Direct selling companies go directly to the consumer, bypassing the traditional modes of distribution—manufacturer, wholesaler, and retailer. In the past, products representing direct selling companies were either unavailable, limited in supply, or so unique that selling them in a retail environment was challenging. In the traditional direct selling companies, consumers would locate a representative of the product nearby and purchase directly. The organization structure would look something like a pyramid with the manufacturer forming the base, the sales manager or district sales manager in the middle, and a representative at the top of the pyramid. This personnel would most likely be employed by the organization. Employees typically are recruited from normal employment channels, with preference given to employees working for competitors, as they bring knowledge of the industry and a customer base. While direct sales organizations at one time employed a league of managers and administrative people to oversee the training and implementation of selling in the market, the internet has disrupted the traditional direct sales organization in two critical ways.
The first is that there is less need for employees. The new model employs contract or freelance workers, many part-time. The Direct Selling Association estimates that nearly ninety percent of the workers are part-time independent representatives. Eliminating compensated employees and hiring contract employees is very advantageous to direct selling organizations. For one, they can concentrate on product marketing and expanding the product distribution with little or no expense, as they are not responsible for employee salaries and benefits. Independent representatives are paid commissions or fees based on their sales. The district managers earn a commission on the number of people they recruit and on the sales of the product.
The second way the internet has changed direct sales is that for many products, a local representative is not needed. Consumers choose the products they want and order them directly from the source. The employees in these organizations are customer service and may work in a call center, more than likely sub-contracted by the primary distributor to handle sales inquiries and customer service. The shape of a direct selling organization that is primarily web-based is rectangular and flat. Product distribution and sales are automated or have very little interaction between actual employees of the company and consumers.
Many organizations have hybrid structures. For example, property and casualty insurers have both employees and representatives. All maintain web-based distribution for their products as an additional method to distribute insurance products. Both are needed because there is a consumer expectation of a certain level of human customer contact. You may purchase your car insurance from the web, but if you have a problem, you will go to the nearest local office to resolve issues. Hybrid organizations retain the traditional management functions of sales representatives, district sales managers, and other administration. They exist out of necessity, though not for lack of trying to find a way to reduce top-heavy administration.
https://www.dsa.org/about/direct-selling
https://www.forbes.com/sites/nextavenue/2013/04/01/can-you-really-make-money-in-direct-sales/
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