What is Direct Selling and How Does It Work?
Direct selling has been around since the 1920s and it’s still going strong today. It is a business model that allows you to sell products in person, by telephone or online with just about any product imaginable. You can use your own home as an office, which means lower overhead costs like rent and utilities for your company. Direct sellers also have much more flexibility than traditional employees who are stuck working set hours and often in a specific location every day of the week.
This article explains what direct selling is, how it works, the types of direct sales, the advantages and disadvantages and offers tips on how to succeed in direct selling.
What does direct selling mean?
Direct selling is a business model where individuals or businesses sell products or services to customers in person. It also may be done by telephone or online with just about any product imaginable. Direct selling is a good way for people and companies, especially those who have trouble finding traditional employment, to earn money without being tied down to inflexible schedules and office spaces.
The direct selling industry includes products like clothing, cosmetics and jewelry. You can also sell food items or gift baskets that you have assembled yourself.
Direct sales are booming right now with a wide variety of companies joining in on this trend by representing different types of goods from personal care to kitchenware.
What are the types of direct selling?
Some of the most popular types of direct selling include:
- Network Marketing: This is a form in which a company representative will sell their products to other people and then get paid commission on any sales they make. The more commissions you earn, the higher status you reach within your direct sale team or network.
- Mail Order Houses: These are companies that offer their products through catalogs or the internet and do not have physical locations. It has a wide variety of products for sale, but if you want to buy something specific it may be difficult because they don’t carry all types of items. The direct seller will also get commission on anything sold by other members of the company.
- Network Marketing: This is where you can sell products through a network of representatives and earn commissions on any sales they make as well. This type has more than just one product, but it may be difficult to find other people who are interested in working for them because there isn’t really a specific location or office.
- Multilevel Marketing (MLM): This is where the company sells products and they have a physical office space. They also usually make money off of any sales made by other members in their network, so it may be easy to sell more items from them because you’re already part of that network. However, many people are put off by MLM because they think it’s a pyramid scheme.
- E-Commerce: This is when the company doesn’t have any physical office space and sells products through their website or other online store. The pros of e-commerce are that it can be easier to find specific items, there may be less overhead costs in general for both the business and the customer, and there are fewer restrictions on who can sell for them.
- Retail: This is when the company sells products through a physical store that they own or lease space in. The pros of retail sales include lower advertising costs as well as having more control over inventory because it’s always available to purchase at their location. However, there are also disadvantages such as high overhead costs and managing multiple locations.
- One-on-one: This is when the company sells products one on one with a customer or through parties that they host themselves where customers can attend in person to buy these items. This has many of the same advantages and disadvantages as retail sales but it’s not always possible to attend the one-on-one sale in person.
- Via social media: This is when people can sell products through their social networks and promote them on other platforms like Facebook, Twitter or YouTube. This has many of the same advantages as retail sales but it’s not available 24/365 because these are all online channels which means that the people promoting them have to be online during these times.
- Via a home party: This is when direct sellers host an event at their house and invite people from their network to come buy products live in person and often get a discount for attending these events. This has many advantages as well; it’s a social event, you can meet other people in your network and if they buy from the party host that means more commission for them which is great for their business.
- Via the internet: This is when you run your own website, have a newsletter and sell products through it with the goal to make money from having commission on each sale. This can be beneficial because there are no overhead costs but you still need to maintain an online presence which can be difficult if you’re not tech-savvy.
- At a show: This is when you’re trying to get people at the event (such as a craft fair) to buy your products and rely on word of mouth for marketing. The downside is that it’s harder because there are no mechanisms in place like online advertising or having an own website so if you want to sell anything then you have to rely on a show being scheduled in your area.
Are direct selling companies legal?
The government has loosely regulated these types of companies and organizations, but they’re not entirely legal because direct sellers do not charge sales tax on products that they sell it does provide an opportunity for those who wish to avoid paying sales tax. These laws are enforced by the FTC which is a regulatory agency that oversees all matters related to advertising, including deceptive advertising and unfair acts or practices.
Direct selling is not a well-established industry in the United States and there’s no protection for consumers with regards to what they purchase from these types of companies. However, because direct sellers do not charge sales tax on products that they sell, it does provide an opportunity for those who wish to avoid paying sales tax.
Direct selling vs pyramid schemes
A common misconception about direct selling is that it’s a pyramid scheme. Pyramid schemes are illegal by definition and the most obvious difference between them and other types of business opportunities, like home-based businesses such as direct sales companies, is they require you to pay for your own inventory.
In a pyramid scheme, a person also pays an up front fee for the right to recruit people into their “downline.” The money from those they recruited goes towards paying off that original investment. If you want to make any profit, then you have to keep recruiting new members who will pay for your fees. In contrast with direct selling, where you earn money from the products you sell.
Successful strategies in direct selling
There are many successful strategies for success in direct sales. Here are a few to get you started:
- Be passionate about what you’re selling and develop relationships with your customers.
- Create an attractive presentation that persuades potential buyers to buy products from you, rather than just pushing product on them.
- Research the different types of marketing tools and techniques that are available.
- Build a website and create your own unique product line. This will help you to control the image of what customers see about you, is one way that direct sellers can build their business online.
- Take advantage of social media marketing tools such as Twitter, Facebook or LinkedIn for spreading information about your products.
- Offer customers incentives for purchasing a product.
- Research the demographics of your potential customers and tailor what you offer to their needs, such as age, gender or profession.
- Keep in mind that direct selling is a form of marketing. You need to be creative so that people want to buy from you.
Direct selling can be a great opportunity
Direct selling can be a great opportunity for those looking to earn additional income or grow their own business. It's worth noting, however, that it is not a get-rich-quick scheme and requires some work on your part in terms of product research and marketing strategies. Successful direct sellers are very intentional about the type of product they offer, how to market it and where to sell.
Be sure to research the direct selling industry. One place to look for information is the Direct Selling Association, a trade association in the U.S. that belongs to the National Retail Federation.
You can also research direct selling organizations by checking out I Buy I Review, which buys online programs and reviews them to determine if they’re legitimate or a scam. One of the direct selling companies we recently reviewed is Team National. Check out our Team National reviews here.
I buy and review courses so you don’t have to. Sometimes, I even find courses that are legitimate and worthwhile; and that’s how I accidentally came across one that led me to building a 6-figure business in a little under 5 years. Now, I still review courses because it’s my favorite hobby. 🙂 Learn more about me here.