Last week I experienced first hand a brilliant business model in action. My wife, Anne-Marie, was throwing her first Stella and Dot "trunk party" to sell the company's rather fab range of jewelry.
This business has gone from zero to $100mill in sales in just 5 years and is valued at a third of a billion dollars, following a sale of 10% of the stock to Sequoia Capital for $37million, reported here.
At the heart of the business model is "social selling". Stella and Dot representatives, or "stylists" as they're called, organise "trunk parties" at the homes of friends, contacts or family members where the jewellery is showcased. In return, the stylist gets paid a percentage of the sales in cash. And the person who hosted the party gets a percentage of the sales in jewellery.
1. Re-invent a proven model
Social selling sounds new, sexy and social media-enabled. In fact, this is a re-invention of the "party" selling model pioneered by Tupperware over 65 years ago.This shows that a new business model doesn't have to completely new. You can look at models in one market and apply them to a new one.
What Stella and Dot have added is a mightily impressive eBusiness platform. This allows each stylist to have their own online store where they place orders from their parties. People can also order from here after the party, with the stylist getting a cut of these sales too.
At the heart of Stella and Dot's success is, you guessed it, a great product. The jewelry really is lovely and priced affordably, with half the range under $50. This means people attending the parties are happy to buy, without the need for hard selling.
3. Control the route to consumer
I really do think the best brands going forward will, like Stella and Dot, control the route to consumer and not so not be at the mercy of retailers. This has a multitude of benefits. The company control merchandising, pricing and promotion. They get instant, 100% distribution of new products. And they build up a data base of customers.
Another key element is Stella and Dot's success is the way they have tapped into the desire of many modern women to have an enjoyable, flexible and fulfilling work life. Stylists get to run their own business, but with a fantastic support system to help them get going, as the company says on their website:
Stella & Dot is so much more than a fashion brand - we're a company inspired by, and created for, strong, savvy women from all walks of life. When you join us, we'll be standing by with all the training tools and support you need to create a thriving businesses of your very own.
This means they have a highly motivated workforce but with the huge advantage of having no fixed costs.
In conclusion, Stella and Dot have already shown the power of creating a new business model based on a great product and owning the route to consumer. I expect them to half a billion dollars in sales in the next couple of years.
And, if you want to know more about hosting a party and getting lots of free jewelry, contact Anne-Marie - firstname.lastname@example.org