General Direct Selling FAQ
How many people engage in direct selling?
A. An estimated 15.6 million people are involved in direct selling in the United States and more than 92 million worldwide. Most are women, though nearly a third are men or two-person teams such as couples. The vast majority are independent business people – they are micro-entrepreneurs whose purpose is to sell the product and/or services of the company they voluntarily choose to represent – not employees of the company. Approximately 90 percent of all direct sellers operate their businesses part-time.
Q. How big is the direct selling industry?
A. U.S. sales totaled just shy of $30 billion in 2011, with more than 74 percent of the American public having purchased goods or services through direct selling. Worldwide sales are also strong, with more than $154 billion in sales.
Q. What is the difference between direct selling and direct marketing?
A. Direct selling is selling a product or service in either a person-to-person or party plan method. Direct marketing involves sales through the mail or catalogues.
Q. What is the difference between direct selling and multilevel marketing?
A. Direct selling encompasses a variety of distribution methods; multilevel marketing is one type of distribution and compensation method. In a multilevel distribution model products are distributed from one level of distributor to another and compensation is based not only on one’s own product sales, but on the product sales of one’s downline. Several states, including Georgia, Idaho, Louisiana, Massachusetts, Montana, Nebraska, Oklahoma, South Dakota, Texas, Washington and Wyoming, statutorily define multilevel distribution companies.
Q. How does compensation in a multilevel distribution company work?
A. In a multilevel distribution model products are distributed from one level of distributor to another and compensation is based not only on one’s own product sales, but on the product sales of one’s downline.
Q. How many direct selling companies are there?
A. It is impossible to estimate the number of direct selling companies operating at any given time. This is a result of several factors. First, most states do not require direct selling companies to register as such. Therefore, no exhaustive list exists. Second, as with any business, many direct selling companies do not thrive in the direct selling market and have a relatively short life span. In fact, many companies may even come and go before they could even be “counted.” However, the Direct Selling Association estimates that the sales made by its more than 250 members account for about 90 percent of all direct sales in the United States.
Q. I’m considering starting a direct selling company of my own. Where do I start?
A. The Direct Selling Association offers a number of resources for companies considering direct sales. DSA’s SmartStart Toolbox (available from the publications page) contains information you need to get started in direct selling. In addition, you may be interested in subscriber status with the association. As a subscriber, you will have access to DSA’s legal staff who can keep you up to date on the latest direct selling legal trends. You might also wish to browse through DSA’s directory of supplier members who can provide you with services from legal representation and consulting to incentive jewelry and convention services.
Q. How many people make money in direct selling?
A. Studies by the Direct Selling Association show that more than half of direct sellers report that their net income from direct selling, after taxes and expenses, is positive. In addition, a positive net income is reported by nearly half of new direct sellers — those representing their current company for less than a year — and by nearly half of direct sellers who say that they are not very likely or not at all likely to continue in direct selling in the future. The survey group also includes those sellers who are discount buyers and do not sell products and services to others, thus not generating an income.
Direct sellers report a positive experience with direct selling in other ways as well:
- four in five (82%) direct sellers have been with their current direct selling company for one year or more, and 34% for five years or more.
- 88% of direct sellers rate their personal experience in direct selling as excellent, very good, or good.
- 85% of direct sellers say that direct selling meets or exceeds their expectations as a good way to supplement their income or as a way to make a little extra money for themselves.
- 91% of direct sellers say that direct selling meets or exceeds their expectations as a business where the harder they work the more money they can make.
Q. Are sales made to people outside the selling organization?
A. Absolutely! As in any retailing environment, direct selling relies on creating a solid customer base. Because most direct sellers were customers of their company before becoming a representative, they understandably continue to purchase products and services after becoming a representative. In fact, that is the primary motivation for some direct sellers to join. However, sales to other consumers are very important. For example, research done by the Direct Selling Association reveals that:
- Nearly all direct sellers (97%) earn money from personally selling product, and 34% earn money just from their own personal sales, not relying on any downline sales.
- Half (50%) of U.S. adults purchase products using the direct selling retail channel during a year.
Q. How long do people generally pursue direct selling?
A. The length of time a person may decide to pursue their direct selling business varies from a few months to many years, even decades. In fact, there are some sellers who will work a few months out of the year to earn a specific amount of extra money and will then drop out, only to return again at the same time the next year.
Satisfaction is also quite high for newcomers to direct selling as nearly four in five (78%) people who have been in direct selling for less than a year report that they are very or extremely likely to continue as a direct seller in the future. In addition, in a survey of former direct sellers, only 34% of them had a tenure in direct selling of less than one year at the time they dropped out from direct selling.
Of course, direct selling is not for everyone, so there will be a percentage of people who drop out each year. And, the ease of entry and exit offered by the direct selling model makes this possible. Try it, and if you don’t like it, you have very little invested.
To put direct selling tenure in perspective, the turnover rate of direct sellers is similar to the turnover rate of employees in the retail industry. During 2001-2003, the average annual turnover rate of direct sellers was 56%, compared to 53% for the retail industry.
Q. What if I feel a Direct Selling Association member company or representative/distributor has violated the Code of Ethics?
A. If at any time a DSA member company representative/distributor or customer feels that company has violated one or more provisions of the Code of Ethics, the incident should be reported to DSA’s independent Code Administrator. The Code Administrator will review the incident in question and prescribe a remedy based on his findings. DSA member companies are required to abide by all rulings made by the Code Administrator to maintain membership in the association. To find out more, visit the Code of Ethics section on the DSA Web site.