Direct Selling: Dreams And Reality

Submitted by Dmitri Davydov on Wed, 2007-03-14 08:20.
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This is how I took 4 vacations last year. 

Direct selling of products such as cosmetics and cookware may not be the easy path to riches. But the flexible hours have made this the work of choice for some 14.1 million Americans, most of them women.

Though there are those who earn six-figure incomes from selling person-to-person or through the home parties that characterize this business, that is more the exception than the rule. More typical of the $30.5 billion industry, which includes names such as Avon, Tupperware, Amway and the Pampered Chef, is part-time or occasional involvement in distributing the products to friends, family and acquaintances. For many, it's a way to earn a bit of extra money during the holiday season or when households are pressed for cash.

How much can you make? The earnings of a distributor, sales associate or independent consultant -- as those in the field are variously known -- average around $13,000 or $14,000 a year, according to the Direct Selling Association, an industry trade group. But that number may be skewed by some hard-driving consultants who choose to make a full-time career of direct selling.

Median Earnings: $2,400

The median income, the point at which half of the work force falls above and half below, is more like $2,400, or $200 a month, says a spokeswoman for the trade group. Only 13% of the participants devoted themselves to their business more than 30 hours a week in 2005, the group notes. The majority of the part-timers work less than 10 hours a week.

To set up their businesses, consultants often purchase a line of products to demonstrate their use, spending an amount that is typically under $100, according to Joe Mariano, executive vice president of the Direct Selling Association. Start-up costs higher than $500, or inventory that can't be sold back to the company when an associate wants to fold up his or her business, should raise a red flag about the character of a venture.

Consultants earn a commission on their sales, and, in many cases, a percentage of the sales of any distributors they recruit to the business, in what's known as multilevel marketing. In larger organizations, the parent company pays additional compensation or incentives based on sales performance. For instance, Herbalife, the nutrition and weight-loss company, says 25% of its distributors sell enough goods to entitle them to an average of $2,200 in additional annual compensation from the firm.

Some people may be taken in by promises of easy money once the multilevel marketing aspect of the business kicks in, but the reality is that the people who have made a fortune in this business have clocked the hours and sharpened their selling skills to succeed.

The Federal Trade Commission is considering a rule that would require direct-marketing firms to give new recruits a week to think over whether they want to sign on, and would require greater disclosure about typical earnings, including how many people aren't able to earn back start-up costs.

It's Not Just the Pay

The appeal of direct selling can go beyond the money. For Mary Lord, a 43-year-old mother of three young children in Chatham, N.J., selling Mary Kay Cosmetics is an "opportunity to have more intelligent conversations" and reconnect with her friends on the computer, to say nothing of the $1,000 a month she earns.

Some people turn to direct selling as a second job. Menina Givens, a 36-year-old Los Angeles resident, started selling Mary Kay products as a sideline 12 years ago, to help chip away at her $20,000 of credit-card debt and $15,000 of student loans.

About a year later, when her Mary Kay income started to top her $50,000-a-year salary as a pharmaceutical sales rep, she quit the day job to concentrate on Mary Kay sales. Today, Ms. Givens has 110 people under her and says she earned more than $100,000 last year.

But success of that magnitude doesn't come easy. Instead, the direct-sales business is known for high turnover. An untold number of people give up after wearying of having to continually buttonhole friends and family to sell them products they may not want or need.

Before You Sign On

If you think you want to give direct selling a try, go with a well-known, reputable company. Don't sign on to any business that bases earnings on the number of people recruited. Beware of companies that require only that you recruit consultants, but don't have any products or services to sell.

The Direct Selling Association advises potential recruits to talk to other people who have had experiences with the company. Verify information about costs, commissions, average earnings of distributors and return policies with the company, not just the recruiter.

Finally, consult the Better Business Bureau or your state attorney general's office to see whether any significant complaints have been filed against the company.

After all, you want to be the one doing the selling, not the one being sold a bill of goods.

[Via - StartupJournal.Com

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