The general perception created in the Indian and Global marketplace is that any company threading the path of a direct-selling model is bound to be illegal. So let’s understand what really is direct-selling…
First and foremost it is a relatively new marketing, business and distribution method.
Direct Selling companies sell their products &/or services direct to the consumers, removing the traditional distribution channels in between.
Normally Direct Selling companies focus more on word-of-mouth advertisements by its consumers than traditional advertisements.
A person can be a:
Consumer: Who only uses the products and services from the Direct Selling Company
Distributor: Who is not just a consumer, but also refers the products and services directly to people and earns retail commission for that.
Network Marketer: Who is also a distributor and must refer products and services directly. He/She also trains other distributors to refer the products/services and sell them in turn to build their own businesses. Now this person not only earns retail commissions, but also commissions for the sales volume generated by their entire Network.
This facility allows people to leverage other people’s effort and earn residual income.
To explain it in simplest manner – As a Direct Seller/ Network Marketer; you are being paid for sharing (and hence selling) products/ services you like. Also, as you are investing your time and effort in training other distributors joining your team and helping them to get started, you are being paid a percentage from the sales volume generated by them.
The government Act legally bans Ponzi schemes but is Direct Selling a Ponzi scheme?: Let’s take a look at what do Ponzi Schemes offer:
- Promises quick & easy money. Or where people can earn quick and easy money.
- Where members are paid to enroll new members only.
- Where there are no significant products or services to buy and sell.
- Where considerable amount of money is collected from people just in exchange of promise of future returns.
On this I absolutely support the government for passing this law for protecting general public from being cheated.
However, what I don’t understand is how can any legitimate Direct Selling company be accused of being illegal prize chit or money circulation schemes?
- It takes time to learn different skills and develop the mindset to succeed in this business.
- One needs to stay at least 3-5 years in this business, before expecting a reasonable residual income.
- One needs to talk with conviction about the products/services & the business opportunity to and find considerable number of consumers and distributors. Keeping your team motivated and focused is an ongoing need.
The advantages over other professions are:
- Lowest startup cost.
- Step by step proven system that can be followed to succeed in this industry.
- Great support system from company and up lines (people who have you in their Networks).
- Working properly for 7-10 hours/week and for 3-5 years, one can generate a great residual income.
All legitimate Direct Selling companies sell or refer meaningful products and services. And they pay their distributors for selling or referring their products and services, not for recruiting new distributors.