What Exactly is Direct Sales? Scam or Legit?

Most likely you recognize some of the logos above and below. They represent a segment of business known as direct sales.  What exactly is direct sales though? Is it legal?

Direct Sales as defined by wikipedia - the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.[1]Modern direct selling includes sales made through the party plan, one-on-one demonstrations, and other personal contact arrangements as well as internet sales.[2] A textbook definition is: "The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs.

These businesses should be incorporated and can be found listed in the state in which they are located. You may also check the Better Business Bureau to see if there have been any complaints. However, know some may not be members of the BBB.  Knowing that this form of business is legal, why does it have a stigma to it?

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I have friends and colleagues alike that do not like direct sales. I'm okay with that. However, when it is almost to the point of demonizing it, that's when I call for the need for parties to truly investigate where they get their opinions formulated.

"Pyramid Scheme"

Every business model can have it's flaws. In direct sales, you hear the phrasing, "Pyramid" or "Ponzi scheme" quite a bit. This is what a Ponzi scheme is,

"a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors."

For a pyramid scheme to exist there must be financial investment that has zero (0) return in the form of product or service.   There are no goods and services involved. Financial investment is being shuffled, giving the looks of legitimacy.  One the best examples can be seen with Madoff Investment Securities LLC, a "respectable" investment firm, that was able to fool the likes of the Securities Exchange Commission for YEARS - https://en.wikipedia.org/wiki/Madoff_investment_scandal.
Does this mean all investment firms are bad? Should everyone boycott NYSE and NASDAQ alike?

With that said, I will present something that seems to get overlooked a bit from those in the fitness/sports industry,

Advocare Texas Kickoff (feat. Houston & OU - Sep 3, 2016)
Advocare Classic (feat. Alabama & USC - Sep 3, 2016)
Advocare Texas Bowl (Dec 28, 2016)
Advocare Rehydrate - Official Sports Drink of Major League Soccer (MLS)
Amway Center - Event Arena, Home of the Orlando Magic
Amway Coaches Poll / USA TODAY Sports
Herbalife - Sponsor of MLS LA Galaxy
LifeVantage - Sponsor of MLS Real Salt Lake

Advocare, Amway, Herbalife, and LifeVantage are all direct sales companies. These perceived, "pyramid schemes" seemed to have "manipulated" the cities of Dallas, Houston, Los Angeles, Orlando, Salt Lake City, Major League Soccer (MLS), along with 2 of it's franchises, Gannet Company Inc (owner of USA TODAY), the NBA, NCAA, ESPN, the Universities of Alabama, Houston, Oklahoma, and Southern California, along with the Universities that have participated in these events in the past (including the formerly branded Advocare V100 Independence Bowl in Shreveport, Louisiana), the Dallas Cowboys Organization, AT&T Stadium, and Texas Bowl Committee. Let us sit back and think about that for a moment.

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Direct sales operates through independently contracted (W-9) individuals that receive commissions and bonuses through various measures of sales performance and sales training. The quality control in which this is conducted is where it receives the bad reputation. Every business and business model within this industry does not operate the same way. Compliance is always an issue.

Case in point, the following disclaimers below are supposed to be used in this particular industry. An overzealous individual or one with little to no proper training (again quality control), may create a major misstep which contributes to the industry's stigma. These various disclaimers should be utilized and followed in this industry in order to stay in compliance with regulations established by the government. When they are not, this is when you usually start hearing Pyramid statements.

  1. Dietary Supplement Health & Education Act (DSHEA) Disclaimer
    The statements have not been evaluated by the Food and Drug Administration.  Products are not intended to diagnose, treat, cure or prevent any disease.
  2. Safety Disclaimer
    Note: If you are pregnant, nursing, diabetic, on medication, have a medical condition, or are beginning a weight control program, consult your physician before using products or making any other dietary changes. Discontinue use if adverse events occur.
  3. Information for General Purposes Only
    Information provided on all publications, packaging, and labels is for general purposes only and designed to help you make informed decisions about your health. It is not intended to substitute advice from your physician or health-care professional.
  4. Earnings Disclaimer
    Earning levels that appear are examples and should not be construed as typical or average. Income level achievements are dependent upon the individual's business skills, personal ambition, time, commitment, activity and demographic factors.

Stigma Contributor: High Pressure Sales Quotas 

Additionally, when people say they don't like being sold, I believe that translates into being pressured to buy.  People may not like being "sold", aka, "pressured" but they do like to buy something they like or want :-).  Going back to different business models in this industry, certain compensation models may be based on quotas. If a quota is not made, the potential earning for that month may have to be made up by the individual business purchasing more inventory or potentially pressuring people into making more purchases.   There is a theme here ---- quality training, aka, quality control and the type of compensation plan should be thoroughly investigated before investing in it.

Investigate Before Casting Judgement 

To broadly paint a picture of an entire sector of business (which is essentially franchising without the high franchise fees and qualifying vetting system) as "bad", is almost to the point of recklessness. Business ownership is not for everyone. Understandably (for reasons stated earlier), some individuals may not understand they are going into business when they start. This means the possibility of overhead, inventory, distribution, sales tax reporting, all that fun stuff business owners love (yes, that is sarcasm).

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Entrepreneurship is NOT for Everyone

Furthermore, some business models are NOT suitable to certain personality types. Unless you are running an automated online system or have capital to hire personable personalities (spokesperson), introverts do not last long (unless they eventually open up). For those that are not wanting the entire burden of business operations, there is a name for that, employee. That distinction is NOT a bad thing. That is simply another way of making revenue which may allow an individual to feel more secure. That should not be looked down upon either.

The point of this narrative is to request those that do not like or understand this kind of industry, take the time to review and truly investigate before broadly branding an entire form of revenue stream. One bad apple does not spoil the bunch.

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Do I Do Direct Sales? 

If you are wondering if I participate in this form of revenue stream, yes I do.  It is not a something for nothing business model. You have to consistently WORK at it, like you would any other entrepreneurial effort. I did choose a business model that does NOT require sales inventory, distribution, and isn't attached to high pressure quotas for consistent income. Are there financial incentives to accomplish tasks at a certain time? Yes, there is. However, I will say that is a bonus to what is already a generous compensation plan. This allows an individual to work slow if they like and not have to be skilled in sales in the beginning. Like any other skill set, you become better the more you practice.  The payoff comes with the consistent effort. No work, no pay. It is that simple. Those are my 2 cents here at the end. If you decide to enter this industry, do so knowing you're going into business and should do some preparation prior to entering it....like you would anything else.

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