Stella & Dot’s CEO on the Brink of Making a Billion
This article is originally from the October issue of More magazine, written by Amanda Robb. Read it HERE.
Stella & Dot’s CEO on the Brink of Making a Billion
Jessica Herrin reinvented her jewelry business twice before finding a concept that really clicked with consumers—and made her seriously rich
It’s a sunny, cold morning in Manhattan, too early for most people to be up. But in the New York showroom of the costume jewelry retailer Stella & Dot, a posse of chic employees are already caffeinated and hard at work. They are shoulder to shoulder around a long conference table, looking at bling—bib necklaces, bangle bracelets, cocktail rings, a rhinestone brooch fanned in feathers. Busy grouping pieces into families is a raven-haired woman dressed like a high-fashion biker, right down to her black ankle boots: Jessica Herrin, 39, Stella & Dot’s CEO and founder. She lines up a row of necklaces, pulling out a golden rope chain that has a dangling trio of hearts. She puts it around her neck and hoists the chain until the pendants lie against her sternum. “We need midlength,” she says decisively to her team. “It’s a style that works for everyone, everywhere. Dresses up or down. It’s fun or functional.”
Herrin’s close attention to her products and to the reasons women buy them has turned the business into a huge success. Since relaunching in 2007, Stella & Dot (stelladot.com/emarkland) has paid out more than $100 million in commissions to its 20,000 sales reps. Remarkably, it is the second phenomenal business Herrin has launched. In 1996, as a 24-year-old student at Stanford Business School, she cofounded one of the first online gift registries for brides, Della & James. Within months, the site expanded into a full-service bridal portal and merged with WeddingChannel.com. Herrin and a business partner appeared as guests on Oprah, where they were introduced as women who “followed their hearts and found their fortunes.” But grateful as she was for her success as an entrepreneur, she also felt deeply ambivalent about the cost to her life. “For four years, I worked every night and weekend,” she says. “I’d just married, and I never saw my husband. I wanted to start a family, but I couldn’t see adding a baby to the picture.”
Then Herrin’s husband was offered his dream job, out of state. She left WeddingChannel.com and moved from Northern California to Austin, Texas, where she became a senior manager in e-commerce at Dell computers. “The job was challenging, but in a completely sane way,” Herrin says. So sane that by the time she found out she was pregnant with her first child, Herrin was using some of her free nights and weekends to work on creating her ideal business—in her words, “a company that you own but that doesn’t own you.”
This time, instead of thinking about developing a business the usual ways —what will be my product? Who will be my customer?—Herrin focused on a target employee: a woman with kids who needs flexibility. At first, all Herrin had to go on was a memory of a Mary Kay cosmetics convention she’d once observed at a hotel. “It blew my mind,” she says. “The women were over the moon with excitement and joy.” She began researching home-based direct-sales businesses that sold makeup, vitamins, candles or kitchenware. “But none of them resonated with me,” she says. In her view, the products weren’t irresistible. Worst of all, they weren’t very lucrative for the salespeople. (The Direct Sales Association reports that the median annual income for a home-based vendor is $2,400.)
Still, Herrin saw potential. Crafting was booming, and Herrin thought a business based on at-home jewelry-making parties seemed like a possibility. “Everyone wants beautiful things,” she says. She turned a sunroom off her kitchen into a craft room, bought some beads, stones, chains, hooks and clasps and came up with the design for a DIY kit. While still working at Dell, Herrin named her fledging company Luxe Jewels and found a factory that would produce the kits.
Three months pregnant with daughter Charlie, Herrin held her first trunk show. She served her friends Merlot and artisanal cheeses and pocketed $450. By the time Charlie was crawling, Herrin had hosted 13 Luxe Jewels trunk shows, most at other women’s homes, and earned $8,000 in profits. In 2004, Herrin resigned from Dell so that she could begin recruiting Luxe Jewels sales reps. In 2005 the company’s revenue hit $550,000.
More than half a million dollars sounds like a lot. But when Herrin left WeddingChannel.com, its sales were upwards of $100 million. To get back into the really big leagues, Herrin did something she felt was key to her first business success: She found a mentor.
Early in her career, during Della & James’s start-up phase, Herrin had sought investment from the venture capitalist Doug Mackenzie, then a partner at Kleiner Perkins Caufield & Byers. “He told me, ‘Nine out of 10 companies in their successful form look nothing like their original form when they began,’ ” says Herrin. “So achieving a good outcome is not about being right from the start. It’s about being tenacious and committed to constant improvement.”
Now Herrin wondered, How could she improve Luxe Jewels? She decided to cold-call Mike Lohner, former CEO of a direct-sales company, Home Interiors & Gifts, that during his tenure had deployed a force of 120,000 consultants and generated about a billion dollars in annual retail revenue. Herrin got Lohner’s home phone number in Dallas through a friend and asked to meet with him. “She was on a plane the next day,” Lohner says with a laugh. “She explained Luxe Jewels, then asked what I liked and what I didn’t. I told her flat out that I didn’t like the beading-party concept. There wasn’t enough money in it—for her and her sales force.”
Herrin’s response: “Oh, great! We can change that.” Lohner was impressed. “You could give her bad news, and it took her about 30 seconds to get over it and turn it into a positive.”
Herrin knew she didn’t have the design chops to create a whole jewelry line. So she signed up Maya Brenner, whose delicate, playful jewelry is a celebrity favorite. Then Herrin rebranded. Luxe Jewels was no longer just a direct-sales business; it was also a “social selling” company. Herrin’s reps, called stylists, ask customers about their social lives (a training manual suggests asking, “What special events are coming up? Weddings? Parties?”), then offer to help them find the right jewelry for their outfits. Stylists learn to mix and match different looks. They make money through a tiered system in which they recruit other reps and earn their own sales commissions (25 to 30 percent of retail) as well as varying commissions on sales made by reps “down-line.” Like most other direct sellers, Herrin requires her salespeople to buy a starter kit (currently $199, which includes $350 worth of jewelry), and they typically invest an additional $800 to buy more jewelry, business cards, display trays and a carrying case.
In 2006, Luxe Jewels hit $1 million in sales. But Herrin was far from satisfied. “I saw the company as something that could do more than make a million dollars,” she says. “We offer people—women mostly—the opportunity to work when they want, as much as they want.” That summer she spotted a chance to reach her goal when she met Blythe Harris, who had recently introduced Banana Republic’s jewelry line. The two shared a vision of selling fashionable jewelry that had broad appeal, and Herrin decided to relaunch her company a second time. She offered Harris the title of chief creative officer and asked her to participate in renaming the enterprise. (Brenner, who already had her own successful high-end line of jewelry, would continue to design for the company.) Harris feels her sense of style and passion for beautiful things come from her grandmother Dot. Herrin traces her drive and tenacity to her grandmother Stella. Stella & Dot was born.
With Harris as lead designer, the company doubled its earnings within the year. Doctors, teachers, stay-at-home moms and even a pecan farmer bought start-up kits and became stylists. Tysh Mefferd, who owned a stationery company and now oversees 2,500 Stella & Dot stylists, consistently earns six figures. Others have far more modest earnings. In 2011 the average monthly revenue for a rep was $261; a typical “star stylist” (a seller supervising four active stylists) takes in $2,673. A senior director (who oversees four star stylists) makes, on average, $13,765 a month.
“Some stylists are really brand ambassadors. They like hosting an occasional trunk show and the opportunity to buy affordable jewelry,” explains Herrin. “Other stylists work full time during the school year and take the summers off. The important thing is that they choose how much and when they work.”
Today, Stella & Dot stylists operate in one third of U.S. zip codes and in the United Kingdom and Canada. This August, Stella & Dot launched in Germany, and it is expanding into accessories such as handbags. Herrin expects to reach $1 billion in sales by 2015. Last year she and her husband reportedly bought an 8,000-square-foot home in Hillsborough, California, for $6 million. Not that she spends much time there. “Obviously I’m wired to work 80 hours a week,” she says. “I accept that now. I’ve learned to divide and conquer. If the parenting activity doesn’t involve physically being with my kids [a second daughter was born in 2006], I don’t do it. I do the school art project for Halloween because we can be side by side, but I don’t volunteer to raise money. That way, there is actually plenty of time for me to be the entrepreneur I want to be as well as the mom and family member I want to be.”
To finalize the new season’s line, Herrin is in New York for exactly 48 hours. She moves and talks quickly, determining the size of the perfect clutch and the mix of materials that should go into manufacturing the company’s charms. She reminds her team that the collection has to have something “for you, your mom, your daughter and even Aunt Rachel.” For the briefest moment she revisits the issue of necklace length. “Every woman needs a necklace that comes here,” Herrin says, touching the soft spot on her clavicle, “because, you know, that length can go anywhere.”
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