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What Is a Direct Sales Model?

Companies that allow customers to phone in orders may be using a direct sales model.
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  • Written By: Emma G.
  • Edited By: Melissa Wiley
  • Last Modified Date: 25 July 2014
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A sales model is the strategy a company uses to get its products to consumers. A company using a direct sales model sells directly to consumers instead of selling its product to resellers such as department stores and third-party web sites. The primary benefit of this type of sales model is that it often allows a company to keep product prices lower and to offer faster, more personalized customer service.

It may be impossible to count the different sales models used by businesses. Every business has a different strategy that changes based on market variables, customer needs, and changes in technology. Yet sales models usually fit into one of three categories: direct, reseller-only, or mixed sales. Companies using a mixed sales strategy make some of their sales directly but also sell their product to third parties for resale. Many products sold in infomercials are sold using a mixed sales strategy because they are sold on television directly by the manufacturer but can also be bought at department stores, usually at higher prices.

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The direct sales model came into use in the mid- and late 1800s when manufacturers realized they could sell directly to customers through catalogs. Instead of selling their product to a store, which then increased the price and sold the product to consumers, manufacturers were able to fill orders through the mail. They did not have to worry about distributing their product to stores or manufacturing huge amounts that might or might not sell. They were able to ship directly to customers and to manufacture only enough of a product to fill the orders that came in.

Common access to the Internet created a whole new forum for the direct sales model. Manufacturers were able not only to sell directly to their clients, but also to interact with them in real time, which allowed for improved customer service. The Internet also took away one of the major obstacles faced by companies using this sales model, which was visibility. Before the Internet, companies using a direct sales model sometimes had difficulty reaching consumers because the company's products were not in chain stores and department stores where people shopped every day.

Disadvantages to the direct sales model still exist in spite of the Internet. Companies using other sales models expect to share some of that burden with distributors. With direct sales, all the burden of marketing and distribution falls on the manufacturer.

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Discuss this Article

sunnySkys
Post 6

@JessicaLynn - When I think of direct selling opportunities the internet isn't usually the first thing that pops in my head. I always think of companies like Avon and Mary Kay that go door to door and hold parties to sell products directly to the customer.

When I was younger I remember we had our resident "Avon lady" in the neighborhood. Whenever anyone wanted to buy anything from Avon you would go to her. She would also go door to door and distribute a catalog every now and then.

I must admit I haven't seen a "resident neighborhood Avon lady" in quite awhile. But I noticed recently Avon has a website where you can buy their products directly. So I think the internet really is changing how companies do their direct marketing.

JessicaLynn
Post 5

I'm a knitter and I've had first hand experience with companies that use the direct sales model over the internet. There are several good knitting sites that sell all types of knitting supplies: yarn, needles, patterns and accessories.

Some even sell both manufactured and sell their own branded products. This means they can sell the same quality as other brands for cheaper because they have basically "cut out the middle man."

Another website that comes to mind is Etsy. Etsy allows individuals to set up store fronts and sell their products directly to consumers. You can buy all kinds of finished arts and crafts on their as well as art and craft supplies. For knitters there are often stores where one person sells their hand dyed or hand spun yarn directly to consumers. You can find a lot of great stuff on Etsy and it feels good to support and independent dyer/spinner.

I think the internet has really revolutionized the direct sales model and made it accessible to individuals.

oasis11
Post 4

I wanted to say that I know a lady that was a maid for my father in law that was searching for the right direct sales opportunity and she researched the direct sales association's website and was able to find an opportunity that worked for her.

She wanted a legitimate company and did not want to be scammed. She became a representative for a cosmetic line and is now a supervisor, and made enough money to build a home in her native country. That is the nice thing about the direct sales model that many people can be successful and set their own hours to work.

The company that she worked with had their business model studied at Harvard Business School which was really impressive because they wanted to analyze why this business model was so successful.

surfNturf
Post 3

@Moldova - I know what you mean. The direct sales business model does put a lot of emphasis on its individual distributors. Some people do well with this type of business model and other don’t. It really takes a lot of initiative if you are following the party model because you can only ask your friends and family to participate so many times.

You really have to be more creative in this business and many people that look at a direct sales job don’t realize all of the work that they would actually have to do to be successful. There are some people that have become successful and really enjoy it, but they usually have a large team working under them that is still selling products which allows the team leader an opportunity to earn a lot more money.

These companies really encourage team building and reward the team leader with trips and even cars if they reach a certain sales milestone. I think that it is an exciting field, but not everyone is cut out for this business because you really have to take a lot of rejection which most people are not really comfortable with.

Moldova
Post 2

@SauteePan - I agree, but I also think that becoming a direct sales agent and having a direct sales job allows you the opportunity to schedule appointments with your customers to preview the items. Many direct sales companies offer a party method that allows the direct sales agent the chance to sell the products directly to the people that attend the party.

On the plus side, people that come to the party usually spend a lot more money than if they were shopping in a store, but setting up subsequent parties is more difficult and is probably the biggest challenge with the direct sales job which is why a lot of people give up after a few months.

With this business model, there is a degree of direct sales training, but in my opinion people that are successful look at this direct sales opportunity like a business and not a job. There is marketing and cold calling that has to be done to actually develop a clientele that would give you repeat business. I know that I would have difficulty with a direct sales model because I prefer to work in a store where there is customer traffic rather than having to create my own traffic.

SauteePan
Post 1

I think that the direct sales business model allows a customer the opportunity to become more familiar with the product because there is usually an active sales presentation that the customer sees. I know that if I watch an infomercial for a certain amount of time, I really start to believe that I need this product.

Many of the shopping channels do this when they remind you about how many of the item were sold and then offer customer testimonials on air. This is really a great way to reach a lot of people and it offers the best direct sales opportunities, but these productions are expensive. I read that the average infomercial costs about $100,000 to produce.

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