Direct Sales vs MLM – what is the difference?

Direct sales vs mlm - what is the difference

The present-day reality is impossible without marketing. People would like to purchase goods from different channels. That is why sales strategies continue to transform and be improved. The main direction of today’s marketing is direct sales. The number of companies that use this business model increases day by day. One of the variations of direct sales is multilevel marketing. Let’s take a closer look at each business model separately (direct sales vs MLM) to see the differences and determine their strong and weak spots.

What Are Direct Sales?

Direct sales are about independent representatives who sell goods of the company directly to the consumer. This business model is often called door-to-door sales because the distributors do not require intermediaries to promote sales. Direct sales can take place through Internet (online channels) or personally by independent contractors. The distributors who use the direct sales business model can sell goods right from their homes without any fixed retail location.

According to the statistics provided in the Direct Selling Association report, direct selling performed $32.5 billion in retail sales in 2019. About 36.9 million American customers prefer purchasing in direct sales companies. These numbers are expected to grow in 2021. It means that business representatives see the true benefits of door-to-door sales and continue to rank among direct sales companies.

Direct Sales: Pros & Cons

It is worth noting that direct sales are suitable for newcomers without any special education and training. The absence of an entry barrier is not the only advantage of this business model. Among other benefits of direct sales are the following aspects:

  • Fast start — it is affordable to get into direct sales because you do not need to invest big sums of money at the very beginning.
  • Most direct sales companies offer a starter kit of products to distributors in the early stage. These sets can be purchased at $25-50 only — investments if you are ready to become an independent selling representative of the company.
  • Personal touch with customers — your potential audience is always glad to receive your attention personally. Personal demonstration of goods is one more benefit of direct sales.
  • Digital sales — this business model online-friendly, so direct salesmen can handle the sales on the Internet without any difficulties. That is why many women on maternity leave prefer direct sales for the opportunity to work from home and distribute products online.
  • Computer-aided sales — it is possible to use sales automation and acceleration software to simplify routine tasks and boost sales. For example, salesmen can use ready-to-use recruiting templates for faster mailing with candidates.
  • No strict work schedule — this is the way to get independence and a flexible work schedule. The optimal solution for most of the people who study have children or other family responsibilities.

To sum up, direct sales are not lacking in advantages for modern salesmen. Speaking about weak spots of the door-to-door sales business model, there is always a high risk to face selling failure and inefficiency of your efforts. But it is possible to improve your skills and promote new direct sales techniques for successful performance in this business.

What is MLM?

One of the directions of direct sales is a multilevel marketing (MLM). But it is not the same business model. It is worth noting that MLM requires the recruitment of distributors that will handle sales. An example of a really inspiring multilevel marketing company is Amway with its progress story and opportunities for MLM representatives. At the same time, some MLM-based projects are not so successful (for instance, Herbalife is far from genius and profitable multilevel marketing scheme with its millions-strong damages against distributors).

The distributor (recruiter) will gain commission from each successful selling result of the involved salesmen. That is why the remarkable feature of MLM is active recruitment. A large portion of general income is generated by the distributors involved in multilevel marketing.

It is worth noting that most MLM participants manage to get promised dividends. The most successful players in multilevel marketing are those who join this business scheme at the starting stage of the company’s development (the earlier you join the company; the more chances to make good money in MLM). Take a look at other benefits of the MLM business model:

  • Low operating costs – multilevel marketing does not require investments and infrastructure development;
  • Low risks – in comparison with traditional business, the MLM model is not risky. Even newcomers can run the business without concerning about losses;
  • High potential income – you can generate as much money as you can. The more salesmen you recruit, the higher income you get.
  • Almost no limits for MLM businessmen;
  • Portability & freedom – as the direct sales model, multilevel marketing offers a flexible working schedule, financial freedom, and well-managed security aspect;

Nevertheless, some countries do not permit multilevel marketing because most of the MLM companies work according to the pyramid schemes (the size of the recruiter’s commissions depends on the level of recruits).

direct sales vs mlm - here is the differece

What is the Difference Between Direct Sales and MLM?

Multilevel marketing offers sales representatives to earn money only with help of the commission got out without the promotion of any goods. The compensation plan is also different in direct sales and MLM business models. The direct sales companies provide distributors with the opportunity to get returns on the goods they sold. The multilevel marketing companies allow salespeople to earn generous commissions on the sales of their recruited representatives.

The reality of MLM projects is about fast reactions and operative activities with efficient recruitment campaigns. It is possible to recruit well and do not sell anything to generate an impressive income. This is one of the notable differences of multilevel marketing in comparison with direct sales.

Direct Sales vs MLM

Both business models provide salesmen the capability to get revenue. In comparison with MLM, direct sales have no print of illegal marketing schemes. Multilevel marketing often operates according to the pyramid scheme that is forbidden in different countries. Direct sales are more about door-to-door selling when MLM requires representative recruitment. At the same time, both business models offer distributors to try their hand in network marketing.

Summary

To simplify routing tasks and boost the company’s selling revenue, there is a special-purpose sale automation and acceleration software developed by the dedicated Cotano team. Both direct sales companies and representatives of the multilevel marketing business model can benefit from the Cotano digital tool that includes communication automation, data analysis, product demand prediction, and many more. Today you can boost your business with the exceptional data-driven approach to sales with Cotano computer-aided features.