Top 10 Myths & Facts About Direct Selling

• MYTH #1: 99.9% of direct sellers lose money; people are afraid to drop out for fear of looking like a failure 
• MYTH #2: Most direct selling companies are pyramid schemes that are doomed to fail.
   
• MYTH #3: Recruiting is the key to success in direct selling; sales to end-users of the products and services are minimal
   
• MYTH #4: The vast majority of new recruits quickly drop out
   
• MYTH #5: Direct selling is an outdated method of buying and selling
   
• MYTH #6: Direct selling products are overpriced
   
• MYTH #7: Direct selling companies are unregulated
   
• MYTH #8: Most companies require inventory purchasers; direct sellers who drop out are stuck with the inventory they purchased
   
• MYTH #9: If you attend a direct selling party you are expected to buy something
   
• MYTH #10: Everyone who gets involved in direct selling wants an easy way to make money

MYTH #1:99.9% of direct sellers lose money; people are afraid to drop out for fear of looking like a failure

FACTMore 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.In addition, research shows the following:

• four in five (82%) direct sellers have been with their current direct selling company for one year or more, and 47% for five years or more.
• 89% of direct sellers rate their personal experience in direct selling as excellent, very good, or good.
• 84% 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. 

(Source: 2002 National Salesforce Survey, Research International, Inc.)

This myth is also quite interesting because it essentially asserts that 15.6 million people in the US and 92 million people around the world continue as direct sellers despite losing money. Are we to believe the 5% of the US population would continue in a business where they are losing money? Simply put, most people do not lose money in direct selling. Neither the facts nor common sense supports that theory. Further, anyone who gets involved with a legitimate direct selling company should not risk financial loss by doing so. The Direct Selling Association’s Code of Ethics, for example, is designed to protect direct sellers and their customers. Inventory buybacks (which include sales aids) and other provisions allow sellers recourse if there’s an issue with the company – no one should lose money in direct selling, nor should anyone feel like a failure if it doesn’t work out for them.

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MYTH #2:Most direct selling companies are pyramid schemes that are doomed to fail.FACTThere’s a big difference between legitimate direct selling companies and pyramid schemes. Pyramid schemes seek to make money from you (and quickly). Legitimate direct selling companies seek to make money with you as you build your business (and theirs) by selling real products and services.In fact, legitimate direct selling companies work hard to protect consumers from pyramid schemes. Before you sign up with a company, investigate carefully. A good way to begin is to ask yourself these three questions: 

1. How much are you required to pay to become an independent consultant?If the startup cost is substantial, be careful! The start-up fee in direct selling companies should generally be low and cover the cost of your start-up kit (usually sold at or below company cost) which can include training materials, sample products and other items to get your business going. These companies want to make it easy and inexpensive for you to start selling. Pyramid schemes, on the other hand, make nearly all of their profit on signing up new recruits. Therefore, the cost to become a distributor is usually high.
2. Will the company buy back unsold inventory?If not, beware! Legitimate companies that require inventory purchases will usually “buy back” unsold products if you decide to quit the business. Some state laws and the DSA Code of Ethics require buy-backs for at least 90% of your original cost.
3. Are the company’s products sold to consumers?If the answer is no (or not many), stay away! This is a key element. Direct selling (like other methods of retailing) depends on selling to consumers and establishing a market. This requires quality products, competitively priced. Pyramid schemes, on the other hand, are not concerned with sales to end users of the product. Profits are made on volume sales to new recruits, who buy the products, not because they are useful or attractively priced, but because they must buy them to participate. Inventory purchases should never be more than you can realistically expect to sell or use yourself.

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MYTH #3:Recruiting is the key to success in direct selling; sales to end-users of the products and services are minimalFACT
There’s no doubt – recruiting is an important element of direct selling – just as expansion is important to any business that wants to grow. For direct sellers looking to build a business, recruiting others and mentoring them so they, too, can achieve their goals is important. But, recruiting is not a requirement for individual success in direct selling, and compensation must always based on the sale of products and services – whether your own sales or the sales made by your recruits.Consider the following: Thirty-four percent of direct sellers do not earn money from the sales of others, but just from their own personal sales. (Source: 1999 National Salesforce Survey, MORPACE International, Inc.)And what about those customers? It is true that most direct sellers are also consumers of the products and services they sell – for many they got involved after having already used the products, and some get involved just to buy those products at a discount.But, half (50%) of U.S. adults purchase products or services using the direct-selling retail channel during any given year. That’s roughly equivalent to 150 million people in the US alone who make at least one purchase from a direct selling company in a 12-month period. When you consider there are 15.6 million direct sellers in the US, that leaves a lot of customers who aren’t also direct sellers. (Source: 2004 General Public Attitudes Toward Direct Selling, Burke, Inc.) 

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MYTH #4:The vast majority of new recruits quickly drop outFACT
Nearly four in five (78%) direct sellers who are 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.
(Source: 1997 Survey of Attitudes Toward Direct Selling, Wirthlin Worldwide)
Moreover, 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. When considering the drop out rate, one also has to consider direct sellers who get involved for several months each year to earn extra money for family vacations, holiday gifts or other seasonal purchases. These sellers don’t “drop out” because they weren’t successful, they drop out because they achieved their goal and don’t choose to sell all year. For many, they’ll join again the next year and drop out just the same.

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MYTH #5:Direct selling is an outdated method of buying and sellingFACT
More and more people are getting involved in direct selling because they enjoy the personal service that accompanies shopping this way. With hundreds of direct selling products and services to choose from, both those looking for supplemental income and those looking for a fun way to shop and socialize with friends find direct selling appealing.Home parties offer great opportunities to chat with friends in a relaxed atmosphere and browse through great products at the same time. And, you might even learn a new tip, trick or skill, or even pick up a new hobby. Many direct selling companies today emphasize education about a particular topic, taking the focus off the sale and onto having fun.Similarly, person-to-person demonstrations of products provide an opportunity to try products, talk to a knowledgeable salesperson and get personal service that only comes with direct selling.Outdated? Not at all. Today’s consumers demand high levels of personal service that many retail establishments just can’t deliver. Couple that with fun and flexibility, and you’ve got a winning combination. Direct selling is based on people so it easily changes with the times.

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MYTH #6:Direct selling products are overpricedFACT
The consumer market won’t sustain products that are overpriced for long. Competition is a powerful force and products that aren’t competitively priced won’t sell and can’t last.But for direct selling, there’s a bit more to the price equation than might immediately meet the eye.The decision to sell a product through direct selling is often based on very specific factors. For example, products that require demonstration to convey the finer points of their operation are ideal for direct selling because a knowledgeable salesperson can personally conduct that demonstration for every customer. In a traditional retail setting, consumers might not understand the product’s unique qualities based on appearance or packaging.It’s true that some direct selling products are priced at the upper end of the retail market’s acceptance level, but there is higher acceptance based on the value-added incentive of the demonstration and personal service. Lexus brand cars are also at the upper end of the retail market acceptance level, but superior performance and service after the sale make that higher price reasonable.Each customer needs to weigh the price, quality and desirability of a given product and make a purchasing decision accordingly.

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MYTH #7:Direct selling companies are unregulatedFACT
Several governmental bodies, as well as the Direct Selling Association and organizations like the National Association of Consumer Agency Administrators, National Consumers League and Better Business Bureau, work to protect consumers against fraud. It is an unfortunate truth that some scam artists try to masquerade as legitimate direct selling companies, making these laws and regulations necessary. Here are a few of the protections on which consumers can rely:

• All 50 states and the Federal Trade Commission (FTC) have cooling-off laws that provide consumers with an unconditional 3-business-day right to cancel an order or contract. These laws are designed to counteract high-pressure sales and allow people who change their mind about a purchase to make a quick and easy return.
• In addition, all 50 states, the FTC, the Securities & Exchange Commission (SEC) and the U.S. Postal Service have anti-pyramid scheme laws or regulations that they can use to prosecute and shut down such frauds. (See citations for examples of State anti-pyramid scheme laws.)
• On the federal tax side, the Internal Revenue Service (IRS) regulates direct sellers through a special form, 1099-MISC, to insure income tax compliance by direct sellers. Direct sellers are independent contractors by virtue of section 3508 of the U.S. tax code. A 1099-MISC form must be filed for all direct sellers who have received $600 or more from the company with which they are affiliated. In addition, a 1099-MISC form must be filed for those purchasing on an annual basis $5,000 or more of consumer products from the parent company. Direct sellers also must file a Schedule C with the IRS in order to claim business expense deductions.
• The Direct Selling Association’s Code of Ethics is also a powerful self-regulatory document by which all DSA member companies must abide. The Code includes important provisions including a buy-back requirement (for both inventory and sales aids), a cooling-off period and other provisions enforced by an Independent Code Administrator. Consumers who feel a Code violation has occurred should file a complaint with the DSA Code Administrator.

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MYTH #8:Most companies require inventory purchasers; direct sellers who drop out are stuck with the inventory they purchasedFACT
Companies that belong to the Direct Selling Association agree to abide by a strict Code of Ethics. Among other things, the Code requires members to:

• Repurchase marketable inventory and sales aids purchased in the past 12 months for at least 90% of the purchase price if a direct seller decides to leave the business.
• Explain the repurchase option in writing.

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MYTH #9:If you attend a direct selling party you are expected to buy somethingFACT
The only thing you have to do at a party is enjoy yourself! And the key to enjoying your shopping experience is to work with knowledgeable and friendly consultants who can tell you about products or services, answer any questions, and let you and your friends peruse the items on display or in catalogs that offer a wider selection. You’re absolutely not obligated to buy, but chances are you’ll walk out with something you’ll really enjoy.

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MYTH #10:Everyone who gets involved in direct selling wants an easy way to make moneyFACT
People choose to get involved in direct selling for a lot of reasons. Some hope to make it a full-time career, but most sign up to either earn a little extra money or to receive a discount on their own purchases.Legitimate direct selling companies are very careful to represent earning potential accurately. The DSA Code of Ethics requires companies and their salesforce members to provide potential independent sellers with accurate information about the company’s pay structure, products and sales methods.And no one should be fooled into thinking direct selling is a way to make money with little or no effort. Don’t be convinced by ads or people who tell you you’ll instantly make thousands of dollars just by signing up or recruiting a few people. As with any business, it takes time to establish a customer base and build a business.While direct selling is not an opportunity to get rich quick, you can be successful if you establish your goals and a plan to reach them. Legitimate direct selling opportunities offer the flexibility to set your own goals and achieve them on your own terms.

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Direct Selling Offers Flexibility and Financial Freedom

Build a sales network

Erin Casey

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For more than 100 years, direct selling companies have offered independent representatives the ability to purchase products at wholesale prices and earn a profit by selling them at retail prices. Most direct selling companies also allow representatives to earn commissions for introducing new sales reps to the business. This business model relies on independent contractors, rather than traditional advertising, to spread the word about a company’s products or services. The word-of-mouth marketing approach works for several reasons: Consumers appreciate the personal service, the convenience of shopping from home, and the comfort of buying from those they know and trust.

Jim Cramer, host of CNBC’s Mad Money, is bullish on direct selling, especially during a slowing economy. “Direct selling is a great model… with high gross margins, low capital intensity, lots of free cash fl ow,” he said on a recent show. “It’s a fragmented industry with gigantic room for growth…. The top 15 players only account for about half the market.”

Amy M. Robinson, Direct Selling Association Vice President of Communications and Media Relations, points out that, while many people seek additional income during lean economic times, “in all honesty, direct selling is hot because it’s a fun, convenient way to shop that people enjoy. So, poor economic times or not, people find direct selling to be appealing. Great products, personal service and income potential are elements of direct selling that make it a strong economic contender at all times.”

“People motivated to get started in direct selling typically share certain attributes,” she says. “Most seek supplemental income, either short-term or long-term. The social aspect also is appealing for those who love to meet new people and many enjoy buying products and services they already use—at a discount.”

With a direct selling business opportunity you can:

Join an industry where business is booming and there’s always room at the top. Direct selling, sometimes referred to as network marketing, is a $32 billion industry in the United States and a $110 billion industry worldwide. The millions of individuals building direct selling businesses determine for themselves when they want to move up the career ladder and exactly how high they want to climb.

Tap into a proven system for success. Avoid wasting time or money by learning from others’ experiences and wisdom. Direct selling companies often provide high-quality, high-impact marketing tools, including personal Web sites, brochures, catalogs, DVDs and CDs to help direct sellers present a professional image—at a fraction of what it would cost to produce the same tools on their own. Additionally, training in best practices is frequently offered online and via conference calls as well as at local and national conferences.

Start a business for $500 or less. Direct selling companies offer big opportunity with minimal startup costs. For a small sign-up fee, new reps receive access to training and marketing materials, discounts on products and sample products to show and sell. You can set up office at your kitchen table with phone and laptop. Low overhead combined with minimal (if any) inventory expenses make direct selling businesses affordable. And because many companies handle online orders and deliver directly to customers, independent representatives can focus their time on connecting with potential clients and team members.

Experience flexibility and time freedom. The flexibility to work around full-time jobs or to create an income stream that fits into their families’ schedules is a huge perk. Because each representative is an independent contractor, not an employee, there is no set schedule or required number of hours. On average, part-time direct sellers devote three to 10 hours per week to their businesses. Those who pursue the business full time invest 15 to 35 hours per week. In either case, representatives can set their own schedules and build their businesses during off hours and lunch breaks or on weekends.

Earn what you’re worth. When you’re the boss, you don’t have to ask for a raise—you simply go out and earn one. A results-driven industry, direct selling levels the playing field by offering the same opportunity to everyone regardless of age, ethnicity, gender or socioeconomic background. Equal opportunity, a clearly defined career path and no earning restrictions mean there are no limits on what successful direct sellers can earn. While some in the industry are earning millions, it’s more common for direct sellers to use their businesses to earn extra cash per month to pay for dinners out, private school, college expenses, cars and family vacations.

Maximize your earnings with residual (or passive) income. By building a team of people who love the products and are excited about telling others about the opportunity, direct sellers can leverage their time and maximize their income. Capitalizing on a team’s efforts means a business owner can devote 10 hours a week to their business, but with 10 other people also devoting 10 hours to their businesses, the team leader earns a commission from the collective sales and team-building results of 110 hours’ effort. It also means a team builder’s business has the potential to grow, even while he or she is on vacation.

“I like the honesty about direct selling,” says economist Paul Zane Pilzer, author of The Next Millionaires, “because it openly tells people the way to get rich is residual income: Get paid tomorrow for something you did yesterday—and let it accumulate.”

Reap the rewards of helping others succeed. Building a team definitely makes financial sense, but it also offers significant intangible rewards. Though representatives run their businesses independently, they often develop a family-like connection with their team members and others in the business. The friendships formed and the experiences of helping others improve their personal and financial lives are often as meaningful to direct sellers as the money they earn.

Get the recognition—and prizes—you deserve. In the corporate world, there’s no such thing as a free lunch, much less free vacations, luxury cars or fine jewelry. Direct selling companies know most people work more diligently and with more enthusiasm for a reward. First-class incentive trips to exotic locations, free cars or car allowances, fine jewelry and cash bonuses are offered by many companies to those who excel. And the opportunity to earn such rewards is open to everyone.

Become a better you. Direct sellers are faced with numerous comfort-zone challenges, and by overcoming those challenges they grow personally and professionally. The encouragement and training these independent business owners receive from their companies’ leaders as well as others in the field spur them to step outside their comfort zones to achieve success.

Common Pitfalls to Avoid

1. Be wary of “once-in-a-lifetime” opportunities. A real business opportunity should be there for the long haul. Research the company and its leaders. The Direct Selling Association (www.dsa.org) is a great resource for learning more about the industry and individual companies. While there are a number of reputable non-DSA companies, this organization sets high standards for the industry. The DSA accepts membership only from companies willing to abide by a strict code of ethics that protects both the consumer and the independent business owner.

2. Don’t jump on the bandwagon unless it’s going the direction you want to go. One company’s product might be a perfect fit for someone else, but if you couldn’t care less about that particular widget, find a business with a product or service you are passionate about. With so many companies offering a variety of high-quality products—tools, wine, kitchen accessories, skin care, telecommunications, cosmetics, legal and financial services, health supplements, clothing and travel to name only a few—there’s an excellent chance the right company is waiting for you.

3. Don’t give up too soon or expect too much too quickly. Building any business takes time, and direct selling businesses are no exception. If you want to earn millions, that potential exists, but you have to be willing to work for it. Much of the success achieved in the direct selling industry is the result of consistent and effective efforts duplicated over time. Start any direct selling business and you’re likely to hear, “I know someone who did that… it never amounted to much.” Don’t base your potential for success on someone else’s failure, especially when there is so little to lose and so much to gain.

- See more at: http://www.success.com/article/direct-selling-offers-flexibility-and-financial-freedom#sthash.VEykYkTf.dpuf

Direct Selling Offers Flexibility and Financial Freedom

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For more than 100 years, direct selling companies have offered independent representatives the ability to purchase products at wholesale prices and earn a profit by selling them at retail prices. Most direct selling companies also allow representatives to earn commissions for introducing new sales reps to the business. This business model relies on independent contractors, rather than traditional advertising, to spread the word about a company's products or services.

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