What is Direct Selling?
Direct selling is a sale to a consumer a product or service. This eliminates any middle men – wholesalers, retailers or advertisers. This means that there is a face to face transaction between two representatives: the supplier or manufacturer and the consumer. Usually, direct selling is in the form of door-to-door selling or where the seller goes to homes to look for potential buyers. In this case, there is no need for an actual store or permanent business. If the customers don’t come then let the sellers come.
Direct Selling vs. Conventional Distribution Method
In the usual distribution method, the products run through a lot of middlemen which also makes way for a higher price. The product starts with the manufacturer to the marketing company to the agency to the regional distributor to the wholesaler to the retailer and then to the consumer. Through every stage the product goes through, there is a corresponding added price. But in direct selling, the product goes through a shorter process. First, it goes through the manufacturer to the direct selling company to the distributor then to the consumer. The shorter the process is, the lower the price.
What are the forms of Direct Selling?
Although some direct sellers work for a company that provides direct sales, most of them usually are self-employed and are independent business operators who work on their own pace at their own choice. Direct Selling comes in three forms: door-to- door or simple commission plan, the hostess or party plan and multi-level marketing or distributor network plan.
Door to Door / Simple Commission Plan
In this type of direct selling, the agent or the dealer avails a discount from the direct sale company. The agent then knocks on any establishment or any home where potential customers are lurking. In this case, the dealer gains profit by selling the product at its suggested retail price.
You may be thinking, why shouldn’t the consumer just go to the company and get it there at a discounted price? Direct selling companies do not make transactions with non-dealers and non-agents. They give the discount to only authorized personnel. You can’t get the product at lower price unless you’re a dealer. Through this, consumers are given no choice but purchase from dealers.
The Hostess or Party Plan
With this type of direct selling, the dealer chooses a friend who shall act as a hostess and invite friends and acquaintances over for a demonstration of how to use the product being sold. Through this, the dealer may gain a lot of buyers in one sitting. The dealer may also reward the hostess with freebies or a bit of commission for inviting the guests and the use of his or her home.
Multi-level Marketing / Distributor Network Plan
In this type of direct selling, the dealer forms a network or a chain of transactions. As a dealer, he gets a discounted price from the direct selling company. Before becoming a direct distributor, he must first seek help from an existing distributor. In time, he will earn incentives and higher discounts. Through this, he may also hire his own dealers and distributors who he will give a discounted price. These hired men may in turn hire their own. Others will sell to consumers. This is also a form of direct selling since there is an absence of any retail store or permanent establishment.