Direct selling is the practice of selling things to customers directly rather than through a retailer. Instead, sales occur at home, at work, online, or in other non-store settings.
Learn more about direct selling so you can investigate alternative money streams and know how to apply them in your business.
Table of contents
What Is Direct Sales?
Direct sales are sales that involve direct communication between a vendor and a consumer without the involvement of any third parties. They take place in non-retail settings such as the home, cafe, online, or office.
Direct selling allows distributors to bypass intermediaries in the supply chain and sell directly to customers. Products are sold online or in a physical store in typical retail settings, while direct selling relies significantly on salespeople getting in front of customers in nontraditional settings.
Direct selling is prevalent in the B2B market, where vendors connect with their clients on a personal level.
In 2019, direct sales alone benefited the global economy with approximately $193 billion in total sales. Over 118.4 million representatives work in the direct sales business globally. 59 percent are in Asia, 26 percent are in North and South America, and 12 percent are in Europe.
How Does Direct Selling Work?
Direct selling eliminates the various intermediaries between product distribution, such as the regional distribution center and wholesaler. Instead, products are transferred from the producer to a direct sales organization, then to a distributor or representative, and finally to the consumer. Direct sales products are typically not obtainable in regular retail places, therefore locating a distributor or salesperson is the only way to purchase the products or services.
Direct selling is commonly connected with party-plan and network marketing businesses. Although these enterprises use direct sales, they are not alone; many businesses that sell business-to-business (B2B) use direct selling to target and sell to their end clients.
Many companies that provide advertising or office supplies, for example, may send representatives straight into stores that can benefit from their services.
Don’t mistake direct selling with direct marketing. Direct selling happens when individual salespeople directly reach out to consumers, while direct marketing involves a company marketing directly to the consumer.
Types of Direct Selling
There are many ways business owners can utilize direct selling, such as:
- Single-level direct sales
- Host or party-plan sales
- Multi-level marketing
1. Single-level direct sales
Single-level direct sales are usually done one-on-one via door-to-door or in-person presentations, online meetings, or catalogs. In general, revenue is based on sales commissions, with incentives available for exceeding set goals.
2. Host or party-plan sales
Host or party-plan sales are usually done in a group setting, with the distributor or salesperson giving a presentation in their own or a potential customer’s home.
A company may sell to people in a business in some instances. A real estate software sales representative, for example, might give a group sales presentation to a group of Realtors. Sales commissions and even the recruitment of other reps can provide income.
3. Multi-level marketing
MLM sales are made in a variety of ways, including those linked with single-level and party-plan sales. MLM income is derived from sales commissions as well as sales produced by other business partners recruited into the firm by the distributor.
Direct sales are sometimes confused with MLM or network marketing, however, the concepts are not interchangeable. While MLM and network marketing are both types of direct sales, MLM is not used in all direct sales systems.
For example, in single-level marketing, the sales representative is only paid commission on sales that they directly produce; there is no recruiting of additional sales team members or commissions earned from their sales.
Methods of Direct Sales
Salespeople use different communication approaches to sell their products to the target market Let’s shed light on some of them.
1. One-on-one sales
This strategy entails face-to-face conversation between a seller and a customer. It happens when a salesperson travels to a one-on-one business meeting with a client or goes door to door to offer their products to prospects.
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2. Online sales
This strategy is popular with both single-level and multi-level sales organizations. Huge international MLM companies, small businesses, and local representatives sell products and services through their websites or social media accounts.
3. Host or party-plan sales
This direct sales strategy involves a seller who gathers a group of customers and offers them with a product. Such gatherings frequently resemble parties, with attendees enjoying a relaxed environment of celebration and becoming increasingly likely to purchase something. The presentation can also take place in an office setting.
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How To Do Direct Sales
Direct selling has its quirks. For example, it should stress sales strategies and invest more in enhancing the sales talents of the staff. Here are five ways to start a direct sales firm from the ground up.
1. Set your goals
It’s impossible to do business without clear goals. They are both motivators and the basis of success. For successful work, your goals should be precise and measurable, like “increase revenue by 15% in the third quarter.”
2. Know your target audience
You need to understand your target audience to make the best of direct sales. You can start by identifying your buyers’ persona, which comprises their lifestyle, habits, interests, pain points, and all.
3. Create a sales strategy and KPIs
Create a sales plan to eliminate chaos. It will allow you to answer your client’s needs, enhance ROI, and minimize your sales cycle. Include key performance indicators to ensure that your company follows the strategy appropriately and meets its objectives.
As you proceed, always keep track of KPIs; they will assist you in evaluating your approach, identifying problems, and identifying effective techniques.
4. Align sales and marketing
Marketing and lead creation are essential for any business, so create a clear plan for reaching out to potential clients. Join your sales and promotional efforts to achieve greater results. Marketing helps sales by generating warm leads, and by gathering information about customers from salespeople.
5. Learn and implement sales activities
At this point, you need to know how to interact with your audience. This includes qualifying a prospect as a potential buyer, presenting your product to them, working with their objections, closing deals, and keeping in touch with clients to turn them into returning customers.
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Why Consumers Love Direct Sales
Here are a few reasons consumers find direct sales appealing:
1. Customers enjoy it when brands interact with them
Customers feel special when you interact with them on social media or any other medium. Adding the personal touch makes direct sales more welcoming to prospects.
By dealing with customers directly, sellers know their buyer persona better and can provide their customers with highly relevant and personalized offers. Additionally, it affects revenue – 91% of consumers are more likely to shop with brands that make suitable offers and recommendations.
2. Direct sale protects customers from knock-offs
The one disadvantage of retail and internet distribution is the possibility of counterfeit goods. Larger corporations are particularly vulnerable (as demonstrated by Apple’s recent lawsuit). Direct sales provide buyers with a level of security, but at a higher cost.
3. The manufacturer usually has all products in stock
Direct sales give your customers access to your whole inventory without requiring you to invest in comprehensive stock distribution. No company sells its whole inventory to a retailer. It wouldn’t make sense because diverse geographic and financial markets require different products.
Conclusively, customers want the best possible product with a personal touch. Going straight to the manufacturer is a reliable way for any customer to ensure they are getting an authentic product at the lowest price with the best service.
Are Direct Sales Companies Legal?
Direct sales, notably MLM and network marketing, have received a poor name due to many organizations being investigated for using marketing strategies similar to pyramid schemes.
Direct selling is totally lawful, however, pyramid schemes are both illegal and fraudulent. In the United States, recruiting people into a pyramid scheme is a felony, and the Federal Trade Commission is the principal entity in charge of putting an end to such cases.
Top Direct Sales Companies
Here is a list of the top-five direct sales companies by revenue:
- Amway – An American company that sells health, beauty, and home care products.
- Herbalife Nutrition – A global MLM corporation that develops and sells dietary supplements.
- Avon Products, Inc. This is a multi-level marketing company headquartered in the U.K. specializing in beauty, household, and personal care products.
- Vorwerk – This brand from Germany that sells appliances, clothing and accessories, cosmetics, home decor, kitchenware, and personal care products.
- Natura – A global company from Brazil with 6,400 regular employees and 1.7 million salespeople. This brand sells cosmetics and personal care products.
FAQs On Direct Sales
Direct sales are sales that involve direct communication between a vendor and a consumer without the involvement of any third parties. Direct sales take place in non-retail settings such as the home, cafe, online, or office.
Direct selling is perfectly legal, but pyramid schemes are scams and illegal.
In a direct sales model, a brand interacts with customers immediately while indirect sales utilize intermediaries – distribution centers, wholesalers, regional representatives, and so on.
The types of direct selling are Single-level direct sales, Host or party-plan sales, Multi-level marketing.
Conclusion
To wrap it up, it is important you note that the foundation of direct sales is personal contact with customers which allows representatives to use an individual approach to every client and build sustainable relationships with them.
References
- thebalancesmb.com – What Is Direct Selling?
- sendpulse.ng – What are Direct Sales?
- zendesk.com – What exactly is direct selling? | A direct sales explainer
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