Direct selling is a business model where a company forgoes the traditional retail environment and sells its products directly to the customer through independent representatives. Unlike a traditional business model where the products have to go through multiple intermediaries and is sold online or at a physical store, top direct selling companies in the world rely on salespeople that introduce their products to prospective clients in nontraditional settings.
How does direct selling work?
Direct selling companies eliminate intermediaries that are involved in the distribution of the product, like regional and local distribution centres. These companies sell their products directly to their representative from the manufacturers, who then sell them to customers. The products that most direct selling network marketing companies sell through their independent representatives are not available for purchase in the retail market, making the distributor the only source for the product.
Types of Direct selling
There are multi ways by which different business owners can utilise direct selling. This includes
- Single-level direct selling
- Host or party-plan direct selling
- Multi-level marketing
In single-level direct selling, the distributor travels from door-to-door to showcase their products or use online meetings and catalogues to attract customers. These direct selling representatives’ commission mostly comprises of sales commission, bonuses and profits. In the host or party-plan model of direct selling, the distributor sets up parties or events where he or she can introduce the product to prospective clients.
In a multi-level marketing model of sales, the distributor recruits more people into their business. The income for the distributor, in this case, comes from both the commissions that he or she earns from the sale of products as well as a part of the commission from sales done people they have recruited. Many a time, the terms direct selling and multi-level marketing are used interchangeably. While direct selling companies use the multi-level marketing business model, not all direct companies do so.
The legality of direct selling companies
There is almost always a confusion about the legal status of direct selling businesses in India. This stems from the fact that many illegal and fraudulent pyramid schemes masquerade as direct selling companies and have caused the former’s name and status to be tarnished. Direct selling companies are legal in India. In fact, they are appreciated for their ability to create employment and provide for the economy.
Potential signs that a direct selling company is a pyramid scheme
As mentioned above, many pyramid schemes try to convince their customers that they are legitimate direct selling businesses. I will be doing a detailed article on how to recognise pyramid schemes and the dangers it poses. But here are some things that you should be aware of when joining a direct selling business to make sure that you are not falling prey to a pyramid scheme.
- Promises of quick riches
- Recruiting new distributors is the main emphasis of the business
- Large initial investment
- Emotional manipulation by distributors to join the business
- Little focus on the actual product and sales by the company
These are just the basics of the direct selling network marketing industry. Follow my page for regular and up-to-date content on the direct selling network marketing business and more.