Trying to navigate the world of multi-level marketing and direct sales can be really confusing. Are MLMs the same thing as direct sales? If not, what’s the difference? Is one better than the other?
The goal of this article is to help clarify the similarities and differences between MLMs and direct sales, as well as the benefits and challenges associated with direct sales.
It’s important to remember that an MLM company can be a business opportunity or it can be a pyramid scheme. Network marketing or direct selling companies have a bad reputation for a good reason, and you should be very wary.
Differences between MLMs and direct sales companies
How are direct sales or direct selling opportunities different from multi-level marketing companies?
A multilevel marketing company (MLM) is often referred to as “direct sales” however, and they are not the same thing. There’s a lot of confusion around the two because they do have some things in common.
Both MLMs and direct sellers sell products or services using person-to-person sales (direct selling). Instead of selling products in a retail store, they are sold directly to the consumer, from one friend, co-worker, sister, or acquaintance, to another.
So, you’re probably pretty confused right now, and you might be wondering if MLMs and direct sales share the same business model, how are they different?
Let me explain.
While MLM programs and the direct sales business model take the same approach through person-to-person selling, in the MLM model, sellers can also make money by recruiting other members. This is where the business models differ. So, when working for an MLM company, you not only make money from your sales but also from the sales of your recruits and the recruits of your recruits, which is referred to as your “downline”
Direct sellers make all of their money by selling a product or service to a person; recruiting others is not part of their business model.
You can see why it’s easy for people to confuse MLMs and direct sales companies but let me break this down even further.
MLMs and direct sales are not the same
The difference lies in how they make money.
MLMs make money in two ways:
Direct person-to-person sales of a product or service. For example, your coworker convinces you to buy an Avon product directly from her. She makes a commission off of this sale.
Recruitment of other sellers. For example, that same coworker convinces you to start selling Avon products. She makes a commission off of your recruitment. A major appeal of MLMs is that if you recruit someone (your downline), you are able to make residual income from the sales they make.
Direct sales make money in one way – through an independent salesperson who sells a product or service from one person to another.
It’s important, as you consider an MLM, to understand the sales strategy you will need to employ and what the company’s products are. You also need to take a long look at MLM’s compensation plan for its sales reps.
Benefits of direct sales companies over MLMs
So, what makes one better than the other? If you’re interested in finding a job in person-to-person sales should you start a direct sales business or join an MLM?
Direct sales and MLM jobs share many benefits, or at least they both promise to provide similar benefits, including:
- Work from home. This is a great perk for new moms or for anyone that wants to work from their home.
- Flexibility. You choose your own hours.
- Low barrier to entry. No special education or training is required, and it is usually pretty cheap to get started.
However, some benefits are only offered by direct selling.
- No recruiting is necessary. This is the main benefit, at least in my mind – you don’t have to recruit people when you’re doing direct sales.
- No strained relationships. On a similar note, if you don’t have to recruit, you are less likely to strain relationships with your friends, coworkers, and family members by trying to convince them to join your MLM.
- Higher-priced items result in higher commissions. Direct sales jobs usually sell higher-priced, long-term items like vacuums or cookware. Because the items are more costly, the seller receives a higher commission, and, as a result, they don’t have to try and recruit their mom or best friends to join in, in order to make more money.
Joining a direct selling company or an MLM business is a risk. These companies may seem attractive, but many MLM companies turn out to be, if not scams, at least less than what they sell themselves as.
Challenges of running a direct sales company
If you’re interested in joining the direct sales industry, then it’s important to be aware of the challenges involved. One of the most common challenges that people encounter in direct sales is SALES.
Sales are hard. If you’ve ever done any person-to-person sales, then you know how hard it is. I did door-to-door sales, selling arguably one of the easiest products — a charity calendar to raise money for the city’s air ambulance — and I knew I wasn’t cut out for a sales job. I had doors slammed in my face, people in their slippers and bathrobes telling me they couldn’t buy one because they didn’t live there, and people telling me they didn’t speak English, which could have been true, but they said it in perfect English.
Direct sales have a bad reputation. This entire article is dedicated to explaining the difference between MLMs and direct sales. MLMs come with a bad reputation, and so do pyramid schemes, and most people don’t know the difference between the three. They all get lumped together and since most people are super annoyed by MLMs and pyramid schemes are illegal, it’s not great for the direct sales reputation.
How to start a direct sales company
If you’re interested in direct sales and you want to set up your own company, here are the steps that you need to take.
Pick a product
What do you want to sell? Why do you want to sell it? Does your product solve a problem?
Remember, sales are hard, and this difficulty will be compounded if you choose to sell a product or service that you don’t believe in or that doesn’t solve a legitimate problem.
You can check out the Direct Selling Associations member directory to narrow down a product that you are interested in selling.
Assess your costs
While the start-up costs for a direct sales company can be pretty low, you need to know your numbers. And it’s not just the initial investment. You also need to consider how much it’s going to cost you to run your business moving forward. Consider things like advertising, customer acquisition, and inventory.
Determine your unique selling point
What makes you different from all of the other people selling the same product? Find that special thing that makes you stand out and focus on it. Don’t try to be like everyone else. Think outside of the box and get creative.
Spread the word
Let people know about your new business. Go to networking events, set up your social media accounts, build your website, and scream it from the rooftops (well, don’t really do this).
You know the saying, “if you build it, they will come.” Uh, nope, it’s not true. You can build a business, and no one will come because they don’t know that you exist. If you want to be successful in direct sales, you need to spread the word.
Check out these direct sales tips for more ideas on how to spread the word and grow your direct sales business.
Grow a thick skin
Okay, I know I’ve already said this a few times, but … sales are hard. So, get used to rejection because there are a lot of “no’s” in your future, and it’s a totally normal part of the process. Not everyone is going to want to purchase what you are selling. This brings me to my next point.
Know your customer
In the words of Seth Godin (entrepreneur and marketer extraordinaire), “everyone is not your customer.”
No matter what you are selling, not everyone is going to want to buy it. Do your research and determine the type of person that wants your product.
Is a job in direct sales right for you?
Now that you know a bit more about the similarities and differences between direct selling and MLMs, you can decide if one (or none) is right for you. While people often use the terms “direct selling” and “multi-level marketing” interchangeably, they are different. Bottom line if you want to sell a product or service but you don’t also want to recruit everyone you know to join your MLM, then stick to direct sales.
–By Jessica Martel