Direct Sales – Good Way to Make Extra Money or Fast Way to Lose Friends?

June 12, 2008

Want to make extra money while working from home?  You could join the thousands of other independent consultants, distributors or representatives that work in the direct sales industry and sell products or services directly to customers. The products are sold mainly via in-home product demonstrations, parties, and one-on-one selling.

According to the Direct Selling Association, annual sales from the direct selling industry currently exceed $100 billion. They list the benefits of a direct selling business as:

  • Good way to meet and socialize with people.
  • Offers flexible work schedules.
  • Good way to earn extra income.
  • Good way to own a business.
  • Earnings are in proportion to efforts.

Direct Sales is Everywhere
Chances are you’ve either been approached by or have purchased something from one of these independent consultants. A study referenced by the Direct Selling Association estimates that 55 percent of American adults reported having, at some time, purchased goods or services from a direct selling representative.  If you have a friend that sells Mary Kay or  Pampered Chef then you know what I’m talking about.

Good for Corporations
The reason direct sales is so popular has to do not only with the benefits to the people selling it but also the benefits to the companies that make the products or services.  The sales model allows these companies a low risk, low cost method of expanding their sales force throughout the country.

It’s low risk to the company because the sales reps typically aren’t paid anything unless they make sales. The company doesn’t have to risk a bunch of money hiring a sales force, they pay out a commission only after they’ve already made money via a sale.

A direct sales model is low cost not only because companies don’t have pay salaries but also because they don’t have to offer benefits to the independent consultants.

Selling to Your Friends
So direct sales is good for businesses and good for sales reps, what’s the downside?  (I’ve never been a direct sales consultant so forgive me if I state things incorrectly but this is my understanding). People who get started in direct sales are coached to sell the product or service to their most accessible market, their family or friends. 

With products like Mary Kay you start off by having a party at your house where you invite your friends, give them free samples, and ask them to host future parties at their homes and invite other friends.  Eventually through word of mouth and the network approach of selling to a friend of a friend you build up a customer base.

Effects on Relationships?
Although direct sales has proven to be an effective selling approach, I wonder if it could also prove to be damaging to relationships.  I would imagine that not everyone will enjoy being sold to by their friends, some people may even be offended or feel “used” when asked to come to “sales party”.

There’s probably another group of people that will go along with it but inwardly feel uncomfortable.  They’ll buy from you not because they want what you’re selling but because they feel like they should.  Although they won’t say anything, the value of your friendship may decrease in their mind as they see themselves as just a sales opportunity for you.

The Real Story
As I said earlier, I’ve never been a direct sales rep so I don’t know what really goes on between friends when selling is introduced into the relationship.  What are your thoughts and experiences with direct sales?  Do you like buying products from your friends instead of the store? Do you enjoy attending or hosting sales parties?  Have you ever lost a friend or damaged a relationship because of it? 

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Ben

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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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24 Responses to Direct Sales – Good Way to Make Extra Money or Fast Way to Lose Friends?

  • Liz

    It’s been 4 years since you’ve written this article, ( I stumbled upon it ) and I’m wondering how direct sales have impacted the sluggish economy.

    I too hated direct sales, direct sales people and have avoided phone calls from friends that I KNEW just wanted to sell me something or recruit me.

    Then I lost my job. Thinking I would be employed in no time this economy had another message for me. I began to become bitter and that is no good for interviews!

    Out of boredom I went to a direct sales party a friend was giving and REALLY enjoyed myself. After thinking a long time about what people would think of me, I decided that I needed to have FUN in my life and do SOMETHING to keep me busy until I found work.

    A funny thing happened along the way. I began to really like what I was doing and as time passed I was actually making some money.

    I don’t invite my friends to have parties. I rarely even discuss what I do unless asked.
    As a sales person I prefer to build my customer base outside of my personal life.

    I can honestly say that direct sales gave me confidence back that this harsh economy took from me.

  • Steve

    Direct sales is extremely *IN*efficient. You have an untrained sales force selling in a ton of venues showing the product to consumers who may or may not want it at all. Furthermore they are giving out samples, free refreshments, etc. And the “host” of the sale/party has to be compensated for the risk and for cashing in some of their credibilty, so they get a fairly large cut of the profits (though usually in the form of the same merchandise they are hawking.) And if it’s a pyramid scheme, sorry I mean MLM, then there has to be even more profit added in to compensate all the levels.

    Compare that to a “normal” store where the few consumers who are actually interested can seek out the product. Or even better, an online store where there is no need for a bunch of individual stores with their relatively high overhead.

  • Sokrith Soeung

    I want to know about derict sales clearly, and I want to make the money also.

  • Mylie

    I don’t like direct sales parties. I think they not only influence individual relationships, but are damaging to the very structure of our society, and to relationships among women in general. Almost no one I know just invites some friends over for coffee, or to do a craft or bake Christmas cookies together. In fact few people I know invite other women over unless there is some financial motivation. Direct sales parties seem to be more and more replacing real socializing. I believe it is hard to be a true friend to others and truly be building a relationship, when you have a motive of profit as well. If people were always invited to these parties on the basis of “I’ve having a party to sell this merchandise. If you might be interested in buying some, I’d love to have you,” that would be okay. But the invitations I have received are almost always from people purporting that they just want me to come, and would enjoy my company, and don’t expect me to buy anything at all. Yet there is always the feeling that that is really not the real expectation. This lack of directness and not-quite-truthfulness is probably what is really damaging. Our society is just lacking in enough pure disinterested love, giving, and friendship, whereas there is always enough materialism and profiteering to go around.

  • Nancy

    I have tried the MLM a couple times. It was 20 years between the two times and time had erased the bad taste the first one left. The last time was a costly experience with a company I thought was reputable. I won’t get into it, but I definitely do not think of the woman who snagged me as a friend. I do have to say that as a young mother, I enjoyed the tupperware parties, home dec parties, etc. You are basically getting together with friends, seeing new items and having a good time. We really didn’t feel pressured to buy in my group since we all were on limited budgets. We just had a good time and the hostess got gifts for having the party. Now if I want to buy one of these products, I’ll just go to their web site and buy it. That doesn’t happen too often as I’m on my way to debt free living and prefer to spend my money on paying off the remaining debts.

  • Chad @ Sentient Money

    I abhore direct sales. I would definitely think less of a person, whether they were friends/family or not. It’s classless.

  • Karen Clark

    Wow! I have lots to say but mainly want to let people know that selling to your friends and family is NOT what direct selling is all about. In fact your business will die if you focus only on that, as well as your relationships! I am at the top of my company and have been doing this for 10 years.

    Your business will not take off and you will not grow professionally until you go OUTside of your friends and family. Focusing only on “who you know” is probably the biggest mistake people make.

    Secondly, yes people feel pressured to buy something – but that’s because that is what the party is all ABOUT. It is a sales party. It is a personal shopping experience. When you are invited to one you are being invited to come buy something. If you don’t want the stuff, don’t go! LOL Yes they are fun and it is nice getting together with friends but you ARE expected to buy (if you like it) and that is why you are invited to it.

    So why would someone want to go to a home party? First of all most direct selling company products are superior to the ones you can get in the store, and some are even unique only to the direct selling company, such as mine. You cannot buy my product anywhere else and it is made just for us to sell through our reps.

    Second, you get customer service and usually a guarantee on the products.

    Third, the hostess gets to get some (sometimes lots) for free for hosting the party.

    Fourth, you get to actually experience the product, use it, taste it, try it on, etc. in the company of your friends, talk about it, see if you like it etc. This is far different than your typical walmart shopping experience!

    Fifth, you will learn something about how the products can benefit your lives and if you decide to buy, you will not only be supporting your friend who is the hostess, but also keeping you money IN your COMMUNITY instead of off to walmart or China or Mexico. Your money goes to the company rep who is more often than not doing the business to make ends meet for her family or even to be able to stay home with her kids. When you buy something at walmart you know the sales clerk gets barely anything and is on an hourly wage and gets paid whether you show up or not, AND the money doesn’t stay in your hometown.

    The problem lies in that many people who join direct selling companies do not get proper training and wing it. I highly recommend anyone considering direct sales to get involved in the Direct Selling Women’s Alliance (DSWA) for some great direction and local chapter meetings.

    I also think there is a lot of confusion out there about direct sales (party plan, door to door, vendors at events) vs. network marketing or multi-level-marketing whose focus is on selling the business opportunity more than actual products. Some reps from those companies can be pretty hard core where as in most direct sales/party plan companies, our focus is on the products and how they enhance lives and although we do recruit other reps, it is so that they can sell the products in their areas and build their own career.

    For what it’s worth I sell for a company called Story Time Felts. I’ve been doing it since 1998 and love it. My kids have grown up with me working from home and are creative, imaginative, hard working and goal-setters. I love what I do and encourage others to be open minded about the direct selling profession. In this day of tough economic times it really can be an answer to making ends meet or keeping people out of debt while providing a product people need and want. I sell to schools, parents, childcare providers and they are always so happy to see me! I love what I do!

  • betsy

    in college i lost a friend due to her trying to sell me some vitamin product over the phone, and me continually saying no.

    i refuse to go to any of those parties; it’s just too much to ask of your friends!

  • Sun

    I generally don’t like people come to my door to sell me something. If I want it, I will find a place to buy it at a price I am comfortable with. Direct sale seems a little pushy to me. For friends, we don’t want it look like we are trying to make money from them.

  • Ben

    So far it sounds like alot of votes against the direct selling approach. I’d be interested in hearing the thoughts of someone who is involved in direct sales and what they’d experienced.

  • Brip Blap

    It’s probably related to the individual. I don’t mind direct sales pressure but that’s probably because I also don’t mind saying “no.” Again, and again. I think it’s actually a win-win for everyone, though. The rep gets a commission, the customer gets a (slight) bargain and the company generates a sale it might not have had. To the extent that people can handle rejection I think it’s probably a good business to go into.

  • Everyday Finance

    My wife’s all about these things with her friends (actually she just buys all their stuff and hosts the parties, but doesn’t run a business herself), like Pampered Chef and Lia Sophia jewelry. Apparently, they don’t mind it, but I guess there are some people who feel obligated to go to each of these things and they start to add up, right?

    On a more contraversial topic, I was recently approached by a friend to join a hot MLM that’s taking off. While it hasn’t hurt our relationship after I backed out, it’s generated a lot of contraversy in even considering. It was shoptoearn and if you haven’t heard about it yet, you probably will soon. Here was the background for anyone considering:
    http://everydayfinance.blogspot.com/2008/06/is-shop-to-earn-scam-or-is-it-time-to.html

  • MillionDollarJourney

    I agree with what’s said above, those parties put way too much pressure on “your friend” to buy something. If the purchase turns out bad, the it will simply lead to resentment. There’s a reason for the cliche to never mix business with pleasure.

  • Kath

    My own personal experience w/ direct sales is limited, but my mother, who is a teacher, is often invited to direct sale parties by the mothers of her students. She likes socializing, but she feels a lot of pressure to buy something that she probably would not otherwise purchase (especially since she feels it is beneficial to her job to please these people.)

    I know firsthand how difficult it is to keep your wallet shut when other people around you are spending $ like crazy, so I wouldn’t want to put someone else in that position. That said, if someone just hands me a catalog (Avon, for example) and asks me to look it over at home and let them know if I want anything…I think that’s a little better than some of the other selling techniques.

  • My Dollar Plan

    I hate those parties! If you go to a pampered chef or tupperware party you feel obligated to buy the stuff…. even if you don’t need it. I don’t mind the cooking ones so much as the candle ones.

    Friends don’t make friends buy junk!

    • I'm a seller, but UGH!

      LOL what is up with all the candles? If I want a smelly candle I will get a cheap one at the store. I don’t need a candle that will last me 20 years.

  • The Digerati Life

    I’ve tried some MLM before. And it was a bust. I had relatives who went with Amway and it cost them a bunch of money on inventory. But I did not sign up. Learned the hard way that this is not something that works for me at least. Some people do well with it though!

  • Lazy Man and Money

    Personally, I don’t like these direct sales. I’d rather give the person a couple of dollars and go buy the product that I prefer at the place I prefer. And this goes for girl scout cookies too.

    I’ve got a spirited conversation on my site about the potential monavie scam… it’s similar to the Pampered Chef, Tupperware, etc., except that it’s hard to find objective benefits to the product. I think it adds a new wrinkle to the discussion.

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