The Difference Between MLMs and Direct Sales Companies

More and more, people are looking for alternative income — either to be their primary source or a side hustle to add to their regular income. People are also looking for ways to work remotely, enjoy life, and still make a living. 

In the new economy, direct sales and multilevel marketing have given people an opportunity to find alternative employment for many years. You and your parents probably know someone who sells cosmetics for Avon or Mary Kay or health supplements for Herbalife. These companies make a great profit and help people who don’t have high levels of education, can’t work full-time, or need to work from home to earn a living.

But before you understand how these two business models fit in today’s economy, let’s take a look at their differences.

Direct Selling vs. Multi-Level Marketing (MLMs)

Both direct selling and multilevel marketing businesses are the pioneers of alternative income. Companies that follow these business models rely on their salespeople’s efforts to sell their products directly to consumers — eliminating several intermediaries in product distribution. The relationship is between the manufacturer, the sales company, and the distributor.

Although direct selling and multilevel marketing have the exact definition essentially, they are not the same thing.

That’s because MLM companies will also pay you a commission when you recruit people to work for them. So, in this case, you make money both from your sales and from your recruits. MLMs are also called network marketing because these businesses are leveraging your social connections to garner employees.

It’s important to note that many direct sales companies use multilevel marketing strategies.

Advantages of Direct Sales Companies over MLMs

Direct sales rely solely on the individual’s effort to sell a particular product. There is no need for salespeople to own a store, and they can work however much and whenever they want. In exchange for selling products or services, they will earn a commission – and they are responsible for their results. 

Representatives of companies such as Avon, Amway, and Herbalife enjoy certain freedoms. A salesperson usually starts small by selling to friends and family and grows their clientele by word of mouth. With social media, people have been able to reach more clients than ever before.

A direct sales career is an ideal option for individuals who enjoy sales and would like to sell a product line. Startup costs are usually limited to the purchase of product samples and literature, and in some cases, a small amount of inventory, and there are no high franchise fees.

Usually, representatives can start selling the products immediately. Some companies even provide sellers with product literature and a pre-designed website for a small fee.  

The direct sales industry can provide representatives with a flexible work schedule to earn money without being restricted.

What products can you sell through direct selling?

There are direct sales companies for almost any type of product and service out there. But they are most common for:

• Cosmetics
• Books
• Home decor
• Clothing
• Insurance
• Utility services
• Toys
• Nutritional supplements
• Personal care items

Will I become rich if I get involved with direct selling?

There are many success stories of people who earned thousands and even millions per year selling clothes, cosmetics, and nutritional supplements.

Avon, for example, had a couple of sellers who made £1.4 million in 2010. One Herbalife consultant can earn up to $480,000. But like we mentioned before, it is all dependent on someone’s ability to sell and work hard.

Most people, however, don’t go beyond the four-digit mark. The Direct Selling Association reported that the average annual income for direct sales reps was $2,400 in 2011.

 

You can’t be shy if you’re going into direct sales. You have to be willing to get out there and engage in face-to-face interactions. Although the internet and social media help, you can’t rely on them to make your sales. 

If you don’t have many friends, you have to be the kind of person who is comfortable talking with strangers. 

Direct Selling and the Gig Economy

According to Forbes, approximately 57 million Americans were working gigs. More than a third of the population chooses to work for companies like Uber, Lyft, Fiverr, Upwork, etc. These companies allow people to work with more flexibility and usually sell a service rather than a product.

The gig economy relies heavily on the internet and millennials because they can easily navigate this informal structure. Because of that, the number of side hustle workers is three times bigger than those working in direct selling companies.

The gig economy model offers direct selling companies a chance to improve their digital platforms to engage independent consultants and customers. To remain competitive, direct sellers need to obtain leads from their customers and make customer and distributor sign-ups as simple as turning on their phones.

Since the beginning of direct selling, the industry has offered perks to employees who reach certain qualification levels. The gig economy is becoming more appealing because it provides similar bonuses and doesn’t look sketchy. Keep reading to find out why some people distrust MLM and direct sales companies.

Workers in the gig economy want an environment where they can earn extra income on demand and choose from income and effort tiers with minimal investments. The real reward comes from working for a company that brings in customers.

Those are a few things direct sales companies need to improve on to regain their popularity. We already know that the business model works, but the working force has changed.

Are MLMs and Direct Sales Companies a Pyramid Scheme?

These two business models are far from pyramid schemes, although many unreliable businesses will make them look very similar. 

 

If a company focuses heavily on recruitment, that’s a significant indication that it may be a scheme. Pyramid schemes function on employee recruitment, but instead of paying those who performed the recruitment, they use the money to pay their executives. 

A pyramid scheme will also require sellers to “invest” in the company and make money by recruiting other sellers who will do the same. 

 

Pyramid schemes are illegal but still operate under the disguise of being MLMs or direct selling businesses.

Keep an eye out for warning signs

Pyramid schemes share a few characteristics:

• Products are more expensive than the average price.
• Focus on recruiting, not on selling.
• Sellers need to spend money on the business.

If you notice any of these signs, run away from doing business with the company.

Great Direct Sales Companies to Join

Direct sales companies are incredibly profitable, but they are all different and sell various products and services. Here are a few examples of top direct sales companies:

 

• Amway: They are the most profitable direct sales company and offer health, beauty, and home care products. Their target audience is women, but because they are one of the world’s leading companies in health supplements, everyone can buy their products. Their annual profit is almost $10 billion.
• Avon: Avon is probably one of the oldest direct sales companies out there and has an annual profit of $6.16 billion. They offer a generous commission from the sales of cosmetics, fashion, and accessories. Avon offers training to help their sellers become successful.
• Mary Kay: Who doesn’t want a pink Cadillac? That’s one of Mary Kay’s top sellers’ bonuses by selling cosmetics for women and men. Mary Kay has an average annual profit of $3.7 billion.
• Tupperware: Another pioneer in the direct selling industry, Tupperware has helped many stay-at-home mothers contribute to their household income. The company has an average annual profit of $2.28 billion from its pots and storage solution products. 

 

In case you are debating joining a DS company

If you think getting involved with a direct sales company would be an excellent way to bring in some extra cash, it’s a good idea to find a company that resonates with your interests.

Many direct sellers join companies that they are already customers of. That’s because they get special discounts and also make money.

If you want a complete list of companies to join, click here.