Do you want to start a new venture? However, do not have the capital for it, then direct sales, as well as multi-level marketing, is the best option for you. No doubt, both these business models work on parallel lines; they differ in product type, organizational structure, costs etc.
While the product range of direct sales companies, mainly includes a range of durable products, products that have a substantial cost and generally have a single sale. In contrast, multilevel marketing companies generally offer consumable products, which have a lower cost and can be sold repeatedly.
Direct selling generally operates with a centralized manufacturer who manufactures the product, the business then contracts out the sales jobs to people who then go about selling the product door-to-door. They generally receive commissions on the volume of sales done by them.
The model followed by multi-level marketing companies are almost similar but not without a twist. In this model, the salesperson can appoint other people into the company, which also forms their downline.
This downline becomes the selling team as well as the income source for the recruiter. In multilevel marketing, the recruiter becomes eligible to collect a percentage of revenue from the people in the downline and as long as the members of the downline continue to sell and recruit more people the entire chain will earn income in addition to revenue from their own sales.
The startup costs can differ from company to company, however multilevel marketing companies have low startup costs. The low costs of products contribute to the low investment costs at the initial stages.
As people are constantly being recruited, no inventory needs to be maintained, however, in direct sales, as the sellers need to maintain a stock of their products, the level of investment at the initial stages automatically increases.
Their sale territories, time and physical availability often bind direct salespeople. The most successful direct salespeople only earn money on their personal sales.
Growing a sales force of other salespeople is generally reserved for sales managers. However, in multilevel marketing distributors are customers who also recruit more distributors, they are generally not bound by any territories.
A multilevel marketing often is compared to pyramid frauds, as the payment structure is almost similar but genuine and legitimate Multilevel marketing programs set a limit on the level of up lines that can collect an income.
The difference between direct sales and multi-level-marketing is very few, but both of them are part of selling a product to earn an income.