Is direct selling your ticket out of the recession?

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The media has been abuzz with stories of struggling workers who are finding salvation in the field of multi-level marketing and direct selling.

The Wall Street Journal(subscription required) recently asked whether door to door sales represents a "safety net in the bad economy." Kelly Spors writes that a recent Mary Kay party surprised her: "About half the time was spent trying to convince me and the other attendees to become Mary Kay sales reps. The pitch: The economy is so bad that, even if you have a full-time job, why not keep a side business in case you get laid off?"

It has a certain allure to it: an income opportunity that you can't be laid off from. Find enough people willing to buy, and you'll always have income. In reality, network marketing is often very different. The emphasis on recruiting over product selling can lead to a business model that has more in common with a pyramid scheme than a "home-based business."

So how do you separate the legitimate opportunities from the scams? It's all in the products and, more specifically, the product prices: Some companies provide an opportunity to make money through recruiting, but the best ones also make it possible to earn plenty of money doing nothing but selling.

If you do decide to pursue the directs selling route, here are two things to look for: Firstly, a product that is priced comparably to similar products available at retail and secondly, a compensation plan that pays the most to people who sell products, not those who recruit others to recruit others. In this economy, pay special attention to how a product's demand might hold up in a recessionary environment. Jewelry and expensive vitamins might not hold up well in a recession, but reasonably-priced makeup might.

Above all, take any claims of income with a grain of salt. Look for actual data on average earnings. For instance, MonaVie's website promises a "unparalleled opportunity that can allow you to capitalize on the surging health and wellness industry", complete with numerous success stories. But the company's Income Disclosure Statement reports that "The average annualized income for all Distributors during this period was $3,539.68." Of course, you're unlikely to be told that at an "opportunity meeting" held by a distributor.

Direct sales may be a good option for some people, but there is a ton of snake oil to be on the lookout for.
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