What exactly is direct selling? | A direct sales explainer

When someone mentions direct sales, your first thought might be of a well-intentioned friend hawking health powders and supplements for some multi-level marketing company.

While technically direct selling, that image doesn’t come close to describing the impact of the direct sales model. If you’ve waited in line for the new iPhone in front of the Apple Store, you’ve participated in direct sales. In 2020 alone, 41.6 million customers purchased through a direct sales channel and the number of companies using direct sales grew nearly 14%.

So while direct sales gets a bad rap, it’s actually one of the most lucrative sales opportunities a company can use – if it’s implemented correctly.

In this piece, we’ll take you through the specifics of direct sales and detail how it can benefit you, your customers and your bottom line.

What is direct sales?

Direct sales are sales that occur between a brand and the end user without a middleman or distributor. They are a type of B2C (business-to-consumer) sale and they can happen in-person or online.

The most important thing for your company to know about direct sales is that it’s on the rise – with no signs of slowing down. Direct sales in the United States jumped from $76.7 billion in 2019 to $123.3 billion in 2021 and is expected to hit $175 billion by 2023.

The most important thing for your company to know about direct sales is that it’s on the rise – with no signs of slowing down.

That doesn’t mean you need to leave B2B sales or other types of B2C sales behind, but it does mean that you may want to rethink your sales strategy if direct sales aren’t in your plans. That said, we know direct sales have a bad reputation right now, so before we dive deeper into what direct sales are, let’s talk a bit about what they’re not.

Direct sales vs. MLM

The direct sales definition is often a little muddy nowadays because of the rise (and infamy) of MLMs (multi-level marketing companies). MLM distributors will often describe their method of sales as direct sales and, as a result, many people assume they are one and the same. In reality, MLMs are one of three ways direct sales can occur, so all MLM sales are direct sales, but not all direct sales are associated with MLMs.

The three types of direct sales are:

1. D2C: Businesses and brands sell directly to their end customer (for example, online purchases directly from the brand’s website).
2. Single-level sales (or single-level marketing): Sales representatives act as distributors for a brand or company and earn commission for products sold.
3. Multi-level sales (or multi-level marketing): Single-level sales, but sales representatives and distributors also earn money from recruiting more distributors (frequently more money than they make selling products).

Over the past few years, the Federal Trade Commission has come down heavily on numerous MLM companies for pyramid-scheme finances, which led to a general distaste for direct sales. That shouldn’t stop you, however. Direct sales, when done correctly, is a fantastic way to generate revenue and build brand loyalty.

Channel vs. direct sales

The other central confusion about direct sales is where it fits in the overall sales model. It’s easy to think of direct sales as ‘the other’ type of sales, but it’s really just a type of channel sales. Channel sales come in two types: direct (direct-to-consumer) and indirect (every other type of sale).

Channel sales are classified by the number of channels a product has to go through before it reaches the end customer. For example, a product that moves from the manufacturer to a wholesaler and then to a retailer is considered a two-level channel sale. Direct sales are just zero-channel sales.

Keep in mind that a channel is not the same thing as a platform when looking at internet distribution sales. If you buy a product on Etsy, you’re still purchasing directly from the manufacturer – Etsy is a platform. But if you buy a product on Amazon, you’re likely going through a channel, as Amazon does not make the majority of the products it sells.

How to create a direct sales model

In general, there are two direct sales models you can use:

Even though the second option technically puts a step in between the manufacturer and the consumer, it’s still considered direct sales because all sales are happening through company employees, not through outside sourcing.

Let’s take a closer look at both of these models.

D2C sales

In D2C sales, your products are going from your company to the consumer with absolutely no stops. This method is extremely common in:

• SaaS sales: With the rise of online selling, very few software purchases need a retailer anymore.
• Enterprise sales: Large deals function best with a personal touch.
• SMB sales: Small and medium businesses frequently capitalise on the local market before branching out to indirect sales.

If your company is already a larger company with distribution partners, you can still benefit from D2C sales. With over 80% of consumers doing at least some shopping online, it’s the perfect time to set up a direct purchasing site for your company.

Single-level sales

The other option for direct sales is single-level sales. Note that a single-level sales team is not necessarily the same thing as a general sales team. Single-level sales teams work almost solely on product commissions, create their own hours and generate their own leads. This is different from in-company outside and inside sales, which can function within standard work hours and work alongside the larger company marketing and supplier teams to create a full sales picture.

What are direct sales vendors?

Direct sales vendors are the employees working as distributors of your product. These vendors frequently sell through door-to-door sales, catalogues and in-person presentations. They can work for B2B sales, but more frequently they sell to individual consumers. As we mentioned previously, these vendors rarely work set hours and are expected to work independently from the company, so they don’t fall under your in-house sales team or under your in-house sales management.

Direct selling examples

Now that we know the types of direct sales, let’s look at an example of each.

Remember, some companies use a mix of these direct sales styles because direct sales is not a one-size-fits-all sales style.

Why do consumers love direct sales?

We know direct sales and D2C sales are skyrocketing, so customers must love them. But what makes them so appealing to the public? Here are a few reasons consumers gravitate toward direct sales:

• Customers enjoy it when brands interact with them. Social selling is on the rise and customers feel special when you interact with them on social media. Adding the personal touch makes direct sales more welcoming to prospects.
• Buying direct protects customers from knock-offs. The one downside to retail and online distribution is the potential for knock-offs. Larger companies are especially vulnerable (as evidenced by Apple’s recent lawsuit). Direct sales offers customers a level of security, even if it comes at a higher price.
• The manufacturer usually has all products in stock. No company sells its complete stock to a retailer. It wouldn’t make sense – different geographic and financial markets want access to different items. Direct sales gives your customers access to your full inventory without you needing to spend the money on full stock distribution.
• Consumers frequently get the best customer experience and support from the manufacturer. You aren’t beholden to your retailer’s return policies or knowledge of the products, so you can better assist customers with questions or issues.

At the end of the day, customers want the best possible product with a personal touch. Going straight to the manufacturer is a guaranteed way for any customer to ensure they are getting an authentic product at the lowest price with the best service.

How your company benefits from direct sales

You might have a great indirect sales strategy going. That’s fantastic, but it doesn’t mean that direct sales can’t benefit your company. When done correctly (and ethically), direct sales can:

• Allow your brand to maintain control of its image. When you distribute through retailers, your brand is tied to the retailer brand.
• Give you the opportunity to control relationship building with your brand. Customers can directly interact with your sales style, building quicker brand loyalty.
• Give customers options – customers love options. By simply providing customers with the opportunity to buy directly from you, you’re gaining customers who might’ve looked the other way.
• Open up your sales avenues. If all your sales were through in-person retailers in March 2020, you likely took a painful hit during the shutdown. Direct sales allows for an online option when in-person shopping isn’t possible.
• Expand your customer base. If someone buys your product from a retailer, you don’t necessarily get their data for marketing. When they buy direct, you can gather their information and can add them to your database.

Can a CRM help direct sales?

Absolutely. Direct sales is all about branding, personal connection and follow-up. Customer relationship management (CRM) software helps keep your customer records straight and your communications up to date.

With a CRM like Zendesk Sell, you can automate emails, track customers through the sales funnel and stay on top of sales goals. Whether you’re a startup or a Fortune 500 company, the right CRM can up your sales game.

Request a demo today to cultivate brand loyalty and bring your products directly to the people who want them.