Tupperware and Beyond: Should You Join a Direct Sales Company?

Are you thinking about getting rich by direct selling weight loss supplements, designer jeans or alternative energy? Here’s what you need to know before jumping into the world of direct sales.

My name is Maryalene, and I am a serial direct sales representative.

For reasons I can’t quite remember, I first signed up with Tupperware. Then, I thought I would feed my candle addiction by signing up as a rep for Eclipse Candle Co. That dream abruptly ended when the company went out of business. Now, I am all about Thirty-One Gifts, but must admit to being slightly smitten with Mary & Martha.

If you’ve been to a home party, looked at the sign-up kit and thought “What a deal!” I can relate. So too can apparently 16.8 million other people. According to the Direct Selling Association, that was the size of the direct-selling sales force in 2013. The industry group estimates that 13.8 percent of U.S. households include a direct sales representative.

Direct selling can be a good way to bring in some extra spending money, or it can be a good way to drain your bank account. Here’s what you need to know before jumping in.

Is the focus on direct sales or MLM?

First, is the company you’re considering more a direct sales biz or a multilevel marketing firm? MLM companies typically place a greater emphasis on bringing in new recruits and creating a downline from which your earnings will be based. While some companies can be categorized specifically as MLM firms, many direct-selling companies include some MLM elements.

I’ll let the Better Business Bureau explain. This is how it describes the difference between direct selling and MLM on its website.

Direct selling refers to a distribution method, whereas multilevel marketing refers more specifically to a type of compensation plan found in direct selling. A direct selling company that offers a multilevel compensation plan pays its representatives/distributors based not only on their own product sales, but on the product sales of their “downlines” (the people representatives/distributors have brought into the business, trained and developed; and, in turn, the people they have brought into the business).

Some companies are very upfront about the fact there is little selling involved and all you need to do is “share the opportunity.” These are firms with a definite MLM focus. For other companies, you may need to read between the lines on their promotional materials or talk with a current rep to get a better feel for how the business operates.

MLM-driven companies aren’t necessarily bad, but they aren’t for everyone. Be sure you understand what you’re signing up for before forking over any money.

Ground floor vs. established biz

The next consideration is whether the company is a “ground floor” opportunity or an established business.

There can be a lot of hype about getting into a brand-new company on the ground floor. If the company takes off, you take off with it. You may find yourself one of only a relatively few reps selling a hot item. Founding members with ground-floor businesses may also find it’s easier to build an impressive downline if there are fewer sponsors available in their area.

However, ground-floor businesses come with risks and drawbacks. Try as I might, I couldn’t find any hard statistics on the failure rate of direct sale or MLM firms. Anecdotally, there are plenty of examples of startups that end up shuttered.

Beyond the risk of closing, ground-floor businesses may not have the infrastructure in place to provide professional marketing materials and representative training. The brochures I received from the fledging Eclipse Candle Co. lacked photos and had a decidedly amateur feel. There were no in-person training opportunities either. On the other hand, 11-year-old Thirty-One offers bimonthly training meetings, free amenities and polished catalogs, fliers and promotional videos.

If you’re self-motivated to create your own marketing plan and materials, a ground-floor business might be a good opportunity. If you prefer to have everything laid out for you, stick to an established company.

Investigate these details

Once you narrow your choices, it’s time to take a hard look at the fine print in those representative agreements.

Before signing on, make sure you know the answer to these questions:

  • What is the selling platform? Are you expected to sell door-to-door, in a home party or using a different format?
  • Can you promote your business online? Some companies have very strict rules about what you can and cannot say and do online and on social media. In fact, at least one company I know of won’t let you even post its name online.
  • How much does it cost to sign up? The average startup kit seems to run right around $99. Typically that will provide some marketing materials, business supplies and inventory, if applicable. If the company is asking for hundreds upfront and not offering much in return, be careful. That could be a sign it’s a pyramid scheme rather than a legitimate business.
  • Are there recurring fees? The $99 kit may seem like a deal, but will you be nickel-and-dimed after that? Common charges include website fees, membership fees and auto-ships, which is where the company sends you new inventory regardless of whether you want it.
  • What is the quota? Most established companies have a minimum amount its reps are required to sell. For example, one mandates its consultants sell $200 of product in a rolling three-month period. At another, the requirement is only $50 a year. Some startups might not have any quota in an effort to encourage sign-ups.
  • What training is available? Does the company have a formal training program or do you rely on your sponsor for that? Is there a way to easily reach the home office if you have a question or problem?

Only people persons need apply

Growing up, my mom was the local Avon lady. She had a basket of carefully arranged items she would take door-to-door and on visits to her regular customers. That was the only way to make sales back in the day. Today’s Avon lady can set up a personal website to display products and watch the sales roll in.

Or can they?

In the Internet age, it may be tempting to think direct sellers no longer need to have personal interaction with their customers. However, my experience has been that websites alone won’t garner purchases. In fact, I’ve never once had an order placed online from someone I didn’t know or previously have contact with.

The way people order has largely changed, but the way they buy is the same. In other words, people may be making their selections online, but they’re often buying only after someone asked them to consider a purchase. The very best direct sellers I know are the ones who aren’t afraid to strike up a conversation with the clerk at the store or compliment a stranger on her purse and then hand her a business card.

If the thought of talking to a stranger about your business makes you want to curl up in a fetal position, direct sales may not be for you.

But can you make money?

Let’s get to the nitty-gritty: Can you make money in direct sales? Of course you can, but it might not be much.

According to this Forbes article, the median income for direct sellers in 2011 was $2,400. There are superstars who make a full-time income off their business, but we need to be real here and admit that those folks are the exception, not the rule. The rest of us might make some pocket change if we’re lucky.

The following are some indications you might make money:

  • You sell a product or service you personally use and are passionate about.
  • The product or service is something in demand in your area.
  • The price point fits the economics of your area.
  • You market to those beyond your circle of family and friends.

As a final note on income, don’t forget that all those prizes, amenities and incentives you receive from a company can be taxable income.

As for the question in the headline, only you can answer that for certain. If you’re looking for a way to make lots of money with minimal effort, I don’t recommend direct sales. If you’re looking for a way to earn some spending money while getting discounts on your favorite products, direct selling could be a winner for you.

What is your experience with direct sales? Tell us in the comments below or on our Facebook page. However, Money Talks News is not the place to promote your business so no links please.

Stacy Johnson

It's not the usual blah, blah, blah

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  • marketfog

    I recall the Jewel Tea and Raleigh men who used to go door to door in the 40s and 50s. These men were able to make a living and support their families. The coffee of Jewel Tea still can’t be matched by anyone, not even Starbucks. I miss it. I once got involved with pots and pans. I still use the product samples 50 years later. The products were made by Alcoa. Although it had good products, I had serious reservations about its high pressure sales techniques, and the fact it was a MLM company. Once when I was out of work, I was approached by a large national multi-product, multi-line direct sales company. I objected to the integrity of the way they got my name, off a resume I sent to a legitimate company. In an orientation meeting, with about 40 people, I recognized the hard sell techniques I had been trained in by the pot and pans people. At the end of the orientation, the organizers invited anyone who didn’t think this was a great opportunity to leave. I left. I was familiar with the products they sold and regard the products as exceptional. One of the problems with MLM, is that so much of the selling prices of the products go to commissions. There are often 4 or more levels of commissions which can eat up over 50% of the price the customer pays. This is true for both the examples cited. Another problem is the amount of inventory the salesman has to buy, it isn’t on consignment. A special problem is the expiration dates on beauty and food products.

  • Ron Sakulin

    Multilevel marketing? Smells like pyramid to me.

  • LagunaLady27

    If you want to work harder and longer than you ever have in your life, if you want to “delay gratification” longer than you ever have before, and if you have to trust the word of others because the rules of compensation are either not written down or are so complicated that even having an MBA won’t help you understand them, then MLM is for you. Otherwise, run, do not walk, in the opposite direction. I did not run. I believed what I saw, what I heard and what I read.

    If you ever hear a line like: “We don’t use people to build up our business. We use our business to build up people,” then you will know that trust is involved in compensation. There is too much to know to evaluate these businesses. They won’t tell you everything. If they did, you would not join them. I risked it all. I am not sorry that I did. But I am sorry that my “up line” did not have the level if integrity that I thought they did.

  • teresawilliamsshearer

    I sold Tupperware in the early 80’s. I love the product. I am considering getting into it again when I move out of my current area (semi-rural, low income).

  • Suzanne Randa

    I have seen so many companies lately that may have good products, but push too hard on the MLM aspect. First comes to mind is Genesis Pure. I like their products and would use them, but most of the people I know who sell them refuse to take orders for product, they insist that it would be “so much better” if I would just sign up “and that way you’ll save money too!”. I don’t drive, so selling anything is out of the question for me (direct sales anyway), and I don’t want to try and wrangle my family and friends into signing up. I wish more direct sales plans would go back to the old Avon model, or even the party plan that Tupperware has had for years.

  • craftycritter

    As a former Stampin Up demo I can tell you that the only people making money off of these types of things are the CEO and the top 100 or so “Superstar” demos. Everyone else is making pennies at best. The emphasis with SU as per the training is on recruiting, not the product! You are told that your goal should be to turn all of your customers into your downline. Most people sign up in order to get the 20% discount on products. You are told that is soooooo easy to earn the $300 per quarter (every 3 months) minimum in order to stay active, that all you have to do is hold one workshop a month and you will easily earn that and then some! Total crap. First you have to find people willing to hold a workshop, good luck with that! Stampin Up products are hugely overpriced and on top of that the shipping costs are huge plus because the company depends on China for all their manufacturing they are plagued with huge backorders. So no one wants to buy that product, which means you get to buy it yourself! But you keep telling yourself it’s cool because, after all, you are getting that discount, right???? Your upline will tell you not to worry about how much money you are spending because in order to make money you have to spend money. This is a common mantra. Your upline, and their upline, and their upline (etc etc etc) are the ones who will benefit from any sales or recruits your bring in. This is how it works. You slave away so they get to earn a free cruise or a prepaid Visa card, among other things. Stampin UP loves to make changes and just recently they changed the free product earning program (Hostess Dollars) making it so now in order to earn free product you have to spend more $$$$. Makes sense, right??? SMH! Plus, they have now made it impossible to promote within the company unless you are recruiting. Not sales mind you, but recruiting. Think you can maybe make some money on Ebay perhaps? Think again! Current demos are not allowed to sell current or recently retired (up to one year) product on Ebay or anywhere else! Craft Fairs? Only if you promise to use ONLY SU product to create with. You are not allowed a chance to make money any other way, even though their way doesn’t work. Well, it works for the uplines, but not for you! Some people think this is perfectly okay, they love SU and are loyal to a fault (kool aid drinkers). They attend the annual conventions, use only SU and sing it’s praises to the raftors, all in an effort to bring in more recruits. I just couldn’t play that game. I want to craft and do my own thing, I don’t want to build an army, I want to make cards! I just think it’s sad how many people get suckered into this nonsense schemes when their money could be put to better use elsewhere. But to each his own I guess!

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