What is the Difference Between MLMs and Direct Sales Companies?
MLM and direct sales companies tend to have several key differences.
When times get tough financially, many of us start researching ways to earn a bit of extra cash. Even a few extra dollars a month goes a long way when you’ve got bills piling up and hungry mouths to feed. But what’s the best way to supplement your regular income with additional work?
There are so many options it’s difficult to choose. Some offer huge rewards for minimal work – too good to be true? You bet. Some require skills or educational background you just don’t have. Some just don’t sound appealing.
Direct selling isn’t as fashionable as it once was, but it remains among the best ways to supplement your income. Let’s look at how it works and how it differs from MLMs and other side jobs.
What is a Direct Sales Company?
A direct sales company allows casual workers to sell its products in exchange for a commission. While a full-time salesperson would be paid a salary by the company and expected to be at their desk from 9-5, a casual worker isn’t limited by time and earns money based on their sales volume.
How Do You Start?
The role may incur a few small start-up costs – for example, if you were selling perfume, you might have to purchase small sample bottles and some literature to offer clients. You might also purchase a low amount of inventory to begin. Still, unless you’re cold-selling door-to-door, you’ll probably be able to make sales before ordering inventory for your initial clientele.
Who Do You Sell To?
Most people start with their immediate social circle. This is why you can often make sales without needing inventory to hand over straightaway – selling to friends and family means that you’ve already got a trust-based relationship. You can also ask your first clients to refer you to their friends and loved ones and build outwards from there.
Social media is a tool that direct sellers and MLMs 20 years ago could only have dreamed of. Your social media following allows you to curate a brand identity for yourself as a trustworthy seller and reach far more people likely to listen to you. If you provide friendly, helpful service to your customers, they’re also more likely to give you a shout-out to their followers.
Is Direct Selling Part of the Gig Economy?
The “gig economy” is used to describe self-employed positions where contractors are paid per job completed rather than at a basic rate. In this sense, direct selling could be considered part of the gig economy – however, the term’s recent boom in popularity is much more related to people offering services than goods.
When used critically, the term also frequently describes the equivalent of full-time work. Many concerns around the “gig economy” revolve around people relying entirely on a type of work that doesn’t offer a basic pay rate and so less security than a conventional job. However, most people involved in direct sales and MLMs use the work as supplementary rather than replacing their primary source of income.
The negative associations of the “gig economy” aren’t strictly applicable to MLMs or direct sales for this reason. While some people become so successful with direct sales and MLMs that they no longer need their 9-5, it’s typically understood as a way to earn extra income.
What is an MLM Company?
MLM stands for multi-level marketing. MLM isn’t just about selling a product – it’s also about selling engagement with the company you work for. In addition to being paid a commission based on product sales, MLM professionals get paid a commission for every person they recruit as an MLM advocate for the product.
The distinction between MLMs and some direct sales companies is a little blurry, as some direct sales companies use MLM as a strategy. After all, it can be a highly effective marketing tool for the company.
Advantages of Direct Sales over MLMs
Key advantages of direct sales companies over MLMs include:
- Selling is limited to the product. You don’t need to persuade your customers about the company you’re working for or why they should sign up. This means they don’t need to consider lifestyle changes, which can be stressful – you’re just selling the product on its strengths.
- Less likely to be greeted with suspicion. Some people dislike the term “MLM” – see below to learn more. People are more likely to be receptive if everything they’re buying is laid out in front of them with no added strings.
- You can choose a product that suits you. If a lumberjack and a beautician were each trying to sell you a chainsaw and a blusher, which would you buy from whom? You can play to your strengths with direct sales – you don’t need to expand into areas you’re less sure about.
MLMs and Pyramid Schemes: How to Tell the Difference
An MLM’s financial health relies on having a strong product to sell. Product sales drive commission for those involved with the MLM company, although you will also get a commission for recruiting new staff.
What is a Pyramid Scheme?
A pyramid scheme is a system where affiliates earn a commission for recruiting new members without the product playing a central role – the quality of the product is almost irrelevant. This means that strong product sales do not guarantee the company’s financial health.
The more members an affiliate recruits, the greater their earnings. Affiliates also get a commission for every new member recruited by people they’ve already recruited. This pyramid-shaped commission system is how it gets its name.
In a pyramid scheme, members pay to sign up and purchase initial inventory. This money moves upwards in the company until eventually, a few people at the top are wealthy and make off with the cash, leaving those on the lower levels out of pocket and out of work.
Signs of a Pyramid Scheme
Key signs include:
- A suspicious or low-quality product
- High sign-up fees
- An overemphasis on recruitment compared to product sales
- Lack of transparency
- The company is very new
The commission earned for recruitment confuses people between MLMs and pyramid schemes. It’s a major reason why direct selling is considered preferable – prospective customers are more trusting, leading to a higher sales volume for you.
Who Benefits from Working in Direct Sales?
People who might benefit from working with MLMs or direct selling include:
- People in part-time employment who want to top up their earnings
- Stay-at-home parents looking for extra help paying the bills
- Specialists in a certain product niche (e.g., a hairdresser selling hair products)
- Students in need of some extra income
- People with wide social media followings
Anyone can earn some extra cash in this way. You might even find that you have a knack for it and that you can prioritize your career in direct sales over other employment. Remember that direct sales and MLMs aren’t get-quick-rich schemes – for most people, they’re a good way to top up your income while working at your own pace.
What Kind of Person is Good at Direct Sales?
If you’ve worked in any sales environment before, you’ll understand what helps you succeed in direct sales or MLMs:
- A proactive approach to finding and engaging potential customers
- An air of positivity, friendliness, and interest in the other’s needs
- The ability to transition from engaging a potential customer to talking up the product
- Expert knowledge that might surprise and delight the customer
- The ability to close and clinch a sale
It’s the last part that many people struggle with at first. However, good news: learning to close a sale is what anyone can do. While it’s often an advantage to be outgoing initially, you don’t need to be aggressive or in-your-face to succeed.
Practice making a seamless transition to a phrase you feel comfortable with. It might feel silly at first, but having a good closing pitch is the difference that will make your career in direct sales profitable.
Should I Consider Direct Sales to Earn Extra Money?
Why not?
Finding a company to work with doesn’t need to be a risk. Many well-known, reputable businesses work with direct sales representatives. Some examples you’re probably familiar with include Avon (health & beauty), Tupperware (home storage), and Mary Kay (cosmetics). Many companies also provide training materials for their new associates if you have doubts about your selling skills.
The key benefit is making money on your schedule and naming your hours. No boss calls you at 7 am asking you to cover a shift. There’s no risk of your work clashing with picking the kids up from school.
Direct Sales vs. MLMs: Final Thoughts
Don’t just take our word for it. Start checking out the direct sales companies you could work with. Remember to play to your strengths and that a key advantage of direct sales companies over MLMs is that you’re only selling the product – no strings attached!
A career in direct sales can help ordinary people take greater control of their lives and finances. Learn how it can help you take control of your future.