If you’re thinking about starting a direct sales business, keep an open mind. While the majority of direct sales companies are legitimate, they can also be fronts for pyramid schemes or other work-at-home scams. If you intend to sign a contract with a company, make sure you understand the terminology on it.

Direct Sales

Direct selling (also known as direct sales) is a type of marketing in which products and services are sold to consumers directly rather than through a fixed retail outlet. Direct sales occur through person-to-person contact, frequently at home parties hosted by the distributor, who may also be referred to as a sales representative, associate, and/or consultant.

Most direct selling operations are also multi-level marketing organisations with compensation plans that pay sales representatives for both product sales and recruiting other sales representatives.

Multilevel Marketing (MLM)

MLM is a business structure in which products are marketed directly to consumers by sales representatives (or distributors) whose compensation is based on their own product sales as well as the sales of the distributors they recruited to the multilevel marketing company. These recruits are referred to as their downline. MLM sales representatives are not paid.

Distributor

Sales agents are referred to as distributors in multilevel marketing operations. An MLM distributor may be referred to as an agent, sales representative, or consultant depending on the organisation.

Downline

Downline distributors are those who have been recruited to the direct sales organisation by another distributor. The recruiting sales resp receives compensation based on her downline’s sales as well as her own. In an MLM, the recruiting sales rep receives compensation based on her downline as well as own sales.

Upline

The person who recruited a distributor into the organisation is known as the sponsor in multilevel marketing (MLM), and the people above her in the organisation are known as the upline. The upline of an MLM distributor is compensated based on her sales as well as their own.

Single-Level Marketing

One type of compensation plan for direct sales companies is single-level marketing (or sales). However, multilevel marketing is far more common. Sales associates in SLM are only compensated for their own personal sales activity. They do not earn money by recruiting other sales representatives. The only source of income is a commission or bonus.

Pyramid Scheme

The main source of compensation for participants in this type of illegal business structure is the recruitment of new members into the pyramid scheme. New recruits typically pay an initial fee of some kind, which becomes income for their upline. That recruit’s path to compensation is to recruit a downline. Typically, a pyramid scheme has a front that gives the impression that compensation can be earned from sources other than recruitment.

Party plan

This is the sale of a product through home parties, in which the direct sales distributor either hosts a party where guests can buy the product or recruits a host to host a party. The distributor makes a sales pitch at these home parties, and guests can browse the merchandise or place orders.

Network marketing

This refers to direct sales made in person rather than at a home party. These sales can be done in person, over the phone, or electronically.