Comparisons of salespeople in multilevel vs. single level direct selling organizations.

Direct selling is a marketing method exhibiting substantial growth in sales revenues, and is particularly noteworthy because it involves so many salesperson participants. Defined as "face-to-face selling away from a fixed retail location" (Peterson and Wotruba 1996, p. 2), direct selling organizations

in the U.S. grew in sales volume from $16.5 billion in 1994 to $25.6 billion in 2000 according to the trade association representing U.S. direct selling organizations (Direct Selling Association US 2001). That same source reported that the number of salespeople participating in this activity in the U.S. grew from 6.3 million in 1994 to 11.0 million in 2000. Worldwide sales by direct selling organizations reached nearly $84 billion from the efforts of over 40 million salespeople in 49 countries (World Federation of Direct Selling Associations 2001). Direct salespeople are usually independent contractors, not company employees, and opportunities with direct selling companies are open to persons from all backgrounds, experience levels, and personal characteristics. Clearly, direct selling is a business activity of significant importance both in financial and human terms.

Of particular note has been a shift in the nature of direct selling organizations. This shift involves the relative incidence of the two types of organization structures, identified as multi-level and single level (Berry 1997; Biggart 1989; Brodie, Stanworth, and Wotruba 2002; Peterson and Wotruba 1996). In a multilevel (ML) organization, direct salespeople recruit, train, and supervise other direct salespeople who become part of the recruiter's downline. In return, the recruiting salesperson receives compensation on the sales of downline members as well as on his or her own sales. In a single level (SL) organization, the salespeople do not build their own organizations via recruiting and training, but rather focus their efforts on selling and achieving compensation based on their own sales. In 1990, the proportion of member firms of the U.S. Direct Selling Association that had ML organization structures was about 25%, with 75% being SL in nature. In 2000, however, the corresponding proportions were 78% ML and only 22% SL. Worldwide data are not available on this shift, though a recent report on direct selling in the UK shows that the share of total sales by ML organizations has grown substantially over the decade of the 1990s there as well (Direct Selling Association UK 2000).