Direct sales can be a cost-efficient way to break into business ownership with minimal start-up requirements. For this reason, you might feel a draw to this business model — and for many, it can be a something that turns into a prosperous business and fulfilling career.
It takes a fair bit of effort to get a direct sales business off the ground, but. using a sales CRM can help you overcome many of the challenges direct sellers face. Today, we’ll discuss the advantages and disadvantages of a direct selling business model and how our sales CRM can help these business types succeed.
What is direct sales?
Direct sales companies sell their products or services to consumers outside a traditional retail setting.
Instead of featuring their products in a traditional retail environment, direct sales companies use more personal selling methods like going door to door, hosting events at their representatives’ homes, posting on social media, or using personal e-commerce websites.
Typically, the products or services sold through direct sales aren’t available at traditional retail outlets.
How does direct selling compare to other types of sales?
Direct selling differs from standard sales methods in how the products reach the end consumer. The direct-sale company and the consumer interact one-on-one to provide the consumer with the products or services they want.
This interaction usually happens over the phone, online, or in person. Unlike traditional channel sales, there are no intermediaries like retail outlets between the customer and the company, which means minimal start-up and operating costs for the seller and a lower price for the consumer.
How does direct selling work?
With direct selling:
- The product is created by or for the business owner.
- The business owner hires customer representatives to sell their products (instead of using a traditional distributor).
- The customer service reps promote the product directly to customers.
- Customers purchase the products from the agents online, over the phone, or in person.
- The reps are generally paid a commission for their sales (but some may also have an hourly rate).
Although this is the way all direct selling works, there are different types of direct sales you should be aware of. Each one operates within this basic framework slightly differently.
Types of direct sales
There are three primary types of direct sales that a company might use including:
- Single-level direct: Generally performed in one-on-one settings, such as presentations or online meetings. Single-level direct also often employ door-to-door sales and catalogs to be left with potential customers.
- Party-plan: This type of direct sales often uses group settings. In party-plan direct sales, a representative either hosts the purchasing party event themselves, or they’ll recruit a customer to do it on their behalf.
- Multi-level marketing (MLM): In this model, an MLM representative will earn commissions based on their sales as well as a portion of what anyone they’ve recruited to the company earns. MLMs can use party-plan or single-level direct sales methods to promote their products.
You may find it helpful to see examples of direct sales in action.
Examples of direct sales
Boeing is an excellent — though maybe surprising — example of a direct sales company. They sell their airplanes directly to airlines without a middleman. This allows them to generate a higher profit margin and create a more personal relationship with clients than by using a third party.
Another example of direct sales people will likely be familiar with is Mary Kay. If you haven’t bought Mary Kay cosmetics, you probably know someone who has. The company uses representatives (and maybe their pink Cadillacs) to sell their products inside their communities using single-level and party-plan direct sales methods. Mary Kay is also a classic example of an MLM, where reps earn a small commission from every person they’ve recruited.
As different as they are, Boeing and Mary Kay are both examples of how profitable and successful direct sales companies can be.
However, you’ll want to be aware of some downsides to direct selling.
Downsides to direct selling
Although direct selling makes owning a business more affordable than the alternatives, there are some downsides to consider before starting your own direct sales business. A few examples include:
- Difficult to scale: A direct selling business model can be difficult to scale because it involves a lot of recruitment and a sizable number of employees to maintain and grow. Direct sales make this challenging because it relies on so many people to track and manage customers.
- Challenging to manage customer base: The challenges of handling a huge-and-getting-huger customer base can become even more complex as the company grows. Maintaining a database of customer information, company interactions, preferences, etc., to tailor the products, services, and content to the right audience — all while providing high-quality customer support — can get overwhelming very quickly.
- Numerous other moving parts to juggle: Countless customers, sales representatives, products, services, and locations are challenging to keep track of. As a direct sales company owner, finding a way to track these parts is crucial if you want to sustain steady growth, a positive company reputation, and increasing revenue.
One way to help mitigate the downsides of direct selling is by using a robust sales CRM like the one from monday.com.
Learn more about other type of sales: Inside Sales, B2B Sales, B2C Sales, SaaS Sales, AI Sales
Managing direct sales with monday.com
monday.com sales CRM makes managing direct sales simple with critical features like contact management, lead management, and in-depth data tracking. You can aggregate this crucial data to get a better idea of how your company is doing and what your ideal audience looks like by choosing the viewing method that works best for you. Features include:
- Customizable dashboards that let you see the information that matters most to your operations, giving you a comprehensive overview of how your company, projects, or customer representatives are doing.
- Data viewing options such as Kanban boards and Gantt charts.
- Seamless integration with key business tools to reduce the number of applications you need to access each day.
- Automation of routine tasks and approvals that can save your direct sales company considerable time.
- Access to customizable forms that make collecting and managing work requests or customer feedback simple.
By now, you likely have a solid understanding of direct sales and how a CRM software can make it more manageable. However, we’ve answered a few FAQs just in case.
FAQs
What does direct sales mean?
Direct sales is a term used for businesses (or people) that sell their products directly to the end consumer, bypassing any intermediary. The opposite is channel sales, which uses third-party sellers to get products to customers.
What does a direct sales company do?
A direct sales company may offer any product or service the same way as other businesses do. The key difference is they sell their wares directly to the customer through methods like e-commerce or door-to-door salespeople instead of using a third party to sell their products (like a chain store).
Streamline your direct sales processes with monday.com
Direct sales can help you start or scale your business quicker by eradicating many start-up costs associated with retail outlets. But there are also downsides to consider.
Thankfully, you can overcome the challenges of a direct sales company by streamlining your business processes and better manage customer profiles using monday. sales CRM.
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