General Benefits of Direct Selling Potential Direct Selling Opportunites Consumer Information Pyramid Schemes ABOUT DIRECT SELLING General Direct selling provides important benefits to individuals who desire an opportunity to earn an income and build a business of their own; to consumers who enjoy an alternative to shopping centers, department stores or the like; and to the consumer products market. It offers an alternative to traditional employment for those who desire a flexible income earning opportunity to supplement their household income, or whose responsibilities or circumstances do not allow for regular part-time or full time employment. In many cases, direct selling opportunities develop into a fulfilling career for those who achieve success and choose to pursue their independent direct selling business on a full time basis. The cost for an individual to start an independent direct selling business is typically very low. Usually, a modestly priced sales kit is all that is required for one to get started, and there is little or no required inventory or other cash commitments to begin. This stands in sharp contrast to franchise and other business investment opportunities which may require substantial expenditures and expose the investor to a significant risk of loss. Consumers benefit from direct selling because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees. Moreover, direct selling provides a channel of distribution for companies with innovative or distinctive products not readily available in traditional retail stores, or who cannot afford to compete with the enormous advertising and promotion costs associated with gaining space on retail shelves. Direct selling enhances the retail distribution infrastructure of the economy, and serves consumers with a convenient source of quality products. An important component of the Direct Selling industry is multilevel marketing. It is also referred to as network marketing, structure marketing or multilevel direct selling, and has proven over many years to be a highly successful and effective method of compensating direct sellers for the marketing and distribution of products and services directly to consumers. Direct selling should not be confused with terms such as direct marketing or distance selling which may be described as an interactive system of marketing that uses one or more advertising media to effect a measurable response and/or transaction at any location, with this activity stored on a database. Some commonly known types of direct marketing and distance selling techniques are telemarketing, direct mail, and direct response. Although direct selling organizations occasionally use some direct marketing or distance selling techniques and technology to enhance their businesses, the primary difference between the two methods of marketing is the face to face, or personal presentation that is always an aspect of the direct selling relationship. top  Benefits of Direct Selling Research shows some of the most popular reasons people choose direct selling are: Direct selling is a good way to meet and socialize with people. Direct selling offers flexible work schedules. Direct selling is a good way to earn extra income. Direct selling is a good way to own a business. Earnings are in proportion to efforts. Anyone can do it. There are no required levels of education, experience, financial resources or physical condition. People of all ages and from all backgrounds have succeeded in direct selling. Direct sellers are independent contractors. You're your own boss, which means you can: Work part-time or full-time - you choose when and how much you want to work. Set your own goals and determine yourself how to reach them. Earn in proportion to your own efforts. The level of success you can achieve is limited only by your willingness to work hard. Own a business of your own with very little or no capital investment. Receive training and support from an established company. People like to shop through direct selling. Direct selling is a growing industry. top  Potential Direct Selling Opportunites The 21st-Century Career: Direct Selling More and more Russians are abandoning the corporate world and going into business for themselves. In fact, entrepreneurship may well be the definitive trend of the ‘90s even the 21st Century. There are many attractions, including: flexible hours the autonomy of being your own boss no more harrowing and time-consuming commutes no worries about downsizing working from the comfort of your own home no office politics increased family time ample opportunity for self determination One of the most popular ways to work for yourself, but without the risks and stresses of being by yourself, is to become a direct seller. In direct selling, products and services are marketed directly to customers, generally in their homes or the homes of others, through personal explanation and demonstration. Direct sellers are independent contractors, which means you work when and if you want to, and you earn in proportion to your efforts. You have the backing of an established company that provides training and advice whenever you need it. More than 4,500,000 Russians associated with the DSA member companies enjoy rewarding part-time or full-time careers in direct sales, now generating around $3.5-billion in retail sales a year. Set for Success The emphasis in direct selling is on the individual and an ability to motivate others. Each independent sales contractor or distributor sets personal goals and objectives, and works as much as she or he chooses. Success depends only on individual ambition and willingness to work. The only prerequisites are an interest in people and a desire to earn additional income. There are no restrictions to a career in direct sales an equal opportunity is open to all without regard to age, gender, race, education, marital status, or previous experience. People from literally all walks of life, of all ages, are successful in direct sales. About 80% of those working in direct sales are women. Many people start part time and later leave their other careers when direct selling becomes more lucrative. How to Get Started Identify a direct selling company and product(s) that appeal to you. Check our list of member companies. Keep in mind that not all direct selling companies belong to the Direct Selling Association (DSA). But those who do pledge to abide by the DSA’s Codes of Ethics the cornerstone of the Association’s commitment to ethical business practices and consumer service. Ask questions, such as: What start-up investment is required? What training does the company offer? Choose a company that invests in training. It’s your best guarantee of being prepared to do your best. What is the compensation structure? Get all the facts about bonuses, profits, commissions and responsibilities. What are the company’s product guarantees and return policies? They’ll be important to your customers and to you. How do other salespeople feel about the company? Check with them, or ask the company to provide histories of people in the business. What happens if you change your mind and want to leave the company? The DSA Codes of Ethics requires that member companies repurchase marketable inventory and sales aids purchased within the past 12 months by salespeople who want to leave the business at not less than 90% of the price paid, less any bonuses or commissions already paid. Other Advantages of a Career in Direct Selling recognition of your efforts tangible incentives/rewards to succeed meet people and make new friends establish yourself in your community work around the other important aspects of your life peace of mind while selling, because the quality of the products is guaranteed (protects you and your customers) opportunity to build security, self esteem and self confidence unlimited potential for growth, both personal and financial it’s fun! Just Give It a Try! It’s easy to get started in direct selling because you probably already have the basics: an interest in people and a desire to succeed. You’ll be taught the rest, and you’ll earn as you learn. Direct selling may answer your dream of running your own business with little risk and strong corporate support. The cornerstone of the Association’s commitment to ethical business practices and consumer service is its Code of Ethics. Every member company pledges to abide by the Code standards and procedures as a condition of admission and continuing membership in the Association. top  Consumer Information Direct salespeople can sell you products or services, or show you how to become a salesperson yourself. DSA member companies deliver extra value because they have pledged to abide by the DSA Code of Ethics and are committed to treating consumers of their products and of their opportunities ethically and fairly. There are many advantages to buying from direct salespeople associated with legitimate companies. Direct sellers can arrange their calls to fit your busy schedule and can deliver your purchases directly to you. Direct salespeople are knowledgeable about their products and take the time to personally demonstrate and explain their products to you. When you purchase a product or a service from a representative associated with a member company of the Direct Selling Association, you can rest assured that the salesperson will follow fair consumer practices. Salespeople representing DSA member companies will: Tell you who they are, why they're approaching you and what products they are selling. Explain how to return a product or cancel an order. Respect your privacy by calling at times that best suit your convenience and wishes. Respect your right to end a sales call. When you make a purchase, you can count on DSA's member company salespeople to provide you with: Accurate and truthful information on the price, quality, performance, quantity and availability of their products or services. A written receipt in clear language. Their own name and address and/or the name and address of the company they represent. A complete description of any warranty or guarantee, limited or full. You can count on DSA member companies to: Make sure all testimonials and endorsements are truthful, current and authorized by the person or organization quoted. Base any product claims on substantiated facts. top  Pyramid Schemes NOT WHAT THEY SEEM! DON’T MAKE A COSTLY MISTAKE! Thousands of Russians have lost millions of dollars participating in pyramid schemes. Many of the victims knew they were gambling (although they didn’t know the odds were rigged against them). Many others, however, thought they were paying for help in starting a small business of their own. These people were fooled by pyramid schemes disguised to look like legitimate businesses. The purpose of this article is to help you avoid falling victim to pyramid schemes, whether simple or disguised. Simple pyramid schemes are similar to chain letters, while disguised pyramids are like wolves in sheep’s clothing, hiding their true nature in order to fool potential investors and evade law enforcers. WHAT IS A PYRAMID SCHEME? Pyramid schemes are illegal scams in which large numbers of people at the bottom of the pyramid pay money to a few people at the top. Each new participant pays for the chance to advance to the top and profit from payments of others who might join later. To join, you might have to pay anywhere from a small investment to thousands of dollars. In this example, $1,000 buys a position in one of the boxes on the bottom level. $500 of your money goes to the person in the box directly above you, and the other $500 goes to the person at the top of the pyramid, the promoter. If all the boxes on the chart fill up with participants, the promoter will collect $16,000, and you and the others on the bottom level will each be $1,000 poorer. When the promoter has been paid off, his/her box is removed and the second level becomes the top or payoff level. Only then do the two people on the second level begin to profit. To pay off these two, 32 empty boxes are added at the bottom, and the search for new participants continues. Each time a level rises to the top, a new level must be added to the bottom, each one twice as large as the one before. If enough new participants join, you and the other 15 players in your level may make it to the top. However, in order for you to collect your payoffs, 512 people would have to be recruited, half of them losing $1,000 each. Of course, the pyramid may collapse long before you reach the top. In order for everyone in a pyramid scheme to profit, there would have to be a never-ending supply of new participants. In reality, however, the supply of participants is limited, and each new level of participants has less chance of recruiting others and a greater chance of losing money. THINGS YOU SHOULD KNOW ABOUT PYRAMID SCHEMES They are losers. Pyramiding is based on simple mathematics; many losers pay a few winners. They are fraudulent. Participants in a pyramid scheme are, consciously or unconsciously, deceiving those they recruit. Few would pay to join if the diminishing odds were explained to them. They are illegal. There is a real risk that a pyramid operation will be closed down by officials and the participants subject to fines and possible arrest. WHY WOULD ANYONE PAY TO JOIN A PYRAMID SCHEME? Pyramid promoters are masters of group psychology. At recruiting meetings they create a frenzied, enthusiastic atmosphere where group pressure and promises of money play upon people’s greed and fear of missing a good deal. Thoughtful consideration and questioning are discouraged. It is difficult to resist this kind of appeal unless you recognize that the scheme is rigged against you. DISGUISED PYRAMID - WOLF IN SHEEP’S CLOTHING Some pyramid promoters try to make their schemes look like multilevel marketing methods. Multilevel marketing is a lawful and legitimate business method that uses a network of independent distributors to sell consumer products. To look like a multilevel marketing company, a pyramid scheme takes on a line of products and claims to be in the business of selling them to consumers. However, little or no effort is made to actually market the products. Instead, money is made in typical pyramid fashion: from recruiting. New distributors are pushed to purchase large and costly amounts of inventory when they sign up. For example, you might have to purchase $1,000 of nearly worthless products in order to become a “distributor.” The person who recruited you receives $500 (a 50% commission) and $500 goes to the top (the company, in this case). Notice the similarity to the simple pyramid scheme described earlier. Most disguised pyramids, however, are not this easy to unmask. Pyramid schemes often choose products that are cheap to produce but that have no established market value, such as new miracle products, exotic cures, etc. This makes it difficult to tell whether there is a real consumer market for the products. The best way to avoid a disguised pyramid fraud is to know what to look for is a legitimate income opportunity. MULTILEVEL MARKETING - LEGITIMATE INCOME OPPORTUNITIES Multilevel marketing is a popular way of retailing in which consumer products are sold, not in stores by sales clerks, but by independent businessmen and women (distributors), usually in customers’ homes. As a distributor you can set your own hours and earn money by selling consumer products supplied by an established company. In a multilevel structure you can also build and manage your own salesforce by recruiting, motivating, supplying and training others to sell those products. Your compensation then includes a percentage of the sales of your entire sales group, as well as earnings on your own sales to retail customers. This opportunity has made multilevel marketing an attractive way of starting a business with comparatively little money. HOW TO TELL THE DIFFERENCE BETWEEN A LEGITIMATE BUSINESS AND A DISGUISED PYRAMID SCHEME Pyramid schemes seek to make money from you (and quickly). Multilevel marketing companies seek to make money with you as you build your business (and theirs) selling consumer products. Before you sign up with a company, investigate carefully. A good way to begin is to ask yourself these three questions: How much are you required to pay to become a distributor? Will the company buy back unsold inventory? Are the company’s products sold to consumers? 1. Start-Up Cost? IF THE COST IS SUBSTANTIAL, BE CAREFUL! The start-up fee in multilevel companies is generally small (usually for a sales kit sold at or below company cost). 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. CAUTION: PYRAMIDS OFTEN DISGUISE ENTRY FEES AS PART OF THE PRICE CHARGED FOR REQUIRED PURCHASES OF TRAINING, COMPUTER SERVICES, PRODUCT INVENTORY, etc. These purchases may not even be expensive or “required,” but there will be considerable pressure to “take full advantage of the opportunity.” 2. Buy-Back Inventory? IF YOU COULD BE STUCK WITH UNSOLD INVENTORY, BEWARE! Legitimate companies that require inventory purchases must buy back unsold products if you decide to quite the business. Federal law and the DSA Code of Ethics and Business Practices require buy-backs for not less than 90% of initial price any inventory or sales aids bought in the last twelve months. 3. Sales to Consumers? IF THE ANSWER IS NO (OR NOT MANY), STAY AWAY! This is a key element. Multilevel marketing (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. HOW TO PROTECT YOURSELF FROM A BAD INVESTMENT Take your time. Don’t let anyone rush you. A good opportunity to build a business in a multilevel structure will not disappear overnight. People who say “get in on the ground floor” are implying that people joining later will be left out in the cold. BEWARE! Ask questions: about the company and its officers. about the products - their cost, fair market value, source of supply, and potential market in your area. about the start-up fee (including required purchases). about the company’s guaranteed buy-back of required purchases. about the average actual earnings of typical distributors. Get written copies of all available company literature. Consult with others who have had experience with the company and its products. Check to see if the products are actually being sold to consumers. Investigate and verify all information. Do not assume that official looking documents are either accurate or complete. top