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Retail Selling vs MLM Selling

May 24, 2021 13:59

Retail Selling vs MLM Selling 

Retail Selling vs MLM Selling 

Looking for a side hustle to fill your time (and your wallet) outside of work?

 

Looking for a job you can do while you’re home with your kids full-time?

 

Always wanted to start a business, but never knew where to start – and want some extra support while you get started?

 

Love using social media and keeping up on the latest trends… and want to turn those interests into a lucrative career for yourself?

 

Well, stop dreaming and start planning! Nowadays, it’s possible to do all of those things. It’s possible to create your dream WFH job from home, with very little startup money.

 

We’re not going to sugarcoat it – finding customers and selling products online takes a lot of hard work.

 

But starting an online boutique can be a very rewarding and lucrative business.

 

Especially among women, there are two popular ways of selling products online: joining an MLM (multi-level marketing company) and buying wholesale inventory to sell at resale prices.

 

While these business models may look very similar on the outside, they’re actually very different.

 

The route you choose to take could affect the scalability and profitability of your business. Whether you’d be better off selling retail or selling for an MLM will depend on your personal situation, along with your goals and vision for your business.

 

We’ll take a deep dive into MLM selling and retail selling so you can make the right decision from the very beginning.

 

What is Retail Selling?

Buying wholesale items and selling them and retail prices is a traditional business model. Essentially, it involves you buying inventory from a wholesale supplier, then marketing and selling those products at your in-person or online store.

 

If you’re interested in selling retail, you’ll have to make things official. Most wholesale inventory providers require you to have a current business license so you can access highly discounted products, then resell them at retail price.

 

Historically, it’s been hard for small boutique owners to break on the scene and start competitive boutiques. Many wholesale suppliers have sky-high minimum order quantities, while others bump up their prices so they make more of a profit and you’re left with razor-thin margins.

 

But today, it’s possible for anyone to get high-quality inventory at a low price. Here at Supplied, new boutique owners enjoy no minimum order quantities and up to 75% off MSRP prices (meaning incredible margins for you!)

 

As a business model, retail selling can involve a significant upfront investment since you have to purchase all of your inventory before turning around and selling it to customers.

 

Retail selling offers a ton of freedom – as a business owner, you can decide where you source your products from, what products you sell, how much you sell them for, what strategies you use to sell them, and beyond. Unlike a 9-5 job, there’s no guarantee of how much you make… but there’s also no limit to your earning potential

 

women in MLM meeting taking notes

What is an MLM?

MLM stands for multi-level marketing. It’s also sometimes referred to as network marketing, direct sales, or party plan sales. It’s a strategy some direct sales companies use to encourage existing distributors to recruit new distributors.

 

Unlike retail selling, joining an MLM does not require you to start your own business. Instead, you join with a larger company to sell or distribute their products as an independent contractor. You earn money by selling products to people you know. No $$ is guaranteed.

 

Like retail selling, MLM selling also involves upfront costs. While it varies widely from company to company, you’ll typically have to pay a set fee to become a distributor and purchase a training/starter kit, which could cost anywhere from $50 to $5000. Some MLMs also involve ongoing required order/sales minimums to stay active. 

 

Perhaps what sets MLMs apart most is their recruiting style. In MLMs, distributors earn a commission from every person they sign up as a distributor, as well as commission from sales and recruits generated from that person, continuing down for multiple levels. (That’s where the name “multi-level marketing” comes from.) 

 

While this business model offers two main ways of generating income, the recruitment structure also means you’re actively recruiting your own competitors and making your market even more saturated. This causes your circle of who to sell to become smaller since you’re competing with all other distributors to sell the same products at the same prices. 


But given the multi-level marketing structure, the people at the top (with many distributors who have signed up under and after them) stand to make very large amounts of passive income for very little work, earning commission for the people below them.

 

However, most people in MLMs don’t just not make money, they actually lose money. Exact numbers vary from company to company, but in a comprehensive study of 350 MLMs, the FTC found that 99% of MLM participants lose money.

 

women working on computer to make a plan

Retail Selling vs MLM Selling: Similarities

Retail selling and MLM selling have quite a few things in common. Here are a few things you should prepare for no matter which business model you choose: 

Social selling

Both retail selling and MLM selling involve (or should involve!) using social media to your advantage to get the word out about your products & sell them to friends, family, and everyone else. Especially when you’re first starting out, your personal network is one of the best resources to advertise to on Facebook, Instagram, and elsewhere.

 

Selling physical products

Both retail selling and MLM selling involves selling physical products, whether online or in-person at pop-up events or parties. That means both strategies will involve similar activities – looking for customers, marketing your products, educating people about your products, etc. 


 

women in green shirt tracking inventory of boxes

Buying inventory

Both retail selling and MLM selling usually require you to purchase the products you’re going to sell before selling them. Prices and minimum order quantities vary a great deal from supplier to supplier and company to company. 

 

No guaranteed income

Whether you go with retail selling or MLM selling, it is what you make it – you could make $100k or $100 (or $0, for that matter). Actual average earnings vary, but your situation could be anything.

 

person in suit working on laptop

Retail Selling vs MLM Selling: Differences

Retail selling and MLM selling involves a few key differences you should be aware of before deciding between the two.

 

Business ownership

When you sell retail, you’re starting your own business. It’s up to you to get licensed, choose what you’ll sell, decide how you’ll price your products, define your company policies, create your brand, determine your business strategies, etc.

 

When you sell for an MLM, you do not own your own business. (Though many companies advertise the opportunity as such!) You work as a distributor for a particular company. You often do not choose the products you sell (or choose from a limited selection), you’re subject to minimum/maximum prices set by the company, you have to abide by the company’s existing policies, and you make a fixed commission. Many MLM participants also face scrutiny and pressure to reach certain sales targets, post a certain amount on social media, be present for team meetings, etc.

 

women on phone holding folder

Commitment level

Retail selling is what you make it. You can order as much or as little from a certain supplier, then never order from them again. You can rely on multiple wholesalers equally to curate your selection of items. You can take a break from focusing on your business for a month or two. In the end, you’re the CEO of your business – so you decide how committed you are.

 

Of course, with any business opportunity, you’ll get the most out of it if you stay committed to reaching your goals. But MLMs involve external expectations to hit targets, order more inventory, and the like. If you want out, you may have to formally quit.

 

Recruitment

In retail selling, recruitment isn’t a major focus. Some suppliers or operators may offer a referral bonus for sending other fellow business owners their way. However, the money to be made is clearly attached to low wholesale prices, quality products, and high resale value

 

In MLMs, recruiting is a major focus. Most high-earning MLM participants make most of their money by recruiting a large downline. Inflated retail values and competitor distributors selling the same products at the same high price can make it difficult to make meaningful income from selling alone. 

 

Products

If you sell retail, you have the freedom to sell whatever you want. You can order products from just one supplier, partner with multiple suppliers to achieve a perfect product curation, mix in retail products with handmade goods – whatever you’d like. Even if you choose to stick with just one supplier, here at Supplied you’ll have access to 250,000+ wholesale boutique items to choose from.

 

If you join an MLM, you’ll be limited to selling whatever the MLM company sells, often limited to certain bundles of products available. If you want to sell other products, you’ll have to join a different MLM (or mix these two strategies and sell retail on the side).

 

Success rate

Again, no earnings are guaranteed with either business strategy. But larger margins and lower direct competition make it relatively easier to make money through retail selling. The average small business owner makes $59,776 per year.

 

The MLM business model makes it very difficult for new distributors to generate meaningful income. While exact numbers vary from company to company, one study estimated that around 99% of MLM participants lose money.

 

For most people who are interested in starting their own boutique and making $$ selling products online, we recommend retail selling.

 

Retail selling typically involves higher margins, a larger chance of success, more freedom, more creativity, lower inventory prices, and access to a larger, less saturated market. As long as you partner with the right supplier, you can find affordable, on-trend wholesale boutique items to resell at competitive prices while still enjoying excellent margins.

 

However, while MLM selling has a very low success rate, some DO find great success from it. Getting in early, having a really large network, being really social-media-savvy, and genuinely loving and believing in the company’s products can all help you have a better chance of succeeding. 

 

If both retail selling and MLM selling sound attractive to you… why not try both? Many business owners who purchase wholesale inventory from Supplied also get other inventory from MLMs. It’s not a bad idea to diversify your offerings, especially if you already have regular income coming in from retail sales. 

 

warehouse with shelves of boxes

MLM Selling: How to Get Started

  1. Research companies

Not all MLMs are created equal. Some MLM companies have a genuinely poor reputation, with multiple pending lawsuits, low-quality products, and unhappy distributors. Others are much more benign! Look into a few different MLMs, read reviews of products, and chat with current and past distributors if you’re thinking of joining one.

 

  1. Try products

If you end up joining an MLM, you’ll have to personally vouch for its products’ quality. Place a small order from a distributor to try things out. It’s a lower commitment than joining, and typically much less expensive than purchasing a starter kit upfront.
 

  1. Gauge costs

Once you’ve found a few products you genuinely enjoy, look into what it would actually cost you to become a distributor. Is there a sign-up fee? A minimum first order you’ll have to purchase? A minimum monthly order you’ll need to place to stay active? Look into everything listed on the MLM website as well as current and past distributor reviews.

 

  1. Reach out to a distributor

To join an MLM, you’ll have to find a distributor to get you started. Contact the distributor you first ordered products from, do some social media sleuthing, or reach out to the company itself to find someone. (If you do end up joining the MLM, you’ll have a continued relationship with this person in your “upline” – keep that in mind!)
 

  1. Purchase a starter kit

Exactly how you’ll officially join your MLM will vary depending on the company, but it typically involves purchasing a starter kit. You can keep or sell the products in your starter kit.
 

  1. Start selling/recruiting

Develop your strategy, then get to work! Let your network know about the products you’re selling and the opportunity you’ve recently found. 

 

artisan products on shelf with plant

Retail Selling: How to Get Started

  1. Start a business

Make things official! Apply for a seller’s permit and a business license in your state. Learn more about how to get a seller’s permit for retail here.

 

  1. Make a business plan

Create a plan for operating costs, what you’ll sell, how you’ll sell it, who you’ll sell to, and how your business will make money. Learn more about how to create a business plan here.

  1. Find a wholesale supplier

Find a wholesaler that carries items you think your ideal customer would absolutely love. Keep an eye out for low wholesale prices, low (or no!) minimum order quantities, and satisfaction guarantees. Supplied is a great place to start. Learn more about how to find the right wholesale supplier here.

 

  1. Purchase inventory

Shop for your shop! Place an order of on-trend boutique items you think your customers will love. We’d recommend placing a smaller item of multiple items first to see how they look in person and test how they sell! Learn more about how to place your first inventory order with Supplied here.

 

  1. Start selling

Get to work! Create social channels for your shop, start an online store, let your network know about your new business, and start marketing your awesome products. (And don’t forget to join the Supplied Family Facebook group to learn from fellow boutique owners!)


 

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