This week’s article puts together a selection of questions that are frequently directed to players of the direct selling industry. These are directed either because of being less or misinformed or due purely to prejudices. I am sure many of you have come across some or all of these.
Here are my usual answers to them:
1. Do network marketing and pyramid scheme mean the same thing?
No! They might seem similar but they are very different from each other. The participants’ incomes depend upon retailing of goods and services in the network marketing model. In a pyramid scheme on the other hand, it is dependent only on the inflow of new participants.
2. What is a “Ponzi Scheme”?
In short, it is the finance industry’s pyramid scheme. Here, participants’ incomes are paid not from the profits generated through their own investments, but through the investments of newcomers. Needless to say, the system collapses shortly when there are fewer newcomers.
3. Is direct selling a sustainable business model?
I will answer this by giving some examples to direct selling companies operating at the moment, mentioning when they were established: Southwestern (1855), J.R. Watkins (1868), Vorwerk (1883), Avon (1886), Kleeneze (1923), Tupperware (1946), Shaklee (1956), Amway (1959), Mary Kay (1963), Oriflame (1967) and Natura (1969).
4. Is this channel only good for beauty products and food supplements?
Beauty, personal care and food supplements altogether is estimated to be generating more than half of the global revenue in direct selling. That being said, all categories that one can think of are making very good use of this channel: Jewelry and accessories, coffee and tea, kitchenware, phone services, financial products, books and toys, to name a few. With the incoming of more and more new categories in the developed markets, the total share of cosmetics and nutritional products is lower than the world average.
5. Is direct selling an opportunity for individuals to get rich quick?
Direct selling provides an opportunity to individuals to reach very high income levels regardless of what their educational backgrounds and work experiences may be. In economic terms, it is a micro-entrepreneurship model. However, one should not expect to achieve a very high income in a short time. Just like it is in any other business, here too, effort, sacrifice and time are required.
6. How important is being one of the first members of a network marketing organization?
There is no direct link between being one of the founding members of a field organization and high earnings. In other words, this does not guarantee a higher income. Looking from another perspective, if this was true who would want to join an organization after a while?
7. Can individuals make a career in direct selling, working for many years?
Absolutely! They can work for many years and their businesses can be inherited after they pass way. I personally know many people who have been doing direct selling for over 20 years now. This is a career!
8. Is direct selling more suitable for women?
Globally, it is estimated that 75% of direct sellers are women and 25% are men. Direct selling can be easily done on a part-time basis. And this characteristic appeals to women very much. There are many organizations where there are much more men than there are women. Being a typical micro-entrepreneurship, we cannot say direct selling is more suitable to women or men.
9. What is a compensation plan?
A compensation plan shows how a direct seller will be compensated against meeting certain criteria of success. Some of these plans are quite simple while some are really complicated. The complexity of a compensation plan does not necessarily show it is a solid one.
10. Do the advances in the digital world pose a threat to direct selling’s future?
Some thought they would. However, especially the developments in social media showed the opposite. Contrary to this belief, we see that the Internet provides very powerful tools to support the activities on the field.
Hakki Ozmorali is the Principal of WDS Consultancy, a consulting firm specialized in providing services to direct selling firms. He is also the publisher of The World of Direct Selling, global industry’s leading weekly online publication. He is an experienced professional with a strong background in direct sales. Hakki was the first corporate professional in the Turkish network marketing industry. His work experiences in direct selling include Country Manager roles at Oriflame, Herbalife and LR Health & Beauty Systems, and Regional Director, North America role at Lifestyles Global Networks.