Direct sales make up a great business as it allows salespeople to earn an average of 25% of the total sales. Two of its most popular types are e-commerce and multi-level marketing. But what are the differences between the two and which one’s better?
In this article, you’ll learn what e-commerce and multi-level marketing are all about, including their benefits and drawbacks, which will hopefully help you determine which one’s better for you.
What Is E-Commerce?
Electronic commerce or e-commerce is a direct sales strategy done online. In e-commerce or internet commerce, the entire process of buying and selling products and services, from the collection of consumer data to making a payment, is all completed over the internet.
What Is Multi-Level Marketing?
Multi-level marketing (MLM) refers to a business strategy that some direct sales companies are using to increase sales significantly by encouraging existing salespeople to recruit new sellers or distributors. MLM companies promise to pay a certain amount or percentage of the sales of the ‘downline’ or recruits to the member who recruited them. Also, distributors make a profit through direct product selling to consumers.
Now that you know the meaning of e-commerce and multi-level marketing, it’s time to find out which is better by identifying their differences, advantages, and drawbacks in terms of the following parameters:
1. Set-Up And Running Costs
The cost of setting up an online business through an e-commerce website is generally lower than brick-and-mortar businesses since the entire sales system is automated online. You can also save a lot on overhead costs since the number of employees and utilities you’ll need will be reduced. Your main cost will go to the development and maintenance of your e-commerce website and online marketing.
On the other hand, setting up an MLM business can also be done online, although not necessarily. Most MLM businesses use e-commerce mostly for their members only. Their products are mostly sold directly to consumers, face-to-face. This means although they may have a website, it’s usually only accessible to members, and is, therefore, smaller in scale.
However, as with any website, there are costs to build and maintain it. If you’re going to be a distributor for an MLM, you’ll be required to buy product packages to get a membership, which are usually very expensive.
2. Legal Guidance
Unlike e-commerce, MLM would require the extensive legal guidance of a qualified attorney with in-depth knowledge on business laws especially because their recruitment, commission, and compensation structure for members is complex.
When selling products via distributors, the MLM company is responsible for the earning claims all recruits are making. The Federal Trade Commission (FTC) monitors and regulates claims, and checks for false or misleading claims regarding the business’ income potential and the claimed benefits of their products.
There are also websites where you may be able to check companies for scam risks. For example, you can look for Ecom elites review if you want to make sure they’re a legitimate company.
3. Profits
Multi-level marketing enforces network marketing, promising higher earnings than e-commerce. While MLM is not a rich man’s game, it usually promotes quick and potentially lucrative profits for members or distributors through percentages and commissions that are threefold and even more of traditional sales.
For an e-commerce business, you can earn a decent flow of income by implementing the right marketing strategies. You may even exceed your sales expectations once you’ve established your brand.
4. Sales And Marketing
Both MLM and e-commerce require the implementation of various digital marketing strategies to stay in the competition. Some examples include social media marketing, email marketing, content marketing, and search engine optimization or SEO.
With MLM, promoting also means recruiting. Once you have several distributors, they’ll do most of the sales and marketing work for you. Once they recruit more distributors, you’ll pay them commission, and more sales from new hires will help you grow your revenue exponentially while also helping more people earn.
5. Seller’s Point Of View
If you’re an e-commerce seller, your focus should be to strengthen your sales and marketing to reach more consumers and sell more items. On the other hand, if you’re an MLM distributor, your focus is two-fold, recruiting and direct sales.
Many MLM distributors largely focus on recruitment for higher commissions, and direct selling usually only comes second. Well, if you decide to take this route, there’s nothing wrong with it. Just make sure that you’re dealing with a legitimate MLM company if you’re planning to be a distributor instead of establishing your own MLM company.
6. Risks
There are more risks involved in MLM than e-commerce because there are lots of scammers that use MLM-based businesses. While there’s a higher risk for MLM, the profits are very promising as long as the company is legit and you work hard enough. If you’re new to MLM, it’ll pay to first know the potential red flags of an MLM scam.
Conclusion
MLM and e-commerce are both profitable businesses given the right business strategies. Whether you want to start an e-commerce business or MLM, you’ll need a significant amount of capital and a lot of hard work.
While MLM offers promising high profits in a short amount of time, careful planning and scrutiny are essential to make sure you don’t end up dealing with scammers. On the other hand, e-commerce offers decent profits, flexibility, scalability, and being your own boss without having to recruit distributors continuously.
