The number of direct-sales businesses is on the rise with approximately 1,400 companies in the U.S. alone. Here’s a look at how the direct sales system works and why it has become such a successful business model.
The Direct Sales Business Model
Although not all direct sales utilize a multi-level marketing framework for compensating employees, many of them do because of the profit potential it provides for every independent sales consultant.
In this model, commission is earned from personal sales is well as from the sales of each salesperson recruited underneath you. Some companies also offer an upfront financial reward for recruiting new members into the company. This framework offers a strong support system to its members and encourages teamwork.
In the Beginning
In early America, there was no internet, phones were few and far between, catalogs were expensive, most people lived outside the city, and the few local stores in each town didn’t offer a large variety of goods.
All these factors led to the need for and success of direct selling businesses. For everything from pans and sewing machines to medicine and bibles, the salesmen of yesteryear played a very important role in equipping homes and families with the goods they desired.
When it was discovered that in-home direct selling “parties” gave the opportunity to hit record-breaking sales goals, women joined the salesforce and by the 1960s they were making millions of dollars selling Tupperware.
During the 1980s and 1990s, the successful, time-honored system of multi-level marketing got a bad reputation when similarly operated but dishonest (and many times illegal) “pyramid” or “ponzi” schemes became prevalent.
However, the last 20 years has brought reform and control to the multi-level marketing business industry. Laws, regulations, and resources are now in place to protect both the investor and the customer from any illegitimate direct sales business recruiting. Due to these new protections, the direct sales business model is once again flourishing.
The Multi-Level Marketing Success of Today
The statistics are astounding. According to the 2014 annual Growth & Outlook Survey conducted by the U.S. Direct Selling Association, the estimated retail sales for direct selling is a whopping $32.7 billion.
These sales aren’t only great for the more than 20 million men and women (1 in 6 households) involved in direct sales but forthe American economy as well. Impressively, “65% of direct selling companies manufacture or assemble products in the U.S. and 29% have laboratories in the U.S.” Companies like ASEA and Mary Kay have thrived in the new direct-selling landscape.
How to Be a Successful Salesperson
Whether or not you are a natural salesperson is irrelevant. No matter your personality and experience level, direct sales is both an art and a science.
1- Do Your Research
Find a product you love and use it daily. Research the ingredients, review the manufacturing process, read the testimonials, and study the science behind how the product works.
Research the parent company of the product. Do they use responsible manufacturing and business practices? Are their start-up costs reasonable? Can you see yourself succeeding within their set expectations and guidelines? How much is the potential income?
The more you believe in your product and company, the easier they will be to represent.
2- Make a Commitment
Dedication and patience are both required in the direct-sales business model. If you are not committed to your new business, chances are you will not meet your goals. The hours you put in and the effort you make directly affects how much money you will earn.
3- Invest in Your Inventory
If your company requires you to purchase your own inventory, do so wisely.
- Don’t purchase everything. Buy items that have long-term appeal and that customers will have the most interest in buying. Don’t order in advance unless you are certain you can sell the items quickly.
- Set aside a specific percentage of your sales income for reinvestment into new inventory.
- Add your own inventory purchases to an existing order (if the company allows it) to reduce shipping costs.
- Deduct your inventory costs, mileage, business cell phone bill, and other business expenses when you file your yearly taxes.
4- Practice, Practice, Practice Your Sales Routine
Some companies offer online tutorials, in-person training, and mentorship programs. Write and memorize your introduction, sales pitch, and your answers to potential questions. Take advantage of every opportunity you have to practice your selling techniques, including through email and through social media outlets.
5- Recruit Others
No need to wait until you find the “perfect” recruit. Talk to everyone you know and everyone you meet. Share your story. Listen to what potential recruits are looking for in a business opportunity and help them find it in your company.
Most importantly, don’t think of yourself as recruiting. You are simply sharing an exciting opportunity.
D. Ortiz (December 17, 2016). Direct Selling: How It Works. http://betacash.org/direct-selling-how-it-works/. Retrieved on February 9, 2017.