery and people are going to compliment her on it. It's easy to have it naturally come up in conversation, because it’s a very public, visible, beautiful product. Many of our stylists have full-time jobs outside the home, or they’re busy working as a mother. But when they’re going about their day, people are going to see their jewellery.
BoF: That makes perfect sense. Jewellery is inherently social to begin with.
JH: Right. It’s shiny, women love it and immediately it’s, "Ooh I love your earrings" and they get a compliment on it.
BoF: What are the economic terms for the stylists?
JH: So you sign up for $199 and you get $350 in free accessories to kick-start your business. I wanted to de-risk entrepreneurship. I knew that what’s usually most daunting for would-be entrepreneurs is the capital you need to start a business. So, I wanted to make this easy. There’s not a lot of barriers to entry. Then, they sell as much or as little as they want. But every time they sell, they earn 25 percent commission. It’s an "effort in, results out" kind of business.
BoF: How much does an average seller earn in a year?
JH: There’s a really wide range. Most of our stylists are part-time; this is a business designed to be seasonal and part-time. So, we have teachers that only do it during vacation and holidays. And we have lawyers that only do it when they’re not busy. Many people will sell a couple of hundred dollars a month, because they’re only working five hours a week. That’s about 80 percent of our sales force. Our top earners will earn $10,000 a month, but that’s a very small percentage of people who actually want to do this full time. In the US, where we’ve been operating the longest, our top earner brought in $1.3 million last year and so there's amazing earning potential. But I always want people to know that it’s an "effort in, results out" business. The people that are earning a lot, they have teams of other stylists working for them and they earn a percentage of those sales.
BoF: So-called multi-level marketing companies have attracted a fair amount of criticism over the years. How is Stella & Dot different?
JH: When people think of these pyramid schemes, that’s because there are indeed companies out there who have a model that's not straightforward. It’s really a wholesale buying club, where so-called sellers aren’t really selling at all. They’re buying at a discount and selling to other people at a discount. Stella & Dot isn’t remotely like that. Our sellers don’t carry inventory, they don’t get commissions on personal purchases of accessories, and we don’t market this as something that you’re supposed to be selling, but you’re actually buying. We do a tremendous amount of training for our stylists. And I always tell them, listen, it takes work. It only works when you do. There’s no oceanside property in Arizona.
BoF: You bootstrapped the company for three years before taking on Mike Lohner as chairman, Blythe Harris as head designer, and sales guru Danielle Redner. How did you know it was the right moment to expand the team and grow the business?
JH: In the beginning, I had another full-time job, I was pregnant, I worked nights and weekends. Then I went to Doug MacKenzie [Wedding Channel’s first investor, when he was at Kleiner Perkins Caufield & Byers] and said, "Listen, I just had a baby, I’m going to have another one, I don’t know exactly what this is going to be but it’s going to be big and I’m going to make it happen over time. Right now, this is a lifestyle business for me, meaning that I’m a mom working, not a working mom, and that part is going to come first. But one day, I’m going to make something of it, do you want to be a part of this and do this?" Luckily, he was crazy enough to say yes.
The trajectory really changed when I stopped breastfeeding my last child. The business was growing rapidly, but I waited until 2006 to say, "Okay now I’m ready to bring on the talent I need to really ratchet things up." I went back to my one investor [Doug MacKenzie] and I said, "Okay we’re ready, now it’s time to go find someone who will take this to the next level in terms of design and who really knows everything about home-based businesses. So I brought on Mike [as chairman], then Danielle [as VP of training], then Blythe [as chief creative officer].
BoF: Staging in-home trunk shows enables you to have really intimate interactions with your customers, which I imagine results in extremely valuable insights. How are you gathering and leveraging these insights? Do they inform design?
JH: 100 percent. First of all, we’re in her living room, chatting about her life! People are talking about their marriages, as much as they’re talking about accessories. And as much as we’re fashion accessories designers, we’re also data geeks and we live in Silicon Valley. We use our iPad app to capture a lot of data and do excellent CRM. We’re capturing birthdays and wishlists and all of that is being used generate product recommendations for our stylists, so that we know they’re going to have the best products on their tables. Then, we have regular feedback from our stylists themselves; we're constantly listening to what they want from us. We even bring stylists into the design studio and give them sticky notes and they look at the product and say "love it" or "lose it." I also do trunk shows all the time, which informs our assortment.
BoF: Why did you decide to expand from jewellery into bags, wallets, scarves and tech accessories?
JH: Our customers have been asking us for other things for a while. Plus, when you broaden beyond jewellery, you double your market size.
BoF: What have the results been? In 2012, you broke $200 million. Where are you now?
JH: We don’t share revenue figures, but we are doing very healthy double-digit growth. And we’re continuing to have amazing success as a company. In Europe, we are in the UK, Germany and France, and it’s been remarkable; we’re growing at over 100 percent.
BoF: Where do you see Stella & Dot in 3 to 5 years?
JH: A global, billion-dollar, multi-brand, multi-category company that changes the lives of women around the world by providing the right opportunities for them to pursue their passions and succeed as entrepreneurs in a flexible way that works for them.
BoF: When you say changing lives, how are you measuring that?
JH: I would be very happy if we had over 100,000 people getting incremental value in their lives from Stella & Dot. It’s really remarkable when you meet people and you recognise what it’s doing for them. We have people for whom this is taking care of the mortgage or a percent of their bills. There are also people who are stay at home moms and they feel like this is the only money they have that they can spend 100 percent their own discretion and without guilt.
I think it would be crushing if I had to ask my husband whether or not I could buy something. How could you want to live that way? I am as passionate about providing a woman with that $300 as I am about providing her with $300,000, which is what some of our top sellers make.
For me, it’s about providing incremental joy in their lives because they have their own money to spend. I really don’t quantify our success in terms of how much revenue the company generates. Our story isn’t a corporate story, it’s the sum of the success of our stylists. And we can be best measured on how many of those people we are making successful.
BoF: Last question. What about exit?
JH: My exit is going to be an oxygen tank and a stretcher [laughs]! I just want to get really old and one day fall over a trunk show table and die.
This interview has been edited and condensed.