Direct Lines

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Direct Lines
Science of Sales: M. Steves founder Mally Chakola at the skin care company’s headquarters in Venice.

Mally Chakola wants her luxury skin care line, M. Steves, placed on more counters – bathroom counters.

To expand her reach and push into profitability, the founder of the two-year-old Venice company is moving beyond her product’s online sales channels and trying to enlist an army of salespeople who will target their network of friends and family as part of a direct sales program.

“The new consumer doesn’t just shop in a single channel,” she said. “I see direct sales as a viable business channel for a small business to actually make money because so many channels nowadays don’t make you any money.”

It’s a tempting model for a business that has yet to turn a profit; direct sales in the United States last year reached $33 billion, up from $32 billion in 2012, according to the Direct Selling Association of Washington, D.C.

The program Chakola has devised for M. Steves consists of two types of sellers – coordinators and boosters.

Coordinators, of which she has two so far, are hired by the company for their beauty and sales experience. Their primary job is to recruit about four boosters, or salespeople, a month. When their booster achieves $250 in sales, the coordinator receives a $100 bonus. Further $100 payments are made each time a salesperson reaches the next sales goal. Chakola said coordinators also receive base pay each quarter, though she declined to say how much.

Unlike multilevel marketing programs, M. Steves salespeople do not have to buy products in advance and are only expected to sell products, not bring in new salespeople. They earn a 20 percent commission on sales.

William Keep, dean of the school of business for the College of New Jersey who has written extensively on multilevel marketing programs, said the key is for Chakola to have transparency and ensure her sales are not based on recruitment.

“The problem comes in when everybody wants to be a distributor,” Keep said. “But six months later, they’re almost all gone. Now, we’ve got a reliance on recruitment and rewarding people for ongoing recruitment. Then we might have a problem.”

Chakola said her goal is to recruit about 200 coordinators in the next five years. She estimates that coordinators who devote between 10 and 20 hours should be able to manage about 20 boosters.

“We created a much lower progression because we want to create quality over quantity,” she said. “And we want that to be managed well.”

Small players challenged

Paul Zaffaroni, managing director at Newport Beach investment bank Roth Capital Partners, said large companies such as Avon Products Inc. have proved a direct selling model can work, but it can be more challenging for a smaller brand.

“When you’re an emerging brand, you have limited bandwidth and dollars,” said Zaffaroni. “Trying to sell through stores, your own store, a website and direct sales – it’s a lot of balls to be juggling.”

Chakola is in the midst of that juggling act. The direct sales program launched last week, just two months after the opening of her first store on Abbott Kinney Boulevard.

She founded M. Steves, which has a staff of 10 and sells a line of natural, anti-aging skin care products that utilize rosehip seed oil, shortly after moving to Los Angeles from New York in 2010. Initially backed by her own money as well as that of her father, Mathew Chakola, owner of Maryland Paper Co. in Williamsport, she recently closed her first round of angel investment, which will be used to build up her direct sales program.

Used to creating her own hair and face masks using aloe vera and coconut oil, a practice she learned from her grandmother and aunts when she was younger, Mally Chakola said that she was unhappy with the quality of beauty products she purchased. She set out to make her own, working with an Food and Drug Administration-approved lab in Texas that specializes in natural ingredients.

Initially sold online and at boutiques in Los Angeles and New York, prices for her products range from $34 for a 4-ounce. purifying cleanser to $68 for a 1-ounce container of anti-aging serum.

Even with her wholesale, retail and online business, it’s been tough.

M. Steves used to be carried at 15 boutiques, but four of them, including NewBeauty by Fred Segal in Santa Monica, have closed. Chakola said major retailers are cutting back on carrying independent labels in favor of more popular skin care brands.

Shifting to direct sales, she believes, can make up for the loss of other outlets.

“(M. Steves) is a brand that if you just hear about it, it might be harder to sell,” she said. “It’s not a known name to most people but if you experience it, you get it.”

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