The Ups and Downs of Direct Selling
I have some bad news: Most of you will not make money selling candles, jewelry, purses or any other product from a direct-selling company. I’ll explain more below. But first, here’s why this is a military business topic and suitable for this column. In 2013, 16.8 million people were involved in direct selling in the U.S., according to the Direct Selling Association.
There aren’t hard numbers about what percentage of those connected to the military are direct sellers, but I think the percentage is high. The evidence is all over town and my Facebook feed.
It makes sense that military spouses would be attracted to a portable career. And who doesn’t love to shop? But what makes multilevel marketing so bright and shiny shouldn’t camouflage the reality.
If I’m a direct sales skeptic, Robert FitzPatrick is an agnostic. He literally wrote the cautionary tale about multilevel marketing and now devotes his time to warning others.
“These one-to-one companies are the most harmful because less than 1 percent of sellers under contract ever make a profit,” he said.
FitzPatrick is the author of “False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes.” He lives in Charlotte but testifies in related court cases across the country, advises foreign governments and runs a website, pyramidschemealert.org.
I told FitzPatrick military spouses are pretty savvy and probably not involved in companies that are true scams. In that case, he said, the “harm is lessened,” but that direct selling still isn’t all it’s cracked up to be. In our interview, FitzPatrick threw out number after figure after number about how money in multilevel marketing doesn’t add up.
But it was his simplest point that struck me – saturation. “It’s not about the product,” he repeated. He says to make any money, sellers must recruit other sellers. And that’s where the pyramid starts to crumble.
“How many salespeople can there be? Every new salesperson that you get cuts into your market,” he said. The median income of a direct seller is $2,400 per year, according to an interview in Forbes magazine with a spokeswoman for the Direct Selling Association. That sounded low to me, but FitzPatrick thinks this figure is actually inflated.
And keep in mind, $2,400 is not an average. It’s the median – half make more and half make less.Paul Skowronek is a vice president with DSA, the trade organization for direct selling companies. He says it’s important to remember most sellers work part time, some less than 10 hours a week.
And he agrees that military spouses would find the sales model attractive.
“I would not be surprised if it was growing at a quicker pace in that community,” he said.
The member companies of the Direct Selling Association – hundreds of them – commit to a lengthy code of ethics.
Military spouse Ginna Van Zant says she’ll beat the $2,400 median this year. She started selling facial products with Rodan + Fields in March and works about 10 hours a week.
Van Zant disagrees with Robert FitzPatrick’s claim that it’s not about the product. Even with eight people selling under her, she says she still makes most of her money off the products she sells.
But even more than the product, Van Zant says, direct selling is about the company. She tried a popular jewelry direct sales company, one with monthly quotas and parties to sell products.
“For companies that are based on parties, I do think that it’s tricky for a military spouse because you leave your network and come to a new installation and have to make new friends and build your business,” she said.
So she did some research and found another category of home-based business – social selling. Van Zant builds her business online, mainly on Facebook. She says only a quarter of her customers are local, so her location doesn’t dictate her market.
But Van Zant does agree that direct selling is not easy money. “Some people join them and think that money is just going to fall out of the sky, and that’s just not reality.” She says to make money, direct selling takes time, energy and work.
In my unscientific poll of friends who sell one-to-one. I was surprised that most enjoyed it. Most weren’t disappointed in the money they made, just in the amount of time it took to make that money.
So maybe it is all about the company. Ginna Van Zant says before signing up, ask about quotas, caps and territories. And try to find a company with fewer than 100,000 sellers. That’s considered a ground-floor opportunity.
“I think that they are like any other profession in the sense that you have to find the one that is right for you.”
This article was published in Elite Magazine, part of the Fayetteville Observer.
The Fayetteville Observer is North Carolina’s oldest newspaper. It traces its roots to the establishment of the Carolina Observer in 1816.