What is Direct Selling
Introduction
Direct selling is a dynamic, vibrant, rapidly expanding channel of distribution for the marketing of products and services directly to consumers. The purpose of this paper is to describe direct selling and the benefits that it brings to the marketplace.
Founded in 1978, the WFDSA is a non-governmental, voluntary organization representing the direct selling industry globally as a federation of national Direct Selling Associations (DSA's). There are presently over 50 national DSA's represented in its membership, and in 1997 it is estimated that worldwide retail sales by its members accounted for more than $80 billion US through the activities of more than 25 million independent salespersons.
The World Federation and its national DSA's have always understood the necessity for ethical conduct in the marketplace and as such the WFDSA has developed a World Codes of Conduct for Direct Selling which all national DSA's have approved and implemented in their national codes. All direct selling companies agree to be bound by these codes as a condition of membership in a national DSA.
Direct Selling
Direct selling can best be described as the marketing of products and services directly to consumers in a face to face manner, generally in their homes or the homes of others, at their workplace and other places away from permanent retail locations. Direct sales typically occur through explanation or personal demonstration by an independent direct salesperson. These salespersons are commonly referred to as direct sellers.
The strength of direct selling lies in its tradition of independence, service to consumers, and commitment to entrepreneurial growth in the free market system. Direct selling provides accessible business opportunities to people looking for alternative sources of income, and whose entry is generally not restricted by gender, age, education, or previous experience. It should be noted that around the world a substantial majority of direct sellers are women, and most work in their direct selling businesses on a part-time basis. A very small percentage of direct sellers are employees of the companies whose products they sell.
Independent direct sellers are those individuals engaged on their own behalf, or on behalf of a direct selling company, selling products and services through personal sales contacts, and are commonly referred to in some jurisdictions as independent contractors. Essentially, this means that these independent salespersons are not employed by the company whose products they distribute, but are independent business persons operating their own businesses. These independent direct sellers have an opportunity to earn profits from their business, and also accept the responsibility for the risks associated with operating a business.
The products sold by direct sellers are as diverse as the people themselves and include: cosmetics and skin care products; laundry and personal care items; vacuum cleaners and home appliances; household specialties; household cleaning products; food and nutrition products; toys, books and educational products; and clothing, jewelry and fashion accessories; just to mention a few.
Generally, these products are sold in the context of group presentations (Party Plan), or on a person to person basis (one-to-one). In a Party Plan approach, the direct salesperson demonstrates products to a group of guests, invited by a host in whose home or other location the direct selling demonstration takes place. By contrast, other direct sellers will often explain and demonstrate the products they offer to consumers in the comfort of the consumers' homes, at a time which is convenient for them.
Direct selling provides important benefits to individuals who desire an opportunity to earn an income and build a business of their own; to consumers who enjoy an alternative to shopping centers, department stores or the like; and to the consumer products market. It offers an alternative to traditional employment for those who desire a flexible income earning opportunity to supplement their household income, or whose responsibilities or circumstances do not allow for regular part-time or full time employment. In many cases, direct selling opportunities develop into a fulfilling career for those who achieve success and choose to pursue their independent direct selling business on a full time basis.
The cost for an individual to start an independent direct selling business is typically very low. Usually, a modestly priced sales kit is all that is required for one to get started, and there is little or no required inventory or other cash commitments to begin. This stands in sharp contrast to franchise and other business investment opportunities which may require substantial expenditures and expose the investor to a significant risk of loss.
Consumers benefit from direct selling because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees. Moreover, direct selling provides a channel of distribution for companies with innovative or distinctive products not readily available in traditional retail stores, or who cannot afford to compete with the enormous advertising and promotion costs associated with gaining space on retail shelves. Direct selling enhances the retail distribution infrastructure of the economy, and serves consumers with a convenient source of quality products.
An important component of the Direct Selling industry is multilevel marketing. It is also referred to as network marketing, structure marketing or multilevel direct selling, and has proven over many years to be a highly successful and effective method of compensating direct sellers for the marketing and distribution of products and services directly to consumers.
Direct selling should not be confused with terms such as direct marketing or distance selling which may be described as an interactive system of marketing that uses one or more advertising media to effect a measurable response and/or transaction at any location, with this activity stored on a database. Some commonly known types of direct marketing and distance selling techniques are telemarketing, direct mail, and direct response.
Although direct selling organizations occasionally use some direct marketing or distance selling techniques and technology to enhance their businesses, the primary difference between the two methods of marketing is the face to face, or personal presentation that is always an aspect of the direct selling relationship.
Codes of Conduct
The World Federation and its national DSA's recognize that the freedom of enterprise carries with it the obligation to consider not only one's personal well-being, but also that of others, and the industry as a whole. The WFDSA has always supported the necessity for ethical conduct in the marketplace, and in 1994 approved a World Codes of Conduct for Direct Selling which all national DSA's are required to implement in their national codes. Further, direct selling companies must agree to be bound by these codes as a condition of membership in a national DSA.
The World Codes of Conduct for Direct Selling provide for the satisfaction and protection of consumers; the protection of direct sellers; the promotion of fair competition within the framework of free enterprise; and the ethical representation of the industry's earning opportunity. The Codes are a measure of self-regulation by the direct selling industry. They are not laws, but compliance with the Codes often requires a level of ethical behaviour that exceeds national legal requirements.
The primary responsibility for the observance of the Codes rests with each direct selling company. It is, however, the responsibility of each national DSA to appoint an independent individual or body, as Code Administrator, to monitor observance of the Codes by member companies. In the event of a breach of the Codes, the Code Administrator shall settle any unresolved complaint.
The Direct Selling industry is a vital, growing part of the small business sector. It has a remarkable capacity to provide a wide variety of earning opportunities to millions of individuals around the world who may be seeking career alternatives; flexibility of working hours; to transition from dependence on social assistance programs; or to operate a successful small business in which little or no investment is required. The World Code is one means by which the Direct Selling industry works to ensure that it continues to make a positive contribution to national growth.
WFDSA Position
The WFDSA and the national Direct Selling Associations have demonstrated through the World Codes of Conduct their members' commitment to fair and ethical practices in the marketplace.
The WFDSA opposes any legislation or regulations that are onerous, or adversely affect the ability of legitimate independent direct sellers to provide quality products and services to consumers, or that otherwise unnecessarily restrict the earning opportunities of these individuals. The WFDSA believes a legal and regulatory environment which allows for small enterprises to flourish is essential to bring the benefits of all types of direct selling to consumers and to the marketplace.
The WFDSA strongly supports legislation/regulations consistent with the WFDSA Codes of Conduct designed to protect consumers from the activities of unscrupulous or fraudulent operators.
