I recently read about a new earnings report for direct selling, can you tell me more about this?

News stories have included inaccurate direct selling earnings information, erroneously inferring that specific earnings data was published in a report by the Federal Trade Commission ("FTC").
 
The FTC has never published any such “report” of this nature and there are no government reports of any sort which address the issue of how much money direct sellers across the business channel earn. The erroneous, non-existent “report” was actually a comment submitted by a critic of the direct selling industry and does not reflect any FTC position.  The comment was submitted to the FTC as part of a public rulemaking on the business opportunity rule and was based on a limited and self-selected review of data.

Click here to read more.
 

What do credible surveys say about how individuals benefit from direct selling?

Direct selling provides people from all walks of life with an opportunity to earn supplemental income by selling products and services they love, while enjoying flexibility, mentoring, and social interaction. According to DSA’s 2019 National Salesforce Study, 80% of those involved rated their direct selling experience as excellent, very good, or good, and 73% of direct sellers would recommend direct selling to others.1  The majority of the 18.6 million people involved in direct selling in the U.S. spend less than 30 hours a week on direct selling activities, and 4.1 million people involved in direct selling are discount buyers.2
 
DSA’s  surveys, conducted by notable outside research firms like Nathan Associates and Artemis Strategy Group, and other studies by noted academics, indicate the vast majority of those involved with direct selling derive some  valued benefit from their direct selling, e.g., modest to significant supplemental income, the ability to purchase product at a discount for their personal use, development of business and personal skills, recognition for their efforts, the ability to  attend  incentive meetings, sharing  the benefits of products they strongly believe in with others, and/or otherwise enjoying  the camaraderie of getting together in a home party or other person to person interaction.1
 
Dr. Anne Coughlan of Northwestern University, who conducted one such study, noted:
 
The first thing that I will say that even surprised us was the importance of non-financial aspects and rewards from being a direct selling distributor… whether you are valued by the firm, whether you are supported and valued by your sponsor, whether you take joy in social aspects of the business, and whether you enjoy sharing products you love with other people.  These have nothing to do with the income you make, and yet they are persistently important in the reasons that people choose to be a direct selling distributor…3
 
Click here for more information on this study and to hear more insights from Dr. Coughlan about her research.

1 2019 National Salesforce Study
2 2018 Growth & Outlook Survey
3 DSEF Fellow, Dr. Anne Coughlan, Polk Brothers Chair in Retailing, Professor of Marketing, Kellogg School of Management, Northwestern University

 

What types of products can be purchased through the direct sales channel?

The direct selling product and service range is as diverse as all of retail. Legal services, insurance, nutritionals, cookware and energy — these are only a few of the many products and services marketed through the direct sales channel.

How many direct selling companies are there?

It is difficult to estimate the number of direct selling companies operating at any given time. This is a result of several factors. First, most states do not require direct selling companies to register as such. Therefore, no exhaustive list exists. Second, as with any business, many direct selling companies do not thrive in the direct selling market and have a relatively short life span. In fact, many companies may even come and go before they could even be “counted.” However, DSA estimates that the sales made by its members account for more than 80 percent of all direct sales in the United States and there are approximately 1,100 direct selling companies in business in the U.S. in any given year.

Are all direct selling companies in the United States members of Direct Selling Association?

While our member companies maintain a base of independent salespeople that represents more than 80% of the direct selling industry in the United States, DSA does not represent every company. When a company commits to DSA membership, it commits to maintaining the highest ethical standards and consumer protections by adhering to the rigorous standards and policies set forth in our Code of Ethics. Not every direct selling company decides to make the commitments necessary to comply with the Code.
What benefits does DSA provide a direct seller of a member company?
A direct seller with a DSA member company will receive the benefit of the company’s pledge to abide by the DSA Code of Ethics. The direct seller is encouraged to share the affiliation of the DSA member company with all their customers as DSA membership is a symbol of the highest possible business ethics. A direct seller can expect the company to:

  • Provide legal and accurate information on the company’s pay structure, products and sales methods.
  • Refrain from any unlawful or unethical recruiting practice and exorbitant entrance or training fees.
  • Base all actual and potential sales and earnings claims on documented facts.
  • Abstain from encouraging the purchase of more inventory than can be sold in a reasonable amount of time.
  • Repurchase 90% of the marketable inventory and sales aids purchased within the past 12 months if the direct seller decides to leave the business.
  • Explain the repurchase option in writing.

Additionally, the individual may be eligible to participate in DSA’s health and liability insurance plans for direct sellers of participating DSA member companies. If you are a direct seller at a DSA member company, please contact your company for information about participating in either of these programs.

What are the responsibilities of a DSA member company direct seller?

A direct seller of a DSA member company is responsible for upholding the same high standards of business ethics the company has pledged to uphold, which are embodied in the DSA Code of Ethics. A direct seller must always:

  • Tell potential customers who they are, why they are approaching them and what products they are selling.
  • Explain how to return a product or cancel an order.
  • Respect the privacy of customers by calling at a time that is convenient.
  • Promptly end a demonstration or presentation at the request of the customer.
  • Provide accurate and truthful information regarding the price, quality, quantity, performance, and availability of the product or service.
  • Offer a written receipt in language the customers can understand.
  • Provide contact information, as well as the contact information of the company represented.
  • Offer a complete description of any warranty or guarantee.

Does the Code of Ethics address if a representative with another company is trying to recruit a direct seller from a different company?

Proselyting, the attempt to convert one or more salesforce members from one company to another is not addressed in the Code of Ethics, but the legality of such activities is a subject of frequent and intense discussion by industry members.

What if a DSA member company or direct seller violated the Code of Ethics?

If at any time a DSA member company direct seller or customer feels that the company has violated one or more provisions of the Code of Ethics, the incident should be reported to DSA’s independent Code Administrator. The Code Administrator will review the incident in question and prescribe a remedy based on his findings. DSA member companies are required to abide by all rulings made by the Code Administrator to maintain membership in the association.

What is the difference between direct selling and multilevel marketing?

Direct selling encompasses a variety of distribution methods; multilevel marketing is one type of distribution and compensation method. Multi-level marketing is a type of direct selling recognized by the Federal Trade Commission and used by hundreds of companies, including some of world’s best-known consumer brands. It is not synonymous with pyramid schemes, illegal business operations, unless the multi-level marketing company compensates members of its salesforce primarily for recruiting new participants, instead of for selling products and services to customers.

What is a pyramid scheme?

By definition, all pyramid schemes are illegal business operations seeking to defraud consumers. Pyramid schemes harm consumers by manipulating their salesforce to enrich company leadership at the expense of individual participants. This is accomplished by compensating members of the salesforce primarily for recruiting new participants, instead of for selling products and services to customers or purchasing them for personal use.

DSA's Code of Ethics explicitly prohibits pyramid schemes as a condition of membership and as a condition of continuation of membership. Before a direct selling company is accepted into the Association, the company’s business plans, marketing plans, websites and other assets are reviewed and evaluated, as are records from consumer protection agencies such as the Better Business Bureau and state attorney general’s office. DSA takes compliance with the Code of Ethics and the consumer protections it promotes very seriously; if a member is found to be out of compliance in any area, we reserve the right to take disciplinary action up to and including expulsion. DSA and its member companies believe pyramid schemes should be prosecuted to the fullest extent of the law.