Direct Sales: How Direct Selling Works To Generate Revenue

In Death of a Salesman, playwright Arthur Miller captured the passing of an era—an identity, even—with his doomed door-to-door salesman protagonist Willy Loman, whose dwindling sales of an unidentified product eroded his sense of self. But salespeople never died; they just adapted to the changing landscape of direct sales. 

Curious about selling products directly to customers? Here’s a guide to the basic types of direct sales. 

What are direct sales?

Direct sales involve transactions between a seller and a customer without intermediaries. This model bypasses the traditional supply chain, allowing businesses to sell products directly to consumers. To succeed in direct sales, build strong customer relationships and leverage social media for outreach and engagement.

In the past, direct sales companies had a limited scope and reach (think Tupperware hosting parties with a living room’s worth of potential buyers). Now, many kinds of companies use the direct sales model, including business-to-business (B2B) companies.

Direct sales require networking. Sales take place over the phone or email, cold calling or cold messaging potential customers, or at events or temporary pop-up stores. Sales also occur in homes, offices, or on social media. Sellers can work from almost anywhere and keep flexible hours. That makes direct sales attractive as a new career or side hustle but can also mean long work hours since you’re playing many roles: marketer, distributor, and seller.

Types of direct sales

Direct sales take place in a non-retail environment. There are three main types of direct salesbusiness models, differing based on your role (seller or recruiter) and your profit model (sales or commissions): 

Single-level sales

Also known as single-level marketing, these are one-on-one sales, from you to your customer. You’ll buy products directly from a parent company or manufacturer and resell them to your client base, keeping the difference as a profit.

Party-plan sales

These sales happen during social events or other group gatherings in customers’ homes or businesses. Like single-level sales, the profit you make is the difference between the cost of your inventory and the price received. 

With this model, there is the potential for recruitment, as guests host parties and other events. In that case, your income would come both from sales and from commissions on the sales of people you recruit.

Multi-level marketing (MLM)

Here, the focus is less on sales and more on recruiting other salespeople. Your income will come mostly from commissions earned by the sales team you recruit. MLMs are often conflated with pyramid schemes, since they’re similar in structure, but MLMs are legal and they sell a legitimate product, whereas pyramid schemes exclusively generate revenue from new recruits.

Advantages and disadvantages of direct sales

Thinking about direct sales as a model for your online brand? There are some benefits and a few potential pitfalls to consider before you launch your own business.

Advantages

Here are the advantages: 

• Total control. You can successfully run a direct salescompany with a small staff and have complete creative control of all aspects of your brand. In direct sales, you are your own marketing department, so you get to set the direction of your sales pitch.

• Opportunity for passive income. If you’re operating an MLM model, you might be able to sit back and cash in, taking percentages of the sales made by the sellers you recruit, also known as your “downline.” 

• Flexible schedule. Unlike a typical 9-to-5 job, you can create your own schedule. With no set hours and no set location, you can work anywhere, any time.

Disadvantages

Here are the disadvantages: 

• Always be closing. The drawback of having no set hours is you might end up working long days. If you sell online, you might feel tied to your computer, chasing new customers across time zones through the night.

• Long road. While direct sales are easy and quick to start, building a network can take a long time. Successfuldirect sales companies have large, loyal, trusting customerbases. These can pay off in the long run, but take many months, if not years, to cultivate.

• Pyramids. Be wary of pyramid schemes, in which money goes back to the company and not to the individual sellers. Pyramid schemes might require sellers to hit unreachable quotas or regularly purchase inventory, even when they don’t need it. If the emphasis is on recruitment rather than product sales, your directsalesbusiness might be a pyramid scheme, which is illegal.

Tips for direct sales

• Know your niche
• Make a connection
• Get social
• Keep track of your customers

When you’re ready to get your direct salesmodel started, here are a few tips to make sure you can be successful from the beginning and have best practices set up for the long run: 

Know your niche

When you’re choosing a product type, look at retail areas that already have some other direct sales companies, ensuring your customerbase is comfortable with the process of buying from a direct seller. Research other companies in your retail space, and think about what you can offer that will separate you from the crowd.

Make a connection

What makes your product unique and what makes you unique as a seller? What makes your product special? What’s your personal connection to the product you’re selling? 

Think about how your story connects with what you’re selling—how you discovered it, what it means to you personally, and why you’re passionate about sharing it with your customers. One of the benefits of direct sales is an intimate link between a customer and seller. Emphasize this personal connection to show the human side of your brand.

Get social

Focus on relationships, not sales. Use social media platforms to spread the word about your brand, incorporating live Facebook Q&A sessions and Instagram Stories. Video works great to engage your target audience and helps with product tutorials and personal engagement. 

Consider the 5:3:2 rule: For every 10 social media posts, include five relevant posts from other sources, curate three that speak about your business, and use the last two as personal posts unrelated to the product that give your brand a more human feel. 

Keep track of your customers

Monitor and analyze your customerbase. It’s crucial to know your network, keep track of who is buying from you, and continue to hone your marketing based on your findings. Make changes as you go, like A/B testing your email campaigns and changing subject lines, to see what is most effective.