Opportunities in direct selling - includes information resources and tips for getting into direct selling for national companies

Nation's Business, Dec, 1993 by Jacquelyn Denalli

For women who would like to run their own businesses but don't have the resources to start from scratch or purchase a franchise, direct selling might offer an alternative.

In this form of marketing, a self-employed salesperson is the primary link between a manufacturer or service company and the ultimate consumer.

The seller usually takes orders for later delivery. Cosmetics, household supplies, jewelry, clothes, toys, and home-maintenance services are among the better-known areas of direct selling.

"Direct selling lets you be in business for yourself but not by yourself," says Neff Offen, president of the Direct Selling Association, a national trade association based in Washington, D.C.

For most product lines, the start-up costs include $50 to $95 for a distributor kit plus inventory purchases, which vary with the products. In addition, the companies provide training and support, including advertising.

The biggest challenge faced by direct sellers, Offen says, is unscrupulous operators who force distributors to load up on inventory that they may not be able to sell and require high-dollar purchases of training aids and materials.

"There are two fundamental questions you can ask to determine the difference between a legitimate direct sales company and a fraudulent pyramid scheme," Often says. "First, is there a risk of financial loss by being involved in the company? A yes answer doesn't necessarily mean something is wrong, but you should proceed carefully. Second, are the profits derived primarily from the sale of products to the ultimate consumer? If the answer is no, we say you've got a fraud and you should stay away from it."

More than 99 percent of direct sellers are independent contractors, not employees, which gives them all of the tax advantages--and responsibilities--of a small-business owner. For example, transportation and other expenses incurred in making sales are tax-deductible, but direct sellers must pay Social Security taxes and meet other legal requirements of the self-employed.

Of the 4 mi]lion direct salespeople in the United States, Often says, only 6 percent work full time, and almost 90 percent are women. Most direct sellers are supplementing family income or income from another job.

But those who focus on their direct selling as entrepreneurial ventures have the income to show for it. The Direct Selling Association says that of American women in direct sales, 147,000 are earning more than $35,000 a year; 84,000, more than $50,000; and 22,000, more than $100,000.

And, the successful sellers say, those opportunities are open without the risks of launching a business.

"If I went out and started a jewelry business, I would have to find capital, purchase inventory, and hope what I bought would sell," says Dawn Stone, an independent distributor for Lady Remington Fashion Jewelry who is based in Thomasville, Ga. "With Lady Remington, I have a major company backing me up, predicting the trends, and taking the risk."

Because direct sellers are paid on commission, their income is tied to production. Most direct-selling companies use a multilevel compensation plan, in which the distributor makes a commission on her own sales, plus overrides on the sales of distributors she recruits into the business.

Stone was making $14 an hour teaching accounting at a local college when she quit to sell Lady Remington jewelry two years ago. Today she averages $35 to $40 an hour. "As a teacher, I had to work the hours they told me to work," she says. "Now I have a choice. I can work my family's schedule around my career, and I can work my career schedule around my family."

A longtime corporate employee, Joan Brown of Orlando, Fla., is now. an independent distributor for Quorum International, a firm specializing in personal and property security devices. Brown says she is making more an hour with Quorum than she was after 32 years with a big company, 20 of them as a manager.

One obstacle Stone routinely has to overcome is the negative perception many people have of direct sales. "Sometimes people think, 'Oh, she has to sell jewelry for a living. It's so sad she doesn't have a real job,'" she says. "I had a 'real job' before, and that real job didn't do anything for me. With direct selling, there is no glass ceiling. The sky is definitely the limit."

In the past, direct selling was done primarily in the home, either door to door or at "parties." Though home demonstrations, as they are now called, are still popular, an increasing number of sales are taking place in offices and other work sites. Direct sellers are also using the telephone and mail to increase their sales volume. Often says more than 50 percent of all households make at least one purchase from a direct seller each year.

"There is an incredible familiarity with and utilization of this marketing method," he says. But, he cautions, direct selling is not an easy way to make a quick buck. "It's a wonderful opportunity, but like anything else that is worthwhile, it takes hard work."