Is “Direct Buy” Cheaper for You?

By | November 19, 2013

Just about anyone old enough to know how to use money is looking for the “best deal,” however defined at that moment. The best deal usually means getting more than expected for a certain outlay of money, or paying much less than the stated price for an item or service.

Anyone who has been to a few alleged “sales” knows that prices are often raised some time before the sale to give the appearance of a better deal than previously. Most people also understand that businesses are in business to make a profit and for the owners to earn an adequate living – or better. Some mark-up in price is expected. Most people, however, have no idea of how great that markup is, or how much it varies among different types of products.

One of the major companies – if not the major one – that has taken advantage of its knowledge that everyone is looking for a better deal has lined up deals with manufacturers to bypass retailers and to allow consumers to buy goods at prices that may range from 30 to 45 percent or more below retail prices found in other outlets. That company is Direct Buy, which is advertised on television and elsewhere as being the vehicle to give consumers the best deal.

How Do You Become a “Direct Buyer?”

Based upon this writer’s personal experience, becoming a member of Direct Buy requires that one call Direct Buy; make an appointment; come to a Direct Buy center; watch some videos; listen to a salesperson between videos; and, after that is done, meet across a table with a sales representative, fill out a survey, and, then sign a contract with Direct Buy.  The whole process can take up to a couple hours or so, depending upon questions, the salesperson’s skills, and one’s readiness to become a member (or not).

During orientation, prospects will be shown examples of price differences between regular retail prices, sale prices and Direct Buy prices.  At the end of the showroom presentation, prospects will be asked how much they expect to spend over the next five or ten years on purchases in order to establish some baselines for illustrating potential savings over those periods of time, which usually end up being tens of thousands of dollars.  The purpose of this to make the Direct Buy
option look even more attractive.  People undoubtedly start to think of these large numbers as “savings” instead of expenses, forgetting that tens of thousands of dollars will have to be spent before tens of thousands of dollars can be “saved.”  Without a careful analysis and some good planning, prospects can be caught up easily in all of this and find themselves going broke to save money.

In one of the videos, prospects are told that they will not be offered another chance to join later, and with some reasoning that comes close to defying logic.  In essence, it is just another part of the sales pitch to manipulate prospects to sign with Direct Buy today.

Inasmuch as this writer chose not to sit through a follow-up sales pitch and sign on the dotted line for a first, second or third level program, no information is presented here on sales tactics, other than that one can expect the usual in such situations that are reminiscent of pitches to buy other things on contract, such as time shares or related things.  Covering these tactics would require another discussion, which is not the purpose of this article.

Can You Actually Save Money by Joining Direct Buy?

It is this writer’s opinion that one can save money only if one has cash to join and one has the cash to purchase enough items with cash that one needs and would have purchased anyhow.  For example, someone who has just bought a house and needs to furnish most of it may save enough to more than pay for his or her membership in a short period of time – if all is done on a cash basis.

At the meeting attended by this writer, three plans were offered:  level one at $2,990; level two at $3,990; and level three at $4,990.  For the sake of simplicity, memberships can cost around $3,000 to $5,000.   A 30-day period of “free” membership is also offered, but the items to which it applies renders it to be very restrictive and hardly worthwhile to consider, but it obviously works for some, or it would not continue to be offered.  Question:  How long will it take to recover the cost of the membership in each situation?

In all probability, most of the people who join do not have the cash necessary  to make large purchases and are looking for a way to do this and save money, and are counting on Direct Buy to help them.

In most cases, those who join will have to take out a loan to do so, which will add substantially to the real cost of the program.  Since the variety of situations preclude giving examples of every one of them, suffice it to say that credit ratings, interest rates and payment time periods and the program joined will affect the total actual cost paid by the time that it is paid off.  Even after it is paid off, renewal fees will also have to be paid.

If people have to finance their memberships, they may place themselves in a situation in which, because of paying on this, they may have to wait awhile before they can qualify to borrow money to make a large purchase on which they hope to save a substantial amount of money.  Secondly, by financing their memberships, they start to lose any advantage that they might have gained by joining Direct Buy.   Depending upon a host of factors too numerous to review here, a $3,000 membership could end up costing much more – perhaps as much or more than the highest level membership that sells for nearly $5,000.  If that is the case, it’s also possible for the highest level membership to end up actually costing nearly twice that much as well.

When interest costs on credit cards or personal loans are added to the purchase cost of an item through Direct Buy, for which a membership has been or is being paid off, it is possible for one to end up spending more money than one would have been spent without joining Direct Buy.

A second factor comes into play here as well.  People who spend money to join Direct Buy in hopes of saving money will want to buy more than they can really afford through Direct Buy in order to justify their decision to pay a substantial fee to join Direct Buy.  This can result in more of going broke to save money.  People may end up buying things that they would not have bought under other circumstances.  Economists would call this a “distorted allocation of resources.”

Questions to Ask at a Direct Buy Presentation

Below are some suggested questions to ask if you decide to attend a Direct Buy presentation.  If you also conduct some internet searches on Direct Buy before you go to a presentation, you will undoubtedly have more questions than those listed below:

  1. What percentage of people finance their membership costs?
  2. If I have to finance my purchase and can pay only the minimum loan payments each month for the maximum period of time that Ican get, what will be the total cost of each of the programs? (Ask for examples of ranges of costs. Direct Buy people know this.  It is a matter of getting them to share this information.)
  3. Does Direct Buy provide financing for those who can’t afford to join on a cash basis? (If so, this is another money-maker for Direct Buy, besides the membership fees collected.)
  4. What percentage of people drop their memberships at each level?
  5. Alternative question:  What percentage of people renew at each level?

As an added measure of preparation for a Direct Buy presentation, conduct a search on the internet on Direct Buy.  You should be able to find a substantial amount of information that will help prepare you to ask more questions at a presentation, or perhaps convince you that the total overall cost compared to the advantages gained is not worth it to you.  You could conduct searches on “Complaints Direct Buy;” “Advantages Direct Buy;” “Disadvantages Direct Buy;”
“Consumer Reports Direct Buy;” “Scams Direct Buy;” “Actual Costs Direct Buy Memberships;” “Real Costs of Direct Buy Memberships;” or related searches.

Conclusion

Direct Buy can be made to “work” for consumers if they have the required cash to join; if they can buy through Direct Buy with cash; and if they actually need and were going to purchase something anyhow and, at the same time, the total savings exceed the membership cost substantially.

If consumers must finance their membership at any level, which probably means that they have to finance any purchases through Direct Buy as well, the chances to save money diminish quickly or never materialize in the first place.

Question:  Is it worth it?  Consumers will have to decide based upon their own circumstances and whether or not they can actually save money.  Those who aren’t good at mathematics should take a “numbers” person with them to a presentation to help them; not go at all; or do some homework on the internet before a meeting