Click here to order the November 2013 issue in which this article appeared.
Editor’s Note: Participants in and proponents of the direct selling channel of distribution have been, in our opinion, wrongfully labeled as “unethical.” While we cannot control the behavior of everyone who engages in business, we firmly believe that the legitimate companies in our channel operate with a very high degree of ethics.
Published here is our industry standard for ethical behavior, as written by the U.S. Direct Selling Association and held to by many companies in our channel. Those who are members of the DSA commit by their membership to uphold these standards. We proudly stand behind these statements. This paper on ethics as well as many other resources can be found at www.directsellingfacts.com.
Ethics and Values
Members of the Direct Selling Association are working in tandem to provide and require adherence to ethical standards and guidance. The direct selling community has high standards that, in many cases, exceed legal requirements.
Member companies work to protect, secure and educate individual direct sellers, consumers and the general public in accordance with applicable standards within the DSA Code of Ethics.
- The direct selling industry is dedicated to consumer protection and has enacted policies to safeguard the industry, consumers and individual direct sellers from nefarious activity.
- Direct sellers invest heavily in educating consumers on best practices and the substantial differences between legitimate direct selling companies and pyramid schemes.
- Member companies of the Direct Selling Association (DSA) pledge to adhere to a code of conduct that requires business to be conducted with transparency and consumer protection at the core.
- The Code of Ethics is enforced by an independent code administrator who is not a member of the DSA staff nor affiliated with any member company. The code administrator is responsible for accepting, investigating and prescribing a remedy for complaints filed against a member company.
- Most direct selling companies require sellers to hold little or no inventory, and all members of the DSA must have a robust buyback policy to protect against inventory loading.
Additional industry protections that have been created include:
- Inventory buyback – DSA members pledge to repurchase inventory from salespeople who decide to leave the business. Any inventory purchased in the 12 months previous to the salesperson’s departure will be repurchased for at least 90 percent of what was originally paid. Thus, there is no risk of being left with large amounts of inventory in the event the seller is not satisfied with his or her experience.
- No large upfront fees – In most cases becoming a direct seller costs no more than the price of a startup kit, which can range from just a few dollars to several hundred dollars depending on the company and the contents of the kit. In all cases, the cost of the kit should be reasonable based on what you get in return (product samples, catalogs, training materials, etc.).
- Compensation based on sales – Sellers are compensated primarily for the sales of real products—not for recruitment.
- No unsubstantiated earnings claims – There are no claims of large profits without time, commitment and effort. Earnings are primarily based on the sale of products and services.
In the June 2013 Board Meeting, the DSA board of directors adopted a new definition of direct selling for official use by the association and its member companies:
Direct selling is a business model that offers entrepreneurial opportunities to individuals as independent contractors to market and/or sell products and services, typically outside of a fixed retail establishment, through one-to-one selling, in-home product demonstrations or online. Compensation is ultimately based on sales and may be earned based on personal sales and/or the sales of others in their sales organizations.
Direct sellers may be called distributors, representatives, consultants or various other titles. They may participate in various ways, including selling the products themselves or through their sales organizations, referring customers to the company and purchasing products and services for personal use.