Direct Sales: What Is It and How It Works

You may have been drawn to start your direct sales business for any number of reasons, or perhaps you’re still conducting research before you move forward. Either way, I welcome you to direct sales, a distribution model that has changed many lives.

What is Direct Sales?

Direct sales or direct selling is the practice of selling products or services without visiting a retail store. Independent sales representatives, also called consultants, presenters, distributors, and others, market and sell these products directly.

Direct sales reps are not employees of direct sales companies. They are independent business owners who enjoy the benefits of self-employment as well as the added benefit of being part of a company that handles operations like shipping, product development, and marketing.

You are in business for yourself, not for yourself alone.

Direct selling allows both men and women to work for themselves, add to their families’ incomes, and live the life they have always dreamed of. There are many success stories in the direct sales industry, from stay-at-home moms paying for dance lessons to women retiring their husbands to families buying their dream homes. Direct sales can probably help you reach whatever goal you have.

When you were a child, did your mother use Tupperware? Did your neighbor sell Mary Kay? Did your family know an Amway millionaire? Even if not, you’re probably quite aware of some of the legendary companies that have used this network style of marketing their products. Direct sales companies include some major household names and global brands nearly as familiar as Coca-Cola, McDonald’s, General Mills, or Kraft. Here are a few examples:

  • Cutco
  • Kirby Vacuums
  • Avon
  • Tupperware

You may have seen friends on a Facebook post about making additional money, getting free trips, or even quitting their day jobs! Many people have had success with enterprises like these. Today, regular people like you are building thriving direct sales businesses.

You may want to establish your business to supplement your income while working part-time, or you may want to eventually rely on direct sales as your principal source of revenue. Or, like many others, you may have fallen in love with a product, observed a friend or acquaintance working their business, and decided that you, too, would want to earn free product and some revenue by sharing something you’re enthusiastic about. If you’re like the great majority of people who join direct sales organizations, your motivation could be a combination of these factors.

For more than 35 years, the world of direct sales has played a key role in my life. I am truly appreciative for what it has done for me and my family. Direct sales revenue and rewards have provided me with a lifestyle I could not have dreamed, as well as lifetime friendships.

The direct selling sector might assist you in achieving your goals in life. It is entirely up to you to define what a better life entails.

Today, you can find a vast array of products and services sold through direct sales. Here are some popular products:

  • Cosmetics, beauty products, and skincare products
  • Clothing and fashion
  • Food and wine
  • Home decor, including candles and fragrances
  • Jewelry
  • Kitchen items and cookware
  • Nutritional supplements and diet aids
  • Organizing and scrapbooking supplies
  • Personal protection
  • Romance and relationship enhancers
  • Tools for home repair
  • Weight management and workout supplies

And it’s not just about products. Services sold through direct sales can include the following:

  • Utilities and energy
  • Financial planning
  • Insurance products
  • Legal products
  • Personal business services
  • Telecommunication

Those lists are just a sampling. There are hundreds of categories of items you can market or purchase through direct sales companies.

But how does direct sales work, and what does becoming an independent direct sales rep involve? Read on.

How Direct Sales Works

In direct sales, products are sold by independent representatives rather than by employees. Direct salespeople join direct sales companies after receiving a business startup kit. The cost of business beginning kits varies by company, and the specifics differ as well.

Starter kits frequently include items that can be used to show to clients at your parties. The kit includes everything you need to get your firm off to a fantastic start, including documentation and training materials. In your kit, you have everything you need to run a successful business. After purchasing this product and completing the usual agreement, you will become an independent representative of the company.

You may be referred to as a representative (or a consultant, or a brand ambassador, or another title) working as an independent contractor, running your own business, depending on the firm. You don’t report to anyone since you are truly independent. It is entirely up to you to determine your own working hours. You choose how frequently you work, when you work, and when you do not work. If you believe you are deserving of a raise, you can work harder and earn more money, or you can pursue a more advanced position. A career in direct sales is completely dependent on performance; there are no job titles, promotions, or pay hikes.

You are self-sufficient, but you also have built-in assistance from the organization and your team. The upline is a network of independent representatives who are invested in your success. As a sponsor, you report directly to the person who assisted you in joining the firm (in terms of organizational structure), as well as other experienced individuals whose enterprises are linked to yours via a sponsorship line. These upline mentors can be of great assistance to you. They know how to build commercial success in addition to sponsoring many additional independent reps. They can teach you how to do the same. Mentorship is an essential component of your direct sales company plan.

You will also learn how to meet people outside of your immediate network to sell products to and how to educate others on the benefits of becoming a representative.

Your upline earns commissions based on the success of the people in their sponsorship line, according to the business model. Their goal is for you to succeed, and they understand your industry better than anybody else. Because their success is dependent on your success, they provide you with the tools and knowledge you need to succeed.

Direct sales, with a marketable product line and an established company model, provides a way for the average person to generate money. You could almost call it a mini-franchise. A doughnut shop or fast food restaurant franchise can cost a new business owner tens of thousands, if not millions, of dollars. As a direct seller, you profit from your association with a company that developed the concept, conducted research and development, incurred production costs, and invested money to launch the business and brand. If you start from beginning, you are unlikely to generate more money than you would with this method.

The corporation will also cover a variety of other high-ticket items, such as storage, development, marketing, regulatory compliance, and government compliance. You won’t have to hire your own personnel or become an expert in these other fields this way. When things are going well, reps may concentrate only on pushing items, caring for their clients and teams, and recruiting new people.

What does it mean for the company? Independent salespeople handle sales and marketing, and commissions are only paid on actual sales. The company avoids advertising and costly promotion by only paying the independent sales force once a sale is completed. Businesses are drawn to this, particularly if their products will profit from word-of-mouth marketing and in-person demos.

Combine outstanding products with a sales technique that utilizes social connections, and you have a social selling model that has been proven to be incredibly productive and profitable over time, for both the firms themselves and the independent representatives who create businesses with them.

Three Different Direct Sales Models

There are three main kinds of company structures within the direct sales business model. They are called Network Marketing, Party Plan, and Hybrid.

Network Marketing

In network marketing, consumable products are moved through a network of independent representatives for personal use and sales to end consumers. In order to build its sales force, Network Marketing companies focus on building consumer networks. People who join as independent representatives to earn money do not get a discount from the company if they only join for the discount.

Multi-level marketing, or MLM, is also referred to as network marketing, but it is a misnomer; direct sales firms are all structured with multi-level compensation plans in order to pay their representatives.

Through a vast network of people who have joined as members, Network Marketing companies can grow very large and sell huge amounts of products. Most members subscribe to receive their products each month – often referred to as auto-ship. As long as people in the network continue to see the benefits of the product, these continuous re-orders can lead to consistent sales growth.

Amway, Isagenix, and USANA are examples of companies that use the Network Marketing model.

Party Plan

Party Plans are designed to sell to groups of people who have been gathered together by hosts they know personally, either in person or virtually (online). Typically, these types of gatherings are referred to as parties. In order to make their parties more unique, some companies personalize the term. Examples include jewelry bars, tastings, cooking shows, and makeovers.

Typically, these parties are hosted at the home of a customer, who is known as the host. Traditional host rewards include discounts, free products, and special offers exclusive to the host. Her friends are invited to the party as guests of the host. In most cases, the party includes light refreshments, socializing, and a presentation by the representative. With a home party, you can enjoy a fun, relaxing shopping experience with your friends.

The rep collects payment (usually through credit cards or cash) from the host and her guests at the end of the party. Her company provides her with a virtual office through which she places these orders.

In this model, the host recommends the products and facilitates social proof, which means the weight of influence carried by a group of people. It is social proof in action when one guest decides to buy, increasing the likelihood that the rest of the guests will also buy.

Many companies using this structure prefer a different term to Party Plan. Parties are referred to by some companies, whereas others may refer to them as shows, demonstrations, classes, mixers, tastings, trunk shows, or showcases. The word party is even actively discouraged by some direct sales companies. The Party Plan party generates sales, attracts recruits, and teaches others how to sell, regardless of the name.

In the Party Plan model, products are sold to customers in an easy-to-understand manner. One-on-one sales can be incorporated into this structure, but the majority of training is focused on the most effective and enjoyable way to sell – parties, of course. For the average person, this business model is very accessible because it can be easily understood by new independent representatives.

The Pampered Chef, Jamberry, Scentsy, and Stella & Dot are some examples of companies that use the Party Plan model.

Hybrid

It’s a new kid on the block. Basically, it combines Network Marketing and Party Plans. In Hybrid companies, independent representatives host in-person or online product demonstrations for friends and family. However, with Hybrid, business opportunity is as important as product sales. Network marketing and party plan compensation plans often borrow traditional elements.

A major difference is that hybrid companies encourage hosts to host impromptu gatherings instead of scheduling them weeks in advance. They might say, “Sure, I’d love to demonstrate how this product works. I absolutely love it and I think you will, too. You can get it for free, too, and I can show you how. Why don’t you and a few friends come over and watch while I show it to you tonight or tomorrow?”

A hybrid company typically produces consumable products, such as health and wellness products or beauty products. The products are well-suited for the auto-ship model in Network Marketing, where independent representatives and customers receive monthly replenishment orders sent straight to their homes.

When a hybrid company offers auto-shipping, the customer usually receives a price break (also known as a preferred customer rate). For customers who refer other customers through referral programs, you may be able to get vanishing auto-ship or free auto-ship. For independent representatives who have a certain number of customers on auto-ship, these referral programs can also include a free auto-ship program, which covers the representative’s own monthly consumption of product. In addition to being very successful, these referral programs combine a customer-focused Party Plan approach with an auto-ship approach similar to Network Marketing.

Nerium, ItWorks, and Thrive Life are examples of companies that lend themselves to hybrid models.

Who does best with each model?

People interested in earning extra income outside of a traditional job may find direct sales appealing. Some people choose to work part-time with a direct sales company in order to pay for extras that challenge their budget, often along with a full-time job. Other people want to make an additional income while attending to priorities in their lives such as parenting, caregiving, school, or charitable work and appreciate that they can schedule events, parties, and one-on-one appointments (where you meet with clients individually instead of in a group setting, such as a home party) around their busy schedules.

According to the Direct Selling Association of the United States, 83 percent of direct sales representatives are women. In the past, generally speaking, men tended to be drawn more to the Network Marketing model, with women feeling more comfortable focused on the Party Plan style of business.

For most women, sharing products they are passionate about is easier than sharing products they are not passionate about. Whatever the case may be, females seem to like Party Plan selling very much. As a general rule, women enjoy gathering with other women and look for reasons to do so. Having a Party Plan business or hosting a party provides an excellent excuse to get together.

In recent years, with the growth of the Internet, the increase in dual-income families, and product lines that are more appealing to modern women (weight loss, skincare, and energy products), there has been a noticeable increase in Hybrid and Network Marketing companies targeting a female salesforce.

Moreover, busy people of both sexes benefit from Network Marketing’s reputation for ongoing automatic income (also known as residual income) from a business that can be operated by phone and keyboard instead of home parties. Many married couples choose to build a Network Marketing business together for this reason.

Even in the early stages of a business, Party Plan continues to be the top choice for people interested in making profits and creating cash flow. In Party Plan, representatives are often paid for some or all of their sales the night of the party. It is especially attractive to people who are looking to alleviate day-to-day budget shortfalls with the Party Plan model.

Due to the Internet and social media as well as globalization, direct sales are growing in the industry. With multiple ways to reach your business, all three models are becoming more attractive.

Your First Steps in Direct Sales

Let’s say for a second that you’ve picked your product and company and have decided to join up. What happens then? What are you in for? Here is a simple checklist you can follow as you take your first steps in your new business.

While waiting for your kit:

  • Get a date book or calendar big enough to write in. This is where you will schedule your meetings, appointments, and parties.
  • Mark all the dates that you want to work for the next two months and add any personal conflicts to your calendar. If your goal is to work Tuesdays and Thursdays, then put a star on each of those dates. This will help you offer dates to clients who want to set parties or appointments with you.
  • Schedule your launch party. Your launch party is a party you host yourself that will launch your business to your family and friends. For best results, you’ll schedule two launch parties within three days of each other. 
  • Make a working list of people you know (50–100 names) and their contact info.
  • Post your plans on Facebook and tell your friends and family how excited you are about your new business.
  • Invite as many people as you can to your launch party(ies).
  • Schedule four to five additional home parties or appointments in a 30-day time frame. In this case, you will ask people who could not attend your launch parties to host parties of their own.
  • Invite a friend to start a business with you. Statistics show that when you start the business with a friend, your chances of success are much higher. 
  • Set up your personal website that your company provides. Your company will provide you with step-by-step instructions on how to do this. This is a website you will be able to share with your customers and use for marketing purposes. Customers will be able to order directly from your website and find out more information on hosting a party or joining the business.
  • Get to know your virtual office. Your virtual office is the portal your company will provide where you can place orders, access training, and get other company information. Don’t get overwhelmed by your virtual office. Ask your leader to walk you through placing your first order and navigating your way.
  • Set up a space that you will use as your personal office.
  • Attend one or more of your sponsor’s or leader’s parties or interviews in your area. Learning from others who are already experienced in this business is a great way to become more comfortable with the presentation, selling, and recruiting aspects.

Once your kit arrives:

  • Set up your kit display and take a photo. Post it on Facebook to show your friends and family.
  • Familiarize yourself with the catalog and products.
  • Place your first order.
  • Order additional business supplies.
  • Set up your kit and practice your presentation and invite someone to come over to help you get some practice. Your presentation will include your product demonstration as well as the other elements of a successful party, like the opening talk, booking talk, and closing. 
  • Open a separate checking/savings account for your business.
  • Invite more friends to try the business with you. Recruiting or sponsoring new team members is usually a component of your company’s “Fast Start” program. You should be able to attract new recruits from your launch party and other parties.
  • Familiarize yourself with your company’s Fast Start program. This program is designed by your company to help you succeed in your first 90 days of business.
  • Familiarize yourself with your company’s compensation plan. Your leader will be able to walk you through this.
  • Learn how to coach your first host.

Advantages of Direct Selling Business

Direct sales models are successful because they offer the company an opportunity to market products directly to consumers. In direct sales, as mentioned, the products are sold by independent representatives who are not employees. These reps are independent contractors who work on a commission-only basis.

Below are some of the advantages of direct selling that make the business model successful:

1. Easier to manage marketing expenses

Because the independent representatives are the sales arm of the company, the company only pays commissions for actual sales. There is no basic salary for their independent representatives. The company is, therefore, less likely to suffer a loss when its sales are poor.

2. Word-of-mouth advertising is more effective

Independent representatives are the main way the company advertises and markets its products. Many traditional companies with ordinary sales channels utilize social media, for example, to help increase brand and product awareness. But direct sales companies don’t use typical advertising strategies like radio or TV to market their offerings. Direct sales companies mainly utilize their representatives to help market their products because they believe the products will do better with word-of-mouth advertising and in-person demonstrations.

3. High-quality products

As you explore the different products available through direct sales, you will find that the products are often positioned as cutting-edge, unique, made from superior raw materials, and basically better than products that are available in stores. Although that may not always be the case, generally speaking, the products do stand up to scrutiny and tend to inspire a type of “super fan” convinced of the supremely high quality of each product.

It is a fact that direct sales product lines often are the first to bring new ideas to market. The companies are often led by mavericks or risk-takers who are looking to get out ahead of the pack and incorporate the latest research and the newest “miracle” ingredients. People in this distribution model who have been laughed at in the past are the same people who first brought things like superfoods, vitamins, healthy energy drinks, and supercharged, nutrient-enriched shake powders to market. All of these things are now, of course, carried widely in health food and grocery stores around the country and are no longer considered fringe.

4. Increased budgets for product research and development

In direct selling, there is also a lot of truth to the cost-savings and cost-reallocation made possible by skipping the middle man and delivering your products direct to the consumer through volunteer sales people (independent representatives). 

Rather than pay a big portion of company revenue for advertising, which, studies show, continues to have less and less real impact on consumer decisions, these companies can and do spend a higher percentage of their budgets on creating high-quality products through product research and product development.

Skills Needed for Direct Sales

Succeeding in direct sales calls for a certain combination of personality traits and skills. Despite their apparent differences, the same personality traits and skills come in handy with all three of the business models:

  • Resilience and persistence
  • Strong work ethic and discipline
  • Ability to accept rejection and work outside your comfort zone
  • Enthusiasm

Beyond those generally applicable traits, below are some of the skills that will be of immense help to you in direct sales. 

Communication skills

You’re in luck if you’re naturally good at communicating. But even if you’re not, you can significantly improve your communication skills if you’re determined and reap the benefits in your life and business. It requires becoming a better listener, who asks questions to gain a clearer understanding; a better connector, because people do business with people they know, like, and trust; and a presenter, since demonstrating your products or explaining your opportunity with confidence is crucial.

Interpersonal skills

You should want to build relationships with others, including your new contacts, party guests, hosts, team members, and recruit leads. In any business, the better your ability to work with others and build relationships, the further you will go.

By putting relationships first, business naturally follows – sometimes directly, sometimes through referrals.

Presentation skills

In Party Plan and Hybrid, you’ll not only present products, but also encourage others to become party hosts and team members.

Being brief is the key to great presentations. People attend an in-person home party primarily to socialize with their friends – shopping while they do it is an added benefit.

When it comes to presentation skills, practice is key.

As you build a team, you will be asked to present to groups more regularly, even though the Network Marketing model relies on tools. During the presentation, you’ll also speak with your team member’s prospects over the phone. In that model, too, developing good presentation skills is important.

Ability to recognize buying cues

It helps greatly if you can recognize small, tell-tale signs that someone is interested in purchasing, joining your team, or hosting a party. Many people will not directly ask for more information about hosting or joining the business. When you mention a benefit, they may simply lean in to listen intently. 

They may ask you how much time you spend on your business or how much money you can earn. In some cases, the clue is as subtle as offering to help you collect your demonstration products and put them in your car, connecting with you on social media, or even sitting next to you at lunch.

Technological aptitude

It doesn’t matter if you’re a computer geek or not, companies are turning to technological solutions more and more. Currently, that means e-commerce, mobile apps, and social media – and encouraging their independent representatives to do the same. They use apps, run webinars, and hold online conferences. You can even “work your business from your phone” with some companies (usually in Hybrid and Network Marketing).

Final Words

The flexibility and variety of options available in direct selling are among its most exciting aspects. In fact, you should use several different methods of touching your business and generating new contacts. (By touching, I mean interacting with.) 

The more different things you try, the more you’ll create a broad base of profit that will sustain you — and the more you’ll appeal to a broader number of prospective team members. Conduct business in multiple ways, and you’ll be presenting options that appeal to the desires of prospects who may not be exactly like you.

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