Want to know what makes me really irritated?
When “bad apples” give good industries a bad name. I’m talking specifically about direct sales here.
What’s your first reaction to the terms “multi-level marketing” (MLM) and “direct sales”? If you’re not familiar with these concepts, chances are you (like most people) have a pretty visceral reaction. Between nonsensical social media posts and gossip, myths about MLM and direct sales grow and become distorted—it’s the classic tale of one “bad apple spoils the bunch.”
So I’m here to set the story straight on what direct sales is, and how to tell reputable direct sales companies from the riffraff.
What is direct selling?
The Direct Selling Association (DSA) explains it as “a retail channel used by top global brands and smaller, entrepreneurial companies to market products and services to consumers. Companies market all types of goods and services, including jewelry, cookware, nutritionals, cosmetics, housewares, energy and insurance, and much more.”
Direct selling channels include the following:
- The party plan. (For example, a host invites a Traveling Vineyard Wine Guide to a social event at their home, where potential customers get a chance to sample and order the company’s products.)
- One-on-one demonstrations.
- Personal contact arrangements.
- Internet sales.
Direct Selling & Multi-level Marketing
Direct selling falls under the category of multi-level marketing. According to the DSA website, multi-level marketing is a distribution and compensation method of direct selling.
“Multi-level marketing is a type of direct selling recognized by the Federal Trade Commission and used by hundreds of companies, including some of world’s best-known consumer brands. It is not synonymous with pyramid schemes and illegal business operations, unless the multi-level marketing company compensates members of its salesforce primarily for recruiting new participants, instead of for selling products and services to customers.”
We explain it this way: An MLM is a business where individuals sell products to the public and receive compensation for recruiting new salespeople to act as a team under them. Recruiters earn what are called “override commissions” from the products their recruits sell. (This is typical in almost all sales industries; they are sometimes called bonuses or “overrides.”)
The salespeople of legitimate MLMs earn income from sales to customers and the sales of their teams. Profit comes from outside the organization.
Why do direct sales jobs seem to be surrounded in controversy?
You’ve probably heard about the controversy surrounding direct sales jobs. I think the majority of this controversy comes from a lack of knowledge about the difference between a legitimate, reputable direct sales opportunity and a pyramid scheme.
What is a pyramid scheme?
In a pyramid scheme, recruiters earn their money based on how many people they recruit and the money those recruits pay to be part of the business. The money comes from inside the organization, because executives make their cash from start-up and training fees of recruits. Pyramid schemes are illegal. Traveling Vineyard, however, is not a pyramid scheme. Our revenue is primarily (over 80%) derived from sales outside of the organization. A Pyramid Scheme would be the inverse, with 80% or greater of sales derived from sales made from inside the organization.
How Direct Sales Works
The DSA says: “Independent direct selling consultants earn commissions on sales but work for themselves. They set their own hours, create their own marketing plans, determine whether to build a sales team and how to mentor those within it, and how to serve their customers.”
At Traveling Vineyard, our Wine Guides are not employees—they’re entrepreneurs. Wine Guides are the decision makers as to how many or how few tastings they host; how many hours they put in; and how much money they want to make. They also have the ability to build teams, find mentors and mentees, and earn incentive trips and other achievement perks.
Make sure you do your homework when researching direct selling companies.
There are hundreds of well-known direct sales companies out there, and I’d say most of them are reputable. Still, you do need to pay attention to what you’re sign on to when you agree to work with a company.
- Paying fees. Read the fine print to see exactly how much you’ll be paying, how often you’ll be paying it, and why you’re paying it at all . Some less-than-reputable companies say it costs a certain amount to get started and tack on excessive fees later, including hefty monthly dues, penalties for selling less product, etc. While you’ll almost always pay some sort of start-up fee in direct sales, it shouldn’t be prohibitive to being an entrepreneur. At Traveling Vineyard, our Wine Guides pay a $179.99 start-up cost to get rolling. If you decide it’s not for you and send back your kit in 30 days, we’ll refund your expense, and up to a year we will refund your kit at 90%.
- Keeping inventory. How much of the product do you have to buy up front to be a part of the company? Take heed—if you end up not selling the full amount, very often you’re stuck with it. That’s one of our differentiators—our Wine Guides aren’t required to keep inventory beyond their current five-bottle Tasting Set. We won’t inventory-load you, which for many is an attractive aspect of our business model.
Learn more about direct sales opportunities with these useful links.
- Direct Sales Myths Vs. Facts
- Ask The Guides: Direct Sales Fears Vs. Facts
- Direct Selling Association Resources
Should you be nervous about becoming involved in direct sales?
No, you shouldn’t! Millions of entrepreneurs have found success and life balance by building a business with a reputable direct selling company. But here’s the thing: Like any job opportunity that comes your way (direct sales or not), you should be cautious and do your homework. If you are interested in a direct sales job, read reviews about the business and speak to people who work there. The right fit will reveal itself, and the company you choose should be highly transparent and accessible to you.
You can speak with a Wine Guide and find out what being a part of the team is really like, or you can chat with us. We’d love to answer your questions!