Drawbacks of direct selling

Direct selling has quite a few drawbacks as well. It lacks one important merit, which is characteristically present in conventional retailing. In the latter case, as the consumer visits the retail shop and picks up her requirement, she has a number of options. In contrast, direct selling does not allow any options. And, there are products, which a consumer will not in any case buy without comparing rival brands. Since direct selling offers only one brand, it has a limitation in such a context.

Moreover, although direct selling saves channel costs, commissions paid to sales persons-cum-distributors amount to as high as 30 or 35% of the retail price, especially when multi-level marketing model is used. Also, recruiting, training, motivating and retaining good sales people — most of whom are part timers — is also a difficult and expensive task. Another minus point is that the companies opting for direct selling cannot sell the products through retail shops.

The logic is that sales mostly result out of the sales persons cum distributors’ efforts in developing a clientele for the product and the rewards thereof should go to them and not to any retail store. Moreover, only when the channel margins are avoided, can the scheme be viable. This means that once a firm chooses the direct selling option, it loses the option of selling through the conventional method. The firm depends solely on the sales persons and there is no second route. Thus, there is an additional risk when a company opts for direct selling.

For direct selling to work, the face-to-face interaction must be capable of producing a significant value addition to the consumer, compared to purchasing from a retail shop. Products to which this idea does not apply may not gain much from the system. Finally, the method will not be effective when times and circumstances change. For example, Avon’s door-to-door selling has suffered in the US since the 1980s as more women had started, going to work. There were thus not enough housewives at home to be approached through direct selling.