8 Things You Should Know Before Becoming a Direct Seller
Just about every consumer product or service imaginable is sold somewhere in the world through direct selling. As its name implies, the products or services of a company are sold directly to consumers by independent distributors—not employees.
Many direct selling companies have been around for years and are likely here to stay such as Avon, Amway and Mary Kay. Other direct-selling firms have had a short life span lasting a few years, especially in the current economic climate.
Some 15.2 million people in the United States are involved in direct selling, with total sales at $29.6 billion in the US and $114 billion worldwide, according to the Direct Selling Association, a Washington, DC-based trade group of firms that manufacture and distribute goods and services. Cosmetics, health items, and wellness products are among those that tend to do well, says Doris Wood, chairman of the Irvine. California-based Multilevel Marketing International Association, a professional organization of direct sales companies and distributors.
Amy M. Robinson, DSA's vice president of communications says direct selling should not be confused with other business conducted outside of a fixed retail location, such as telemarketing, shopping mall kiosks, or work-from-home ventures such as envelop stuffing. Direct selling is primarily done one-on-one, at product demonstrations, or home shopping parties—the most widely recognized sales method where friends and family gather for a few hours to learn about and sample the product.
When a distributor sells products to consumers that is single level marketing, says Woods; whereas, with multi-level marketing a distributor is given the opportunity to sell to consumers and to build his or her own independent sales force, known as a downline, by recruiting, training and motivating others to distribute the same products and services.
Surveys show most people choose direct selling because it's flexible—you get to be your own boss, set your own hours, and work around other priorities such as your family. Some people see it as a side business; others choose it as a career, but this entails a commitment of 40 or more hours a week.
Direct selling is not a cash cow; so, don't expect to take in a $1 million after 18 months, working only 15 hours a week. According to DSA, the median income for a direct seller is $200 a month or $2,400 a year—meaning other earners fall below or above that amount. Those who draw six figure incomes, especially with multi-level marketing, generally are distributors who are able to sell a lot of product and bring a number of new recruits into the business, according to MLMIA. They are compensated on their individual sales plus paid bonuses based on the sales of the members of their downline.
In the last three years, Wildtree Herbs direct seller Synara Brown's earnings have skyrocketed to around $300,000 a year, all while being a full-time wife and mother to three small children ages 4, 7, and 9, and nurturing other sales reps along the way.
Brown had five criteria in looking for the ideal direct selling opportunity: 1) a consumerable product, 2) a product that was a necessity and a not a luxury item, 3) something that needed to be repurchased, 4) something that appealed to a broad demographic, and 5) a very generous compensation plan. "Wildtree fit the bill on all fronts," says Brown, who operates the business out of her home in Wauwatosa, Wisconsin. Wildtree is a direct sales company that makes over 100 all natural gourmet culinary products, grape seed oils, dressings and sauces sold through home tasting parties, where guests learn how to make quick and easy health meals.
Brown says that the bulk of her income now is generated from the size of her downline, about 1,450 active distributors. "There is so much product that you can sell by yourself." The 34-year-old former occupational therapist in pediatrics attributes her success to being consistent. She commits faithfully to doing eight home-tastings a month. "I am always garnering customers and offering the business opportunity to others."
The decision to become a direct seller should be one that you make according to what you want to achieve, says Wood. To determine if it's right for you, first weigh your goals, both personal and financial. "Make sure they are realistic. It may take years to achieve a high level of success," Woods adds.
1. Identify a product
Direct selling companies offer more than 70 product and service categories – everything from health and beauty items, apparel and accessories to cookware, wine, pet items, gardening supplies, and much more. Most people choose something they already use or are familiar with. Find a product or service you love, says Wood. "Without a strong belief in what you are selling, it is doubtful that you will be able to market it or recruit others to do likewise."
2. Choose the company
Identify companies that offer the type of product or service that interest you. Start by searching DSA's member list based on product category and MLMIA's database of direct sales companies. Visit a prospective company's web site. Attend a party or demonstration, if applicable. With the right product and the right company, you'll have every opportunity to succeed, says Wood.
Dig Deeper: The Ultimate Sales Force
3. Contact consumer watchdogs
Research the company's background and track record. Is there a history of complaints filed against it? If so, what was the nature of the complaints and how were they handled,. Check with the local Better Business Bureau (www.bbb.org), state consumer protection agencies, and the Federal Trade Commission (www.ftc.gov). What do others have to say about the company? Talk to former or current direct sales reps to find about their experiences. You're also likely to find any negative information about a company online.
Dig Deeper: Understanding Sell Through (Direct Sales) Campaigns
4. Get industry literate
Get copies of all company literature and read it thoroughly. Look at how many years the company has been in business. Find out about the number of distributors, average distributor earnings, and distributor dropout rates. Read the company's product brochure, marketing materials, and any distributor agreements. Also, request the company's financial statements for over the last five years.
Dig Deeper: Tips and Techniques for Cold Calling
5. Ask plenty of questions
Be sure to ask as many questions as you need to get a good feel for the company's policies and procedures. If someone else is recruiting you, that person should be able to answer your questions. Call the head office if necessary. Any reputable company will be happy to answer any questions you may have, advises Robinson.
Dig Deeper: Personal Selling
6. Size up the costs
No matter what direct selling company you chose, the cost of entry should be modest, usually around $100, says Woods. Typically this includes a sales kit with company information, product samples, and training materials. Watch out for companies that try to pressure you into paying large sums of money for the privilege of joining or loading you up with large inventories. To the contrary, pyramid schemes make all of their profit on signing up new recruits, so, they tend to require higher up-front money to join. Beware of service fees: $50 a month comes out to $600 annually, cautions Woods.
Dig Deeper: Multilevel Marketing
7. Review the return policy
Find out if the company buy back unsold inventory, especially if you decide to quit the business. Beware of opportunities that encourage buying large inventories of products to reach achievement levels or receive a special discounted price. Make sure the company guarantees it will buy back at least 90 percent of all unsold inventory, sales kits, and materials (that are in good condition), says Woods.
Dig Deeper: Looking to sell Online? Paypal Wants to Take You Global
8. Look into the compensation
Make sure you understand the compensation plan, which differs with each company. Just as with other retailing methods, it's all about establishing a market and selling consumers quality products or services at competitive prices in reasonable quantities, Robinson says. The money you earn shouldn't be dependent solely upon your recruiting new distributors. Only sign on the dotted line when you are confident this is the right company for you.
Dig Deeper: How to Diversify Your Customer Base