Direct selling is on the rise, so that’s no coincidence. Over 18 million Americans were involved in direct selling and estimated retail sales reached $34.5 billion last year (an increase of 5.5 percent), according to the Direct Selling Association’s 2015 Growth & Outlook Report.
Joseph Mariano, president of the Direct Selling Association, a trade association for firms in this space, attributes this growth to several factors, including “the incorporation of social media and a new [younger] demographic being attracted to the model.” Makeup titan Mary Kay (known for its pink Cadillacs and well-coiffed saleswomen) is the classic example of direct selling. But nowadays, there are myriad other options, with wellness products and services leading the pack, according to the DSA report.
But these opportunities aren’t a fit for everyone.
According to Mariano, the average direct salesperson nets around $5,000 per year after expenses, but a small number of power sellers make it a full-time business and pull in six figures. Some also enter the business to meet a short-term financial goal like funding a vacation or holiday gifts and then stop selling once they’ve met that goal, he adds.
Before you sign up, talk to current consultants and consider these questions first.
1. What’s the initial required investment?
Policies vary by company, so find out if you’re required to buy inventory or a starter kit when you sign up or if you’ll have ongoing costs like paying for an online profile. “Some people are shocked when they find out that they have to pay for their first party and then get reimbursed from their orders,” says Karen Mishra, professor of marketing and advertising at the Meredith College School of Business in Raleigh, North Carolina. “Be smart about your initial investment, and ask how fast they expect you to get it back.”
DSA’s code of ethics requires that its member companies have reasonable startup fees and costs and buy back inventory purchased in the last 12 months if the seller decides to leave the business. After her own experience, Jacobs encourages potential sellers to “slowly invest in your business [instead of] going crazy and buying it all upfront.” Also find out if you’re required to sell a certain amount each month or quarter to remain active as a seller.
2. What’s the compensation structure?
Some direct selling companies offer commission for recruiting other consultants or sellers, a concept called multilevel marketing. Not all multilevel marketing companies are pyramid schemes, but you should be skeptical if a company focuses more on recruiting new salespeople than actually selling products. “Compensation should come from the sale of products rather than merely recruiting other people who invest money upfront,” Mariano says. “If you don’t have to worry about selling, all you have to do is recruit others, something is wrong there.”
Also find out the commission rate on products sold and whether the company restricts you from selling on third-party sites like eBay, as you may need to go outside your friend circle to generate new business.
3. How much training will I get?
The amount of training and support you’ll get varies by company. “Some reps get into a business because they love the product, not necessarily because they are great at sales or comfortable leading other reps,” Mishra says. “Find out if your company offers training to help you grow.”
4. What’s the long-term violability of the business?
Before you invest your time and money in a direct selling opportunity, assess the expected longevity of the business. How long have they been in business? Are they growing or struggling to survive? Mishra points to a friend who quit her day job to work from home as a Southern Living at Home rep. Now, the direct selling website simply redirects to the magazine website, and there are few other references online to Southern Living at Home. “That would be frustrating to someone who thought they were building a career,” Mishra says.
Also check with your local attorney general’s office or the Better Business Bureau to find out if the company has any unresolved complaints. If so, ask the company about those situations. “The company should always be willing to answer your questions straight up,” Mariano says, so proceed with caution if you get an evasive answer.
5. How well do I handle rejection?
Selling takes a thick skin, and not everyone wants to keep at it after rejection. “A lot of people will turn you down, and that’s OK,” Friedman says. “For everybody who turns me down, there’s always going to be somebody who helps me out. I think you just need to be really outgoing and willing to communicate with people.” She says it’s actually easier to sell to her broader network than to her friends by sharing her experiences. “I don’t want to come off as a slimy salesperson,” Friedman adds.
6. How much time can I spend on this?
If you’re not highly motivated or don’t have the time to put in, direct selling may not be the right fit. “With most of these types of jobs, you get what you put into it,” Friedman says. “The harder you work, the better you do.”
Source: US News – Money