Doing the Basics of a Traditional Direct Selling Business

What are the basics of a traditional direct selling business? Well, first of all, we need to understand that the traditional direct selling business is not a new invention, for it is just selling something directly to your prospective customer. The contrary concept of it is the invention of stores, which I think followed long after the advent of direct selling that was as old as the barter system in the olden times. Just like the shop, which is the real mother of the mall business, MLM (e.g. Amway), the more modern fork of direct selling, was just a new player (less than a hundred years old) in the industry.

Types of Direct Selling

Study shows that there are many types of direct selling. We have the traditional, the multi-level marketing (MLM), the binary system, the unilevel [have you heard about 'monoline'?], among others. They differ in compensation plan and the concept of leveraging.

Read: The Pareto Principle in Direct Selling

Avon Cosmetics, Inc. (although rumored to be in financial distress these few years!)is one of the leaders of this industry being already more than 125 years old in the market. The age-old and basic direct selling concept, at the vantage point of a company-size operation, as used by Avon, et. al., requires two parts, viz.: A) the main distributor of products we typically call as the Company, and B) the people (also known as Dealers or Agents) directly selling the products to the customers. Let us call this type as Traditional Direct Selling (TDS), where dealers earn commissions or rebates out of product movement. No commission, of course, without closing a sale, and no bonus payment over the sales performance of recruits. (Note that Avon has just migrated from TDS to semi-MLM!)

The Traditional or Pure Direct Selling (TDS) Concept

In TDS, the life of the company doing it depends so much on add-ons such as free travels, car incentives, and most importantly, the recognition of top sellers during business gatherings. The Avon Concept is indeed worth considering given its track record of being the authority in TDS.

Firstly, it extends a 30-day credit term to its dealers. Isn’t it a risky business-—extending credit to people you don’t know? Well, to borrow from a certain bank’s slogan: “we find ways.” If credit extension program is bad, then the credit card industry shouldn’t have succeeded.

Or, let’s look around; observe those businesses occupying major parts of commercial centers such as pawnshops, lending institutions, car centers, appliance corporations, bank-loan operations. All of them are relying on this procedure of activity known as credit extension.

If you intend to start your own traditional direct selling business as the middle man (let’s give it an acronym of “Mid-Man” for the purpose of our discussion) between the Main Distributor (or the Company, e.g.: Avon or Mary Kay Cosmetics) and the Agents or Dealers, you need to understand the following:

• Visibility

By it, I mean, you need to have an office (a makeshift office, a garage, for example, will do) in order to be visible to your clients. Without a meeting place and a mobile phone, then you could hardly manage your traditional direct selling business in this high tech world.

If you plan to put up your own company as a Main Distributor, then it is another kind of visibility. For there’s no substitute to the good impression. Start a well-founded company having both good office and amazing products, or don’t start it at all. Always be visibly overpowering!

I don’t mean to say though that we cannot start small-–yes we can. What’s important is that by now we have already a concept so needful indeed in starting a traditional direct selling business, and that is good exposure and visibility. I learned of a dealer who didn’t have a mobile phone. She wasn’t “visible” to her agents. Playing hide and seek, her agents left her out of frustration. Be visible or forget the business altogether and then go elsewhere.

• Recruitment

Traditional direct selling is a telling illustration of the law of supply and demand. It thrives on the market, for it provides the need of millions of people: the need to have a product to sell—and which is payable within 30 days. We need to be readers of people--not just of books--as we grow old. Yes, try to place people in an enormous imaginary box. You would find for certain that many of them have traditional direct-selling leanings in their blood. They just don't have enough money to start the business. Find these people, recruit them, offer to them your business opportunity. That is recruitment, plain and simple.

If you’re a Main Distributor (or the Company!), all you need to do is look for the right staff members who will do the task of organizing dealers. If you’re just a Mid-Man, on the other hand, you need to do recruitment activities by yourself. Now please don’t be scared: recruitment is easy and very simple. I experienced recruiting just one person as I was determined to start a Mid-Man traditional direct selling business in a particular place. This woman I recruited wasn’t a direct seller. We (my wife was with me then) just told her that if she could bring in recruits during our Orientation Meeting, we would give her one piece of umbrella per person. She brought in four middle-aged women, who, as a result, formed our core group for our business in that one particular locality.

In traditional direct selling we always emphasize, in our campaigns to be able to sell, the acronym R.I.T.A., which means Recruitment Is The Answer. I noticed that direct selling fits best in almost all kinds of culture. For example, Avon Cosmetics, Inc. becomes very successful in the U.S, in the Philippines, and in other parts of the globe.

To succeed in your traditional direct selling career, you need to bear in mind that recruitment obeys the law of averages. It means that if you approach three prospects, the chances are that only one will sign up, and the two others will not—depending of course on your batting average.

With this principle, you need not worry if your business moves on slowly at the start. Just keep on keeping on. Fishermen don’t catch every fish in the water. You cannot recruit all people to your business, even if it is not in line with direct selling.

• Meetings

So you have a handful of dealers already. I told you that we always have a pipeline of dealers because traditional direct selling answers a particular need: the need to have products to sell based on a 30-day credit term. Those who have employee-mentality cannot see what we do see and believe in, that is, to have a business of our own through direct selling. Your recruits, as well as the invitees of your recruits to your organization, need the constant pep talk and group empowerment. Motivate them by using the mode and spirit of the group. Group tone or liveliness is powerful a tool in encouraging dealers to do their best. It is always one of the needs of man’s ego and sense of balance to be part of a group that is endorsing his hopes and aspirations. We all know that everybody is hungry for recognition. Group meetings boost the ego. In traditional direct selling, the holding of regular assemblies is second to none in terms of motivating the dealers.

Read: How to start your own direct selling business?

• Incentive Programs

One great management principle is the giving of rewards to dealers for a certain performance. “Reward performance” is the essence of traditional direct selling. While cash business is spending around 30% of its earnings in ads, traditional direct selling, on the other hand, focuses on giveaways and promotions. People work for add-ons, for gifts! Many tend to despise direct sellers’ tendency to strive for just a mere gift, instead of striving for true stability and the accumulation of some residual income as promised by most MLM networkers. All I can say is that traditional direct sellers are a different breed of people: they are the today-mentality people. That is why 99% of them are women—consistent with scientific findings that women don’t have good navigational acumen—they can hardly qualify as pilots or as chess players. God created Eve as helpmate of Adam, and that I think explains why—without offense to the gifted and brilliant women in our midst.

Direct sellers are gifts-weak: give to them what they want—-incentive programs!

• Due-date System



Traditional direct selling is mostly credit-extension business. If it is not, then, it is another form of direct selling. I am not prepared to discuss it this time. For now, I want to stress the value of the due-date system as part of the TDS platform. It is referred to a certain fixed schedule weekly where dealers come to pay their accounts. I mean weekly due date, or once a week and not the daily schedule of remitting collection. Dealer’s daily payment is more than welcome, for collection is the lifeblood of any form of business. What I am talking about is the fixed schedule of the due date. For example, a purchase that’s made from day 1 to 7, its due date will have to be set on the 4th day of the following month. You design your own due date system. My suggestion is this one: from day 8 to 15, due date schedule would be on the 12th day, 16-22, 20th day, 23 to end of the month, 28th—of the following month.

The purpose of a once-a-week due date system is for the effective management of the collection aspect of the business operations. One woman distributed to her neighbors her products without due date or schedule of the collection. After 30 days, she started collecting, but to her surprise, none of her customers really cared about the transaction. Why? They simply didn’t know anything about the due date.

• Credit Line

If we were to allude credit extension as the right leg of a direct selling corporation, then credit line is its left leg—the other most important part of the business to make the company stand. “Out of debt–out of danger” is the slogan of millions of people. Businessmen are risk-takers. Hence, only very few belong to their class. Credit extension is risky business, and the only key we need to use in the opening of its treasures is Credit Line or Limit. How to give a credit limit to a dealer-applicant you don’t know who? TDS relies on what it calls “4Cs of Credit,” which are Character, Capital, Capacity, and Condition. Before absorbing an applicant, Mid-Man should conduct a C.I. (Credit Investigation) first. I learned of someone who extended credit to a man of whose family name and address she didn’t know. You know better what did happen to such folly! (No navigational gift?)

• Direct Selling Reinvented

Around 58 years ago, direct selling (TDS) was reinvented by Amway, GNLD, among others who pioneered multi-level marketing (MLM). I purchased a book on this subject; it told me that around 70% of products in Japan were sold via multi-level marketing. The concept is simple: you’ll earn a bonus out of the production of your downline-recruits. Hence, multi-level network business.

Avon, in the Philippines, is no longer a traditional direct selling company as it has migrated to semi-MLM. There are many businesses in this country today that are carving out a good market share via semi-MLM like Natasha, Sundance, etc.

The advent of “binary” and “unilevel” compensation plan has pushed direct selling further from what it was originally. The problem with pyramiding business is its lack of sustainability. Flight-by-night companies (the binary type!) are sprouting fast. But, personally, I won’t recommend most of them. I had been there–as a victim of this fraud. Those “binary companies” such as Zija, Kyani, among others that are not as easy to establish as compared with others are highly commendable. They are, to my mind, the face-saver of this industry that are being ruined by like companies that are nothing but scams!

For the pure MLM advocate, we recommend Atomy.

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