Should I Become a Direct Seller or Independent Consultant?

One reader wrote me the following question:

How does direct selling in the scrapbooking/stamping industry work? Do most direct sellers do it for the discount or is it possible to make a living as a direct seller? If they are making a living at it, are they working it like a regular job (e.g., 40 hours a week)? (summary of original question)

What a great question! It is so difficult to get an honest answer to this question.

I have been a direct seller for a scrapbooking company (I am keeping the name of the company private to maintain anonymity in my dissertation research) and for a non-scrapbooking company. I no longer sell and some of the reasons for that are addressed below. I will use seller, direct seller, consultant, and independent consultant interchangeably.

Direct selling companies are not allowed to make any claims about how much money you could make as a consultant. They can showcase how much money some of their consultants make, but they do not disclose what the average consultant or typical consultant earns. You will probably not get a straight answer from a consultant you are interested in working under either. They could include how much they make based on their customers’ purchases and include the the amount product is discounted for their own purchases. This over inflates how much they are actually earning.
It is possible to make a living as direct seller. To do this, though, in most circumstances, you do need to treat it like a full-time job. You will get at least one email a week from the company you are working for updating you on anything important. You have to promote yourself. If permissible by the company you are working for, you will want to set up a facebook page, maybe a twitter account, and perhaps even a blog to promote yourself as a consultant. You will be sending out sales notices via email and perhaps even mail. You have to keep track of your orders and if you sell enough, you will also need to keep track of records for tax purposes. You will need time to do parties (preparation, travel, the party itself, follow-up, and so on). You might organize crops or even classes for your customers (paid and unpaid). You might set-up at holiday bazaars (same issues as parties, plus you might want some inventory for a bazaar–be careful that you don’t spend too much money on this…maybe I need to do another post to talk about this issue). Your company will most likely have videos and other learning resources for you to look over. Again, this takes time. Check out all of the things Benno Landfair does to promote his Longaberger basket business. Now, all that being said, it does offer flexibility. This is why so many women are direct sellers. They can more easily combine this type of work while taking care of their families compared to other types of work.
Direct sellers are placed in an awkward position. They are encouraged to recruit more consultants and they can earn a small commission from these consultants sales, but the flip is that they then lose this person as a customer. They might make you a lot of money as seller but they may have made you more as a customer. You also run the risk of the customer becoming disenchanted by the company if things don’t go well selling. If this happens, you might also lose them as a customer. They might not want to go back to paying full-price for the merchandise, too.
Both direct selling companies I worked for had a “locate a consultant” feature on their website. The problem is that they only locate consultants who are earning over certain amount of money each month. I would find out how people are listed on the “locate a consultant” feature before I signed any agreement. Personally, I never earned enough money to be listed. The company’s rational is that people earning under a certain amount are selling as a hobby or purely for the discount rather than treating it as a serious business, but as a new consultant this would have been a great way to possibly get new customers. My mom is a current consultant for Longaberger (of course, I have to promote her, if I am promoting her competitor!) and customers have found her through this feature before. It doesn’t happen often, but it does happen. Because I know that this is how direct selling companies work, I try not to use the locate a consultant feature unless I really can not find a consultant any other way. I would rather support someone trying to get started rather than someone that is already established because I know how hard it can be to get customers. The other frustrating thing about this feature is that if you are looking to see how many consultants there already are in your area, in order to decide if you should start selling, you are not getting an accurate number. It looked like very few people were selling for the scrapbooking company I was selling with, but now know there are many more than are listed on the site. In other words, you can not accurate gauge how much competition you will have by using the “locate a consultant” feature.
You can earn larger commissions, prizes, or both as you sell more. If you can regularly get above whatever threshold your company sets, then you can earn a lot more money simply because your commission could increase (not all companies do this). At the very least, you will most likely earn free product, which you could keep for personal use or resell for 100% profit.
Do not trust your friends and family when they tell you they will buy from you. Unless you have some idea how much they actually spend on the products, you have no idea how much support you will get from them. You need a larger customer base than this. Do the math. If you earn a 30% commission, how much in sales do you need each year to make it worthwhile to you? How much do you think each of your customers might spend each year? If you have 100 people on your customer list, and you think that each of them will spend an average of $50 a year with you, how much will you earn? $1,500. If you only devoted 5 hours a week to consulting, your hourly wage would be $5.77 (less than minimum wage). If you devoted 10 hours a week to consulting, your hourly wage would be $2.88. If you have more people on your customer list or a customer list that will spend more money, then you could definitely do okay. If you have fewer customers or customers that spend less money, you do even worse.
The shipping costs could really get you. One of the companies I worked for charged a flat-rate for shipping for orders $100 or less. It did not convert to a percentage until you exceeded $100. If you have one customer that asks you to order one sheet of stickers, the shipping might cost as much as the item being shipped! One of the companies I worked for charged a flat-rate for shipping for orders $100 or less. It did not convert to a percentage until you exceeded $100. If you have one customer that asks you to order one sheet of stickers, the shipping might cost you more than the item costs. Are you really going to charge your customer the full shipping rate? No way, they’ll go elsewhere or just not buy. You will have to eat the shipping (cutting into your profits), buy more to save on shipping (and hope you sell the stuff later), or charge the full shipping to your customer (and risk losing them).
Make sure you understand exactly how much you have to sell in order to remain a consultant. One company I worked for misled me as to how this worked. I was under the impression that I had to sell $500 every three months. This is true, however, as soon as you reached $500, the clock started ticking again. It was not a quarterly system. So if you sold $500 in month one, you had to sell $500 again within three months and not within five months (the two months you still should have plus three months for the next three months). Make sure you understand exactly how this works.

In a nutshell, it is possible to make a living as a direct seller, but there are a lot of barriers in place to prevent this from happening. Honestly, if I have to work that hard, I’d rather have my own company (like this blog). If you decide to pursue direct selling, make sure you understand all of their policies before you sign-up. If you can not get a straight answer, I would run.

Have you been a direct seller? What has your experience been? Comment below or join the conversation on facebook or twitter.

If you have a question, you would like me to answer or topic you would like me to address, please email me at stephaniemedleyrath at gmail dot com or here. I will personally respond to your emails and may use your questions in future articles.

Stephanie

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