Exposed: 3 Reasons Direct Sales is not Small Business

As a Shop Girl I completely support anyone willing to dive into direct sales.  After all, it is the gateway drug into strategic sales and job opportunities where charisma is key.   It forces the consultant to step out of their comfort zone and stand for something without having to put their family’s livelihoods on the line.  Reps are granted the flexibility to call the shots, to practice self-discipline, and stretch their legs into leadership.   This shopgirl attributes much of her rapid success in retail to her start with PartyLite as a college kid.

That being said, in my stint as a PartyLite rep, I was not a small business owner.  I never felt that way despite the endless efforts of those higher on the pyramid attempting to influence me that I “owned” this destiny.  Indeed I did own my personal destiny, but as far as PartyLite was concerned I was a glorified manager, without any of the perks of professional training or a storefront.

According to the SBA a small business should make less than 7.5 million dollars annually.  Or have 500 or fewer employees.  A small business is considered an opportunity for the community more than it is for the shop owners.

The Positive Products of a Small Business:

  • Employ local individuals
  • Pay into local taxes
  • A dream coming to life
  • Developing/maintaining prosperous neighborhoods
  • Reflection and Representation of the community
  • Inhabited Real Estate

Many direct sells leaders will tell their consultants that since their reps technically have no manager that means they practically operate their own small business.  Considering these facts one may think of just the small fraction of the income they make or the few amount of consultants on their team and they are wowed by this illusion that they have their own small business.  That is not the case though, and here is why.

  • Profit Does Not Impact Local Community:
    • If an employee works for Scentsy the majority of their profit does not go to their pocket but to Meridian, Idaho (well unless you are one of the 75k that live in Meridian).  Which means your Scentsy purchase has contributed to the 100-500 million dollar business that is not being dispersed within your own prosperous neighborhood, but more your consultant’s prosperous household and a far more beautiful Meridian.
  • No Huge Stakes:
    • If a rep invests to sell LuLaRoe, their 5,000 dollar investment that seems to take forever to pay off, does not equal the struggle of a small business owner who placed their home up for collateral.  When a LLR consultant pulls out it’s just a headache on their bank account, and if it is more than that they should have sought a direct seller with a far lower buy in.
  • No Ultimate Decision Power:
    • A Mary Kay rep has no real say in their product, only the illusion of say as they are granted the ability to pick and purchase their own inventory.  Beyond this Mary Kay Reps have no real power in major decisions on who produces the product or what that product contains.  They do not own the business, and it is not a small one.

So, while I respect the effort and push it requires to make money without a storefront, I also find my stomach churning  when I have my Facebook feed filled with Scentsy and LulaRoe Reps posting memes that encourage you to “Shop Small” or “Shop Local” by supporting their endeavors.   And though I have picked on Scentsy, LuLaRoe, and Mary Kay, they are almost all fantastic companies to consider for those who are interested in direct sales.

Also if you are already in direct sales, or if you are considering it, here are some additional tips to help your personal endeavors succeed!

 

24 thoughts on “Exposed: 3 Reasons Direct Sales is not Small Business

  1. Chris says:

    Great post! I like your insights and connection between different opportunities like LLR. You also did a good job with your research on the SBA. 😀

    I am an accountant who has been helping my sister start her LLR adventure. I agree with you, and disagree on a couple of items.

    I see it as a LLR consultant is a small business owner, just that they have been restricted to a single supplier and have other diminished control over their business.

    I also disagree, to an extent, that purchasing from a LLR consultant doesn’t help your local community. Yes, there is a portion of the sales that goes to the main corporation in another location, but the local economy is stimulated. The consultant needs to drive around, purchasing gas. The consultant will probably want to spend their profit, which can be spent in their hometown. Potentially, they could purchase a home, car or another large item that would be directly in their community.

    I’d love to know what your thoughts are on the above counter points. 🙂

    Like

    • shopgirlanonymous says:

      The economy is helped with jobs, upkeep of brick and mortar. A LLR consultant can have “team members” who are not hired, but instead also required to invest in their own inventory. And that up front 6k to 8 k investment is going directly to a non-local outlet. Then the reps are free to do what they want with it, but that’s one individual buying gas, not a series of individuals.

      A person, like myself, could be a store manager, purchase local gas, spend my profit, I have purchased a home with that money, and a car, but that does not mean that I own the store, no the company owns the store. The large majority of income goes directly to the corporate office, who then pays their distributors, their bills, their office parks, their human resources, accounting, providing many jobs without up front investment in their home town.

      Second they have no real specific control of their inventory. That’s the point LLR. It’s a grab bag, of random. If they wanted to make major corporate decisions in inventory, they do not have that power, because they do not OWN the small business, they have an investment in a tiered business. The clothing fits funky, the selections of patterns are not all hits, while some sell like hot cakes, but the reps have no choice in their inventory flow so far as their trending sales are concerned.

      Liked by 2 people

  2. marketing65info says:

    Good post covering the good and bad of being in direct sales. I think it is not for everyone. However, there are many people who make a good living from it.

    Liked by 3 people

  3. Susan Landry says:

    I kept thinking “Amen!” & “Preach It!” while I was reading. I have a sister who will not see this. She has drunk the kool-aid and bought their message hook, line, and sinker. She insists that her company is “just like Costco…you have to buy a membership to shop there.” What she doesn’t seem to process is that at Costco, I could buy my membership and never shop there once…with her company, I have to spend a certain amount each month to maintain my “membership.” Not the same! I have done direct sales in the past, too. And I agree that they can be a good way to bring in a little extra money. The downside is that these companies are expert “motivators” and it’s hard to make money with them when they convince you to spend all of your own money in the process.

    Liked by 2 people

    • shopgirlanonymous says:

      I have a write up posting next Monday on a direct sales company that is silencing any complaints, you must only speak in motivational or positive phrases. If you have any reason to question the company or a complaint they silence you and remove you…

      Things can get crazy town with some of these pyramid schemes. This one your describing sounds like absolute craziness!

      Liked by 1 person

  4. Suze says:

    I’ve had a small business. I owned a boutique and employed three part timers. I also was in direct sales, the plastic ware that shall remain nameless, avon, mary kay, lifetime lingerie, princess house crystal and the Toy Factory (children’s toys and games). Party sales can in no way be considered a small business. They don’t pay employment taxes, they don’t pay state or city taxes, they don’t employ others. They rarely do more than purchase their own inventory (to show at parties mostly) and write up sales. They are great for working whenever you want to and making a little bit of money on the side, but I equate them more with having a lemonade stand than a business.

    Liked by 4 people

  5. Marisa Ulrich says:

    Good job clarifying the difference! Hubby and I are both in small business, his as a local handyman, myself with selling my book and attempting launch guest speaker engagements. 🙂

    Liked by 1 person

  6. Lacey says:

    I agree. I recently signed up to sell Usborne books, and in one of the product facebook groups someone had posted about small business Saturday. I was like Ummmmm . . .. I don’t think that’s right. . .

    Liked by 1 person

    • shopgirlanonymous says:

      Ya, I experienced similar social media messages and I knew it wasn’t necessarily their fault, they’ve been told they are their own business, and maybe for those who have not ran a small business, the difference may never have occurred to them. 🙂

      Liked by 1 person

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