SMC marketing program may not produce "Happy Days" for investors

When you see actor Tom Bosley, you can't help but think that "Happy Days" are here again.

These days, however, instead of playing father to Richie Cunningham and friend to the Fonz as he did on the popular TV show, Bosley is promising happy days for consumers who get involved selling products with Specialty Merchandise, noting that it's possible to start your own business and make hundreds or thousands of dollars selling these goods.

But if you follow up on the national advertising campaign featuring Bosley, it's entirely possible that you'll spin in to a Stupid Investment of the Week, because that's precisely what a membership with SMC is likely to be.

Stupid Investment of the Week showcases the trouble spots and danger zones that make an investment less than ideal for the average consumer, in the hope that showcasing trouble in one situation will make it easier to root out elsewhere.

While obviously not a purchase recommendation, neither is this column intended as an automatic sell signal, as there may be times when getting away from a problem situation creates new and different issues.

SMC membership is not a traditional investment, but it is made in the hope of building a business and getting a return. Its value as an investment will vary depending on the individual customer; clearly, SMC's methods have worked well for some people, who should not be scared off by my reservations about the company's plans being right for average consumers.

The basic problem boils down to SMC's idea for your business. It boils down to "Sell something — anything! — some way to somebody."

SMC sales representative Scott O'Brien explained that I could make money 10 different ways (on the Internet, through mail-order, in a gift shop or at flea markets, etc.). He promised a free Web site — in addition to SMC's standard business coaching — if I agreed to a deal right then by phone.

To start the cash flowing at what O'Brien suggested is a great profit margin, I simply had to sell some of SMC's 3,000-plus products. SMC would even help with the shipping (the company effectively gets one-third of the sales price of any of its items, with the seller keeping the rest minus any shipping or other charges).

A silver membership in SMC costs $24.95 — plus $15 shipping-and-handling fees — and then 11 more monthly payments of $39.95. Alternatively, a gold membership required a $400 upfront payment (plus handling charges), which saves on the monthly plan and comes with some coupons to further reduce charges.

The one hitch was that I had no clue what products SMC was offering. The only way to see the catalog was to become a member. The firm's Web site (www.smcorp.com) offers a few thumbnail pictures, all of gift items and novelties. I sent a number of business experts to the site to check it out, and the most charitable descriptions of the products were "junk" and "stuff."

Maybe the other products are more appealing, but a beginning SMC customer won't know this. Instead, they are paying for the right to sell products that they have no real knowledge about.

"If their products were truly that good and had unique value, why wouldn't they want to share them with you to get you really excited about the opportunity?" asks Greg Horowitt, executive director of the Global Connect, an entrepreneurship-opportunities program at the University of California, San Diego. "We coach our entrepreneurs to establish if there is truly a need for the product, if it is a must-have or a nice-to-have, and you can't really do that well if you can't see the products.

"You also can't really identify the customer, how they are purchasing these goods now, the best way to reach them and more if you don't know exactly what it is you'll be selling."

In short, this is no way to start a business, whether you are hoping to do it full time or on the side.

When I suggested to O'Brien, the SMC rep, that I would want to know more about the products and take appropriate time to see if there was a real opportunity with his sales offer, he proceeded to tell me how "wrong" that kind of thinking was. I needed to get in now, and the rest would take care of itself, especially with the help of that free Web site, an offer that would not be available to me if I waited.

If I didn't sign up, O'Brien warned me, someone else would. SMC might not want me later, because they have plenty of other people "anxious" to do business with them.

That kind of "You're dumb if you don't buy now" sales talk is an enormous red flag. Any company truly committed to serving you wants customers to be at least 100 percent prepared to enter an agreement.

While SMC maintains an excellent rating with the Better Business Bureau, it also shows a high number of complaints, the latter a likely testimony to the fact that many customers are sold something that only works out right for a few.

O'Brien couldn't say what percentage of SMC's customers start successful businesses, nor could his supervisor, Mark McPhillips. No one else at the company responded to requests for information.

SMC is hardly alone in this start-a-business-selling-stuff-from-home concept, and there is little doubt that these kinds of enterprises can work out for some people who go in with a great attitude and proper expectations.

Says Horowitt: "Making money without working very hard seems to have become the American Dream, and what could be easier than sitting on your ass in your living room making thousands of dollars a year selling stuff? It sounds great, but it usually doesn't work out that well. ... Business just isn't that easy."

When you buy into a program like SMC, the only one assured of happy days is the company.

Chuck Jaffe is senior columnist for MarketWatch. If you have a suggestion for Chuck Jaffe's Stupid Investment of the Week, or a comment about this week's column, you can reach him at jaffe@marketwatch or Box 70, Cohasset, MA 02025-0070.