What is Direct Selling?

Direct selling is a retail channel for the distribution of goods and services. At a basic level it may be defined as marketing and selling products, person-to-person away from a fixed retail location. Sales are typically made through party plan and other personal contact arrangements. A text book definition is: “The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs.”

The industry is global and growing. Recent figures show almost fifty-five million people are involved and in 2007 it is estimated that worldwide retail sales accounted for more than US$111 Billion.

At its best, direct selling can be an opportunity for individuals to find fulfillment, express their entrepreneurial talents and gain financial independence. At its worst, it can become a kind of pyramid scheme.

Some direct selling associations, for example the Bundesverband Direktvertrieb Deutschland, the direct selling association of Germany, have given themselves codes of conduct which lead to a fair partnership both with customers and salesmen. Most of the national direct selling associations are represented in the World Federation of Direct Selling Associations (WFDSA).

Direct Selling is distinct from Direct Marketing because it is about individual sales agents reaching and dealing directly with clients. Direct Marketing is about business organisations seeking a relationship with their customers without going through an agent/consultant or retail oulet.

What is Multi-Level Marketing (MLM) or Network Marketing?

Multi-level marketing (MLM), also known as Network Marketing, is a business-distribution model that allows a parent company to market its products directly to consumers by means of relationship referrals and direct selling.

Independent, unsalaried salespeople of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.), represent the parent company and are awarded a commission based upon the volume of product sold through each of their independent businesses (organizations).

Independent distributors develop their organizations by either building an active customer base, who buy direct from the parent company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the parent company at wholesale price.

Distributors earn a commission based on the sales efforts of their organization, which includes their independent sale efforts as well as the leveraged sales efforts of their downline. This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager. Commissions are paid to multi-level marketing distributors according to the company’s compensation plan. There can be multiple levels of people receiving royalties from one person’s sales.

Source: www.dsa.org