Direct selling: A boon or A bane?

What is Direct Selling?

Direct selling is a form of non-store retailing that occurs outside of a traditional retail establishment. It consists of Direct Selling Entity, Direct Sellers, customers, and consumers. It means marketing, distribution, and sale of goods or provision of services through a network of persons (registered with the company as independent contractors), other than through a permanent retail location/s.

Direct selling as a distribution channel originated when a producer sold its products or services directly to an end-user or consumer. Most direct selling currently involves independent contractors, individuals who purchase from a producer (at wholesale) and resell to consumers at retail. However, the modern aspect of the internet has brought a slight change where the seller can sell off their products using the internet. Compared to other marketing methods, direct selling possesses several essential benefits.

Most prominent among these benefits are its flexibility and the quality and quantity of information exchanged. It is flexible in that it is not constrained by location or time. It can occur in places and times most convenient to a potential buyer and seller.


What are the different variations?

A complete understanding of direct selling requires that it is to be viewed from three perspectives, here designated as "operational", "tactical", and "strategic". These perspectives collectively provide a framework for discussing direct selling and facilitate its exposition at three levels. The levels can be better distinguished as direct, single-level, and multi-level. In the direct structure, people are directly connected with the company. In contrast, in the case of the single-level, participants are connected to the company via another participant with an existing contractual relationship with the company. Finally, in the multi-level structure, the participants are connected to the company via other participant/s arranged in more than a single level, all having existing contractual relationships with the company.


How does the business model work?

The business model of direct selling works in a very simplified manner. A wide range of products are manufactured by the direct selling companies, which make life convenient for the consumers, and instead of marketing, companies appoint people who are termed as "direct sellers" to sell the genuine products to the possible consumers and connect people through it. The company offers commission to the direct sellers, and the business model operates. The model is entirely dependent on the user's confidence, and therefore one must use the products themselves to gain the confidence of the product's efficacy.

It's a risk-free business approach that compensates individuals only when they put forth the necessary work, expertise, and dedication to successfully retail the goods offered by the company. Multi-level compensation plans must be carefully designed and managed to avoid the risk of becoming an illegal pyramid operation or a money circulation scheme.

The central character of a pyramid scheme is that the founders and early entrants to the organization profit from the fees and inventory investments required of later participants when they join rather than from revenues created by sales to ultimate users of the organization's products or services.

"Money Circulation Scheme", also known as Ponzi Schemes, means any scheme in which the company's verbal or written promises are not arithmetically sustainable and/or are not tied to the sale of goods/services by the participants engaged or those below them in their organizational structure. This scheme is wholly/partially reliant on future investments for the earnings committed.


Perks of Direct Selling

There are many perks attached to direct selling, and it suits a large group of people because of the convenience factor attached to it. People engaged in direct selling can work at their own time, and unlike other businesses, they can work with a group of people they like with ease, anytime, anywhere. Plus, it helps people connect, develop their communication skills, and gradually build their personalities. Moreover, direct selling provides an opportunity to do some other jobs or business while you are engaged in the direct selling business, which is nothing but an add on to the productivity of the person engaged.


Boon or a Bane?

Even though widely discussed, direct selling is not well understood, and the term itself is often abused, confused, and misused. A suggested definition is face-to-face selling away from a fixed retail location. It brings plenty of opportunity in front of the people to get engaged and earn a livelihood when it is not seen to take advantage of the weaker section of the society instead to provide strength to that section and obviously when it is seen with that perspective it is a boon and not a bane.