Can You Make Money in Direct Sales?

March 20, 2011

Direct Sale Companies for $$$? You’ve heard stories, or perhaps you’ve been promised easy money to sell a product with a flexible scheduling on your own time, from the comfort of your own home with little cost or risk for you.  But can you really make money in a direct sale company and which one should you choose?

For several years I worked with Mary Kay Cosmetics, both in assisting a director run her office and her unit, and in selling my own products as a Consultant.  I carried an inventory, had plenty of parties and facials, and learned a lot.  But long story short- yes, I made money, and I enjoyed the experience.  I no longer sell with the company because it no longer fits with my goals, but as an undergrad I did use the flexibility, product discounts and sales to my advantage.  It’s not a get rich quick scheme and it could just as easily be a source of income as a black hole in your finances.

First things first:  Not all direct sale companies are the same. If you are not careful- hidden fees, meager product discounts and mandatory purchases could easily negate any “income” you create!  Know what you’re signing up for.

You may compare two of the best known direct sale cosmetic companies in the U.S.:  Mary Kay and Avon.  They are both two notable and profitable direct sales companies but have very different business structures.   For more information on the details, all you have to do is a quick Google search to find the gripes with either.

 

I’m here though, to help you ask the right questions:

Does it cost you to join?  Do you get anything for that fee? Each company will have it’s own “start-up” fees.  This can range from $10 to hundreds.  Some will offer a “starter kit,” or discounts on other products when you first join- like discounted business cards, an extra discount on your inventory order.  What is the BARE MINIMUM you need to pay for or purchase to get started?  It’s easy to get enamored with all of the extras, but keep to your bottom line.

Do you have to carry inventory? Some companies see not having an inventory as a selling point to potential consultants, while others see the key to your success as having a regular inventory to offer the best customer service.  Also, every company has unique rules as to how your orders (size, frequency) affect your discounts.

Do you have to purchase a lot of extras? Catalogs, samples, business cards, website registration and hostess gifts all cost money.  Also keep in mind that each company has seminars, conventions and other pow-wows that you may or may not be encouraged to attend.

Do You Have to Recruit to Get a Better Discount? Truth be told, ALL direct sale companies, even if they aren’t “pyramid schemes,” will have incentives for recruitment.  Why this is demonized to the extent it is beyond me- since nearly every business does some form of recruitment, but it might just be in the form of advertising or referral incentives.  Sadly though- there are some companies who require you to recruit new salespeople to get a reasonable discount or remain active in the company.   If you don’t like to recruit, (or even if you do) you MUST ask how recruiting will impact your participation in the company before you sign up.   Some companies will offer a flat discount to everyone in the sales force (like Mary Kay) while others give you a bigger discount (from 10%-30%) on inventory products only if you recruit.

How much and how often do you have to sell to get a bigger discount? All companies have strict policies on what qualifies you for their best discounts- you need to ask how the company’s discount program works.  If you’re selling as a hobby and may not place regular orders, will you be penalized with fees, or will it impact your consultant discount?  Some companies will require regular minimum orders to even stay active in the company- be sure to know what that number is and if its feasible for you.

Does the company have a money-back guarantee on both its products and your membership fees/inventory if you’re not satisfied? Who foots the bill if your customer isn’t satisfied with the lipstick she bought?  If you have to pocket the expense of replacing a faulty product or simply have a customer that can’t make up her mind about lip gloss, that can add up.    Additionally, what if you’re not happy selling the product?  Can you return the inventory?  Some companies will take the product back at a reduced refund, while others will tell you’re “S.O.L.”

What are the perks and are they attainable to the average seller? Just know whoever is recruiting you is going to highlight the perks of signing up with their company.  They will most likely try and sell you on the biggest and best- free vacations, jewelry, company cars.  Be sure you really understand what it takes to earn these bonuses and don’t distracted by the shiny things they promise you.  I have seen lots of people thrive in direct sales companies, but it of course, didn’t come easy.  Remember, though- it’s the goal of the recruiter to make it look easy. It can be a hobby- but to get those big ticket items, you are going to need to treat it like a job.

Do you have what you need to be successful? Even if you aren’t the “salesperson” type, many of these companies offer plenty of inspiration and education to help you improve.  Truthfully though, looking at your own life- can you handle the opportunity?  Do you have enough time in your life to commit to really learning and leading the business, and do you have room in your budget and in your home to put towards the business?

How often does the inventory change? You want to be on “the cutting edge,” when it comes to sales, but if your company changes the lineup too often, you could be stuck with unappealing and outdated product.  Know that this is how some D.S. companies make their money.  An easy way to see how fast the product line updates is to see how often catalogs are released.

Do you love the product and will you passionately sell it? I loved Mary Kay, I also loved the discount!  I loved having inventory on hand to use for last minute gifts and I enjoyed earning the prizes.  But with anything, there will be a lull- a time when things aren’t as profitable as hoped, and at times you will fail.  To be profitable though, you can’t just do it for the discount, you need to want others to use it and you need to love it enough to sell it to them!

Is your product too easily bought elsewhere? Know one of the downsides to the D.S. industry for consultants is that recently, some companies have sidestepped the consultant in order to sell directly off the corporate website or to big retailers.

Of course, former consultants will always be unloading old inventory (against company policy) on Ebay, but when a company cuts into your potential client base with a high-ranked, easy-to-find corporate website that detracts from your sales- you should really take that into consideration.  Why would a customer give you a try when they could avoid a consultant all together to buy it from corporate?  A quick way to check this is to go to the corporate website and see if you can buy from there or if they refer you to a local consultant or representative.

11 comments so far.

11 responses to “Can You Make Money in Direct Sales?”

  1. Marty Devito says:

    Ive been working online for years now and I know a few legit companys that always pay ontime.

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  10. Great post! I love to hear how you did MK while in school. Way to get the experience in customer service and personal development.

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