Many people will be quick to dismiss direct sales business models, deeming them far less lucrative than others. However, figures show that the direct selling market is on the rise. More and more people are opting to shop online, straight from the sellers website.
In 2020, direct sales grew by 14 percent, which is incredible compared to previous years. Direct sales models could benefit a lot of businesses, and it’s important to familiarize yourself with it to decide whether or not they might be right for you.
To find out more about direct sales business (see also: What Business Can I Start With 50k?)models, and what exactly they consist of, keep reading below, as we take a closer look.
In a direct sales business (see also: 15 Best Sales Courses For Your Business)model, there will be no ‘middle man’. It relies heavily on a good network of sales people. There are a few different variants of this sales model, some of which include online sales, and others which are performed in person.
The most important thing to note is that direct sales are on the rise, so if you don’t have these laid out as a part of your current business plan, you might want to revisit the drawing board.
Different Types Of Direct Sales Business Models
Now that we’ve covered what a direct sales business model consists of, we can move on to discuss the different types. There are a variety of different ways to implement direct sales into a business plan, some of which we take a closer look at below.
Direct Sales On A Single Level
The first kind of direct selling occurs in person. These would be conducted in all of the traditional ways you might think of when you hear the words ‘direct selling’.
They could mean a person traveling door to door with a stock of items, or a person with a stall at a marketplace selling their produce.
Direct selling can also be conducted through catalogs. The seller will distribute the catalog door to door, and then wait for customers to show an interest in the products.
The person distributing the items to customers will be a well trained sales person.
They often work full time, but there are some who work on a part time basis in order to gain extra money. They will typically be paid on commission, and might get bonuses if the company is doing exceptionally well.
The salesperson will take the order, then have it shipped directly to the customer.
Direct Sales Via Party Plan
This kind of selling plan will be conducted by the company’s representatives, who will perform a presentation of the product. This will typically be held in a large hall, that’s big enough to fit in plenty of potential customers.
The host, or representative, will introduce the product to customers in a fun, relaxed, and entertaining manner, which will urge the audience to purchase the product. Research shows that this kind of sales tactic is highly effective, as once one person shows interest in a product, other people will follow suit.
There are lots of different types of direct selling via this method, and might include items such as makeup tutorials, cooking demonstrations, or tasting sessions. They are a way for the customer to interact directly with the end product.
Sometimes, now more than ever, these events take place online. Representatives can invite guests via Zoom, and present to large crowds from all over the world.
Direct Sales Via Multi Level
Eventually, if a business has gained enough traction and is selling a lot of products, they may be able to transform their business into a multi level model. This means having sales teams who are unsalaried selling their products directly to the consumers.
New members can join the sales team along the way, and also sell and distribute the company’s products. This type of selling is also sometimes called network marketing.
What Are The Advantages Of Direct Sales Business Models?
Now that we have discussed the different types of direct selling, we can move on to discuss some of the benefits of this business plan. Keep reading below to find out more.
Customer familiarity – One of the best things about direct sales business models is that they allow small businesses to sell their products directly to family and friends. Because they don’t rely on distributors, they can easily sell their products straight away. This is great for businesses that are still working on their marketing campaigns and advertising.
Control – Another great thing about direct sales is that it gives the business owner full control over the price of the product. This becomes far more difficult to control once there’s a supply chain and third party distributor.
Rapport – Another positive thing about direct marketing is that it helps to build a rapport with customers. Because the representatives are interacting directly with customers, it can help to build a strong relationship that guarantees further purchases.
Feedback – This brings us to the next point, which is direct feedback from customers. Because the business owner, or their representative, is out there talking to customers directly, they can hear firsthand any feedback that they might have, good or bad. They can witness which products are selling the most, and which aren’t as effective.
The Disadvantages
Now that we’ve covered some of the advantages surrounding direct sales business models, we can take a closer look at some of the disadvantages.
Reliant On Representatives – One of the key disadvantages of direct sales is that the business owner is completely reliant on their sales people or representatives. This means that the people in this position are completely responsible for growing the business by selling products, as this is the only way the business can flourish.
Harder Sales – Another thing is that the sales representatives will have to have impeccable selling skills, or otherwise, it will be incredibly difficult to shift any products at all.
Networking – Normally, the business owner will not have any leads, and are therefore left to their own devices when it comes to selling. This means that they’re entirely responsible for networking with others. This can be difficult to get started with for novices.
Pyramid Scheme – If the business focuses too much on employing new representatives, the whole venture could turn into a pyramid scheme.
Final Thoughts
To sum up, direct sales business models consist of the seller making a direct sale to a customer.
There are many different formats to this kind of business model, some of which include door to door selling, events that showcase the product, and online tutorials and workshops.
