What is Direct Selling? | Types & Benefits of Direct Selling In (2023)
Direct selling business is one of the most popular and the most profitable business models of the 21st century. Many large and medium enterprises choose this distribution model to sell their product and services to consumers.
During the year 2010 to 2018, the direct selling industry has a spike in its global retail sales and reaches $193 Billion USD.
A Complete Guide on Direct Selling.
Before we go through why this industry has got such exponential growth first let’s see its history.
The concept of direct retailing was first started in the early 1700s in the US where Yankee Peddlers would travel to sell products from town to town.
However, the real direct selling concept was first started when the South-western Company was founded in 1855. After the civil war ended in America this company started selling Bibles and books using mail order.
In 1886 a perfume company in California was founded and later became the company called Avon in 1939. Avon is the first company in history which fully implement the concept of direct sales business in the world. In 1910 Avon united with other 9 big organizations and forms the US Direct Selling Association (DSA).
In 1959, the Network Marketing Company called Amway was established in the US and became a game-changer with the concept of Multi-Level distribution. This company effectively implemented the concept of direct selling using the MLM compensation structure.
Direct selling is a unique way of selling products and services by companies, without any middleman and just by using a network of distributors. The products and services are made available to the consumers directly from the manufacturer through distributors.
By using this business model a company can save a lot of money that could have been invested in advertising and publicity. The selling process is completely word of mouth and they exploit an army of distributors to sell the products to consumers.
This process is commonly used by 1000s of Network Marketing companies and other big manufacturers making the marketing process extremely simple. The products are directly shipped from the manufacturing units to their distribution centres where the distributors pick them up and sell them to consumers.
How Does Direct Selling Work?
Direct selling usually eliminates all the intermediaries which are involved in product distributions, such as wholesalers, suppliers, agents and retailers. After the products are manufactured it goes directly to their distribution centres.
Then it goes to the distributors and from there goes to the consumers. To get products from these companies the only way to get it is through the distributors or the representatives.
Tips & Tools for Network Marketing
Direct selling business is normally associated with party plans and Network Marketing companies. Not only these companies but companies associated with B2B (business to Business) model use these marketing methods to sell their products and services.
There is also direct marketing use by companies to market their products directly to the customer. This is different from direct selling where companies use distributors to market their products.
Direct selling Vs Traditional Marketing:
Traditional marketing is one of the oldest forms of marketing that companies use to get attention from customers. Such marketing methods include billboard ads, print media, newspapers and radios etc.
The main goals of such ads are to get a brand awareness that leads to generating enquiries and leads for their businesses. These marketing methods are tried and proven by which the companies are getting a good ROI if done correctly.
In traditional marketing, the manufacturers or companies are supposed to invest a huge amount of money every month. Whereas in direct selling the companies pay a good amount of commission to their distributors for every sale they make.
Marketing Strategies for Prospecting.
The involvement of middlemen such as wholesale suppliers, agents and retailers are completely eliminated in the direct selling process. The manufacturer directly supplies the products to the distributors who sell them to the customers.
The distributors are trained and equipped with marketing materials by the company which helps them to become master-salesmen or recruiters. They market the products using word of mouth and sell them to the consumers after which they get commissions from the company.
Types of Direct Selling Business:
Direct selling business can be done in several ways to make it more effective based on the type of products or services you are selling. These can be classified as:
Single Level Sales:
The single-level direct sales are done through a door to door, in-person presentations or one-on-one advertising. You can earn commissions based on the number of sales you generated with your efforts plus target achieved bonuses.
Party Plan Sales:
A Party plan also called host sales is done by conducting a presentation to a group of people in a house meeting or any location. A good example of this is a sales rep doing a group presentation to realtors to sell a property.
Multi-Level Marketing:
Multi-Level Marketing can be defined as a direct selling business on steroids and is used by many Network Marketing companies of the 21st century. Even though all Multi-Level Marketing (MLM) companies use the concept of direct sales, the two should not be confused with one another.
No all direct selling businesses use MLM to promote their products and hence the commissions are different. MLM pays you for your personal sales as well as group sales however direct sales may only pay you for your personal direct sales.
Direct Selling Vs Pyramid Scheme:
Whenever the term Pyramid schemes are mentioned the MLM business models are considered to share the same characteristics. At the same time, Multi-Level Marketing uses the direct selling business model and all the three are interlinked with their terms.
An illegal pyramid scheme is a business model which survives on the recruitment of new members or distributors without a legit product or service. This is an illegal business model and they manipulate investors with rewards for recruiting more distributors.
A legit direct selling business will always involve the selling of a legal and legit product in exchange for the money. If not, according to the FTC (Federal Trade Commission) this is illegal and can be imprisoned for scamming consumers.
Pros & Cons of Direct Selling Business:
There are several benefits and disadvantages of a direct-selling business and is worth knowing before you decide to start one.
Benefits of Direct Selling (Pros):
You become a business owner immediately with little or no investment
You can work from home in your own schedules
The direct selling business is huge and you can run it globally
There are no criteria to become a direct sales business owner
You will get a higher commission with this business model
Most of these companies have high-quality products
No need to own any merchandise or business premises
Direct selling is one of the most promising business models with consistent growth
You will become a great salesperson with great skills
You get a lot of tax benefits too.
Every prospect you get might become a long term loyal customer
Cons:
Too much scam in the name of direct selling and MLM
Rejection rates are very high as people normally hate sales
It’s not for everyone and you need a good circle of influence
You need a lot of hard work and long term commitments
Final Thoughts About Direct Selling:
A direct selling business can be one of the best choices for you if you are planning to start your own business with low overhead. But before you jump to a conclusion make sure you do proper homework and know which industry you will be passionate about. If you want to succeed with direct sales you got to love what you do. Always look for a strong mentor and someone who will train you to become a successful person. Follow a success blueprint if you want to make good money with this business.