What is direct selling?

Avon has been around since 1886 and was popularised in the 50s and 60s in the US, but there’s now a renewed appetite for budding entrepreneurs wanting to make money through direct selling.

Since the rise of the side hustle, direct selling in the UK has grown in popularity with more people wanting to be their own boss – without the financial risk of starting a new business.

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The latest figures suggest more than 560,000 people in the UK are involved with direct selling – but what exactly is it? This article explains how direct selling works, the pros and cons of becoming a rep, and the legal and financial responsibilities.

Direct selling – method and definition

Direct selling is when you make money by selling products to consumers when you don’t have a shop. You’ll typically buy products from a company and then sell them on social media, telephone, door-to-door, or by hosting parties.

Also known as multi-level marketing (MLMs), direct selling relies on your communication skills and social network to sell anything from books and homeware to jewellery, fashion, and makeup.

How does it work?

You pay for a starter-kit that can cost anything from £0 to £200 and will then get paid commission on any products you sell. You may also have to pay delivery fees when you order stock.

It sounds straightforward enough, but can you really make money from direct selling?

While you’ve probably heard success stories in the media and claims of six-figure salaries, this is fairly rare. Direct selling requires hard work and dedication, and you’ll need to be outgoing with a wide social network to reach customers with your products.

It’s also worth mentioning here that there’s often negative press around the concept of direct selling as some companies encourage people just to recruit new sellers in return for a substantial commission.

That said, if you work with a legitimate direct selling company, you’ll be selling high-quality products with fair compensation schemes – so it’s important to do your research.

Direct-selling companies

As we know, the likes of Avon have been around for a long time, but more companies are moving into the direct selling scene, including the Body Shop, Neal's Yard Remedies Organics, and Usborne Books.

In no particular order, the top five direct selling companies in the UK include:

• Avon
• Forever Living Products
• Amway
• Herbalife Nutrition
• NYR Organic

Direct selling – advantages and disadvantages

While for many people direct selling can be an attractive way to earn money around other commitments like childcare or another job, it’s important to understand the pros and cons.

Advantages:

• low start-up costs
• flexible working hours
• work from anywhere
• low-risk way to run your own business
• bonuses and perks, including travel trips and discounts

Disadvantages

• additional costs for parties, stationery, stock delivery
• commission structure can vary
• risks if you buy more stock than you can sell
• success depends on your communication skills and social networks

Choosing a company

The Direct Selling Association (DSA) is the recognised trade body for direct selling companies in the UK. You can find a list of approved companies on their website so you can make sure you’re investing in a reputable and approved company that follows DSA guidelines.

Try not to be swayed by the most attractive bonus and commission structure, you should be passionate about the products you’re selling, too.

Rules and regulations for direct sellers

There’ll be different legal requirements and tax responsibilities depending on how you run your direct selling business, but we’ve outlined some of the key areas you’ll need to consider.

Tax responsibilities

Most direct sellers are classed as self-employed. This means you’ll need to register as self-employed with HMRC and file your tax return by 31 January every year.

Read more about how to do a self-employed tax return in our Self Assessment guide.

If you’re planning on selling outside the UK, our article on VAT rules explains the changes to imports and exports since we left the EU.

Distance selling laws

If you’re selling through digital TV, mail order, or phone or text message then this is called distance selling. The UK government’s guidance on distance selling says that there’s certain information you must provide and conditions you have to meet to comply with the law. The law covers:

• information you must provide to customers before they order (including business information, description of goods, and price)
• a customer’s right to cancel their order (up to 14 days after the order is delivered)
• delivery of the goods

Food hygiene

Hosting a party to sell your products? Chances are you’ll want to offer food and drink to your guests, so make sure you’re following EU food hygiene law. The Food Standards Agency has more information on providing food for community events.

Working from home

Many direct sellers will work from home in between organising parties and delivering products and catalogues. If you’ll be home-based, it’s a good idea to check your tenancy agreement or mortgage agreement as you may need permission from your landlord or mortgage provider and local council. You may also be able to claim tax allowances on your business expenses.

Our guide on starting a business from home goes into more detail.

Have you considered direct selling? Let us know in the comments.