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Behind the scenes of Direct Sales

Posted: 16.01.2013 16:55:00  | Category: IN GENERAL  | Tags: Multilevel

A brief IT perspective for those who wonder how it all works.

You must have heard of companies like Avon, Amway, Herbalife, Oriflame and NuSkin many times by now. Or maybe you have even met or seen one of their distributors/consultants around your neighborhood, at work or at a party. These companies together generate billions of dollors worth of business each year. Despite the pyramid scheme critisms, these companies make a lot of people happy too. Actually, their distributors/consultants does just like what a typical sales team does. They SELL. And if they sell well, they can make considerable amounts of income .

But how does it all work?

I will not be discussing the whole MLM business but I will try to give you a brief IT perspective on critical parts of this business.

Since these companies can have very large sales teams consisting of hundreds of thousands of distributors/, they need to have a good system to keep track of the sales volume being generated by each distributor. This system can either be an inhouse developed software or some ERP/OMS/CRM backed with heavy sales related customizations.

Tree

Database

The database can be SQL Server, Oracle or any other, it really does not matter too much as long as you are able to get outmost performance out of it. The critical point is the hierarchy management. Since distributors bring in new distributors, you end up with a huge hierarchial tables representing your sales team. So if your database and your hierarchy algorithms are good enough to perform these operations on huge sets of data, it is ok to go ahead with it.

Order Channels

Each direct sales company tries to do its best to maintain a multi channel platform for other taking. But basically, it is all very similar to what a catalog sales or an ecommerce company does to take orders.

Of course, the major source is the distributor and new comers who do not know any distributors. A distributor takes an order from consumer, and reports the order to the company. To do this� he/she uses the order channels. Order channels usually are only open to these people.

Orders can be taken and collected :
  • by entering the order in an e-commerce web site (destop or mobile, unfortunately most of the Direct Sales companies still ignore the mobile channel),
  • by calling CallCenter Operators,
  • by calling an Automated IVR system that takes orders,
  • by messaging with an automated two way SMS sytem,
  • by sending printed order forms via mail,
    • received orders can be passed through an automated document scan process,
    • or they can be manually entered into the system by operators,
  • by simply going to the Show Room, and telling the operator the order,
  • Etc.
Helping the distributors to sell more

Use of promotions helps distributors sell more. Nowadays, many of these companies use promotions techniques to draw more attention to certain set of products or to just drive more sales. A few examples of these promotions can be:
  • Buy 100$ worth of kitchenware products and get 2 product free from the knife group,
  • Buy one get one free,
  • Buy 40$ worth of beauty product and get 25% discount on textile group,
  • Bring in a new customer who would generate 100$ worth of �sales in a certain period of time, and get 1 pencil for free,
  • Etc.
Possibilities are limitless and are used frequently. So this is very important part of the business and where IT plays an important role. The Order Management/eCommerce system being used should have good support for advanced promotions management. Otherwise it is very likely that you will not be able to compete with others.

Appreciating the work done : Money well earned

OK, you have millions of distributors making sales all over the world, and they collect and report orders to you. You are happy. You have good products and offered good promotions in last period, so consumers are happy if they also receive their orders on time. Now it is time to make you distributors happy. These are the most commonly used methods:
  • giving sales commissions based on volume,
  • offering extras over loyalty promotions �where qualifiers get products, discounts, coupons etc.
  • offering extras over competition programs (winners get cars,�TVs etc)
In order to compete, each company has to do it all. But to do it all, you need a well designed software, �Otherwise you wont be able to process, calculate millions of data manually or by excel sheets. Also if you dont have the right software, you are most likely to live many problems. So this is once again where IT comes in and makes all possible.

Back to consumers

Now everyone is happy, but products are also need to be shipped to distributor who will then give it to consumer. This is a typical stock based ecommerce operation. A typical DS warehouse contains a main storage and possibly a several forward pick locations that are replenished from main storage. Orders are picked in forward pick locations in pick-and-pass manner, then packed and shipped to distributors in certain parties. Normally having a system plays vital role in maintaining the warehouse, but some old school companies prefer to do it old way. But it is apparent having a good and solid WMS system can help to improve the performance and accuracy of operations. Here are same examples:
  • increased picking speed,
  • accurate picking which results in less returns,
  • accurate inventory,
  • tracking expiry dates,
  • faster replenishment,
  • overall visibility,
  • etc.
Team Play

I like refering to these type sales companies as football teams.
  • Executive Management is technical director/coach, (for direct sales CEO needs to be a bit Messi like),
  • Sales team and distributors are your forward players,
  • Defense and goal keeper are your operations,
  • Mid fielders are IT people who silently coordinates the whole team in the background and technically make all possible.
Hope to go in to more detail in coming weeks...