One of the enduring, widespread consumer scams is Direct Buy that uses high pressure sales methods to lure consumers into paying a large membership fee. by Joel S. Hirschhorn
(libertarian)
Tuesday, March 2, 2010
There are two reasons why consumers continue to be victimized. Greedy and dishonest companies and individuals are willing to go to extraordinary extremes to steal peoples’ money. So many consumers have too little intelligence and critical thinking to detect the truth about those who want to steal their money. Here is my newest discovery of a major consumer scam.
If you want to experience one of the most painful, hard sales pitches in the universe, then accept an invitation to an open house at a Direct Buy showroom. If you have ever suffered through a lengthy sales pitch for a time share or remember your absolutely worst experience in a car dealership, then you have a hint of how awful the Direct Buy sales pitch is. From reading many comments from people all over the US and Canada who have also been suckered into a Direct Buy showroom there is a highly structured sales pitch given everywhere.
The process consists of three time-wasting stages: first spend time with small talk with a smiling sales person, then get herded into a room with other couples attending the open house to hear a much more detailed sales presentation, including several videos and lots of clever question and answer sessions with the audience. Following that you are taken back for another private conversation with the first sales person who is clearly the closer; that is when you really get the high pressure treatment designed to get you to sign up that day and pluck down about $7,000 for a ten year membership (though the price seems to vary with location). If you don’t sign up that day you are told that it will cost another $1,000 at a later time.
With the original invitation to the open house you are told that you will get a 30 day free membership. But that membership is very limited. What really angered me was that there was no piece of literature that we were given to look at with details about membership rights and costs that we could take with us. Talk about a high pressure sales pitch!
After my bad experience I discovered that there is a national class action lawsuit against Direct Buy for fraudulent marketing. Here is what the suit claims: The company misleads customers by promoting a $5,000 membership fee which entitles members to purchase a wide array of goods at wholesale prices with no markup, and that it makes no profits other than from the membership fees. In reality, it makes a substantial profit from product markups, exorbitant shipping and handling fees, and tens of millions in annual rebates from manufacturers that it conceals from customers.
The whole logic of Direct Buy is that you will be able to pay wholesale prices from manufacturers and avoid all the markups of retailers. But you would have to spend a small fortune to justify the huge membership fee. Plus, there are several charges added to the base manufacturer’s price that cut down on the savings you might obtain. Further, the whole premise is basically that you are a stupid shopper and cannot really tell whether you are getting a genuinely low price for stuff on sale at ordinary retailers. And hardly anything that you might buy can be seen at the Direct Buy location, because virtually everything that is purchased requires considerable work looking though catalogs.
If the Direct Buy sales pitch really told the whole truthful story, then logic says there would be many millions of people who bought everything there rather than through ordinary retail channels, including the Internet. In fact, if Direct Buy was such a great buy, then the whole huge world of retail would have screamed to their wholesalers to stop selling stuff through Direct Buy. But obviously there are not millions of Direct Buy members. From reading many complaints about this company on websites, especially consumeraffairs.com, it becomes clear that my experience has been shared by many others. I wasted two hours of my weekend because I fell for the email marketing notification I received, which now I realize should have been classified as just more spam.
Finally, as I rode home after my wasted time at Direct Buy, I mused about the logical contradiction that was embedded several times in the intense sales pitch. They boast that because you save so much you will be able to buy higher quality products, but that just tells me that if you behave this way you will end up spending as much money as you would have spent as a nonmember shopping at ordinary retailers. Especially when you factor in the thousands of dollars for membership, and not lifetime membership at that!
My advice: If you get an invitation to attend an open house at a Direct Buy outlet, toss it. Don’t waste your valuable time. And certainly don’t bet that you will definitely save enough money to justify the high upfront cost of membership.
I know lots of Direct Buy members will surely write in that they are very happy and satisfied, but considering a large fraction of the public are not very intelligent or terrific shoppers I am not impressed with such opinions. No matter what the business or corporate scam there are always people who will not complain about it. Scammers, rip-off artists and thieves like Bernie Madoff are so successful because such a large fraction of people are dimwits. And once someone pays more than $5,000 upfront for a membership they are psychologically programmed to conclude that they have made a smart choice.
But there are huge numbers of complaints about Direct Buy on countless websites. Here are two of my favorites:
I was recently employed with Direct Buy. I’ll save you the time and the $4200 membership fee! They are a scam! They only get people that are stupid and have money! The way they talk about prospect customers is degrading and disrespectful! Do NOT and I mean DO NOT attend an open house!
I attended one of these scams and walked out. The salesperson that invited me, almost tackled me as I was trying to escape. It’s an out and out scam. The one in our town has been in operation for over 5 years and is still in business. Seems that we have a lot of people with lots of money and no brains.
Here is my bottom line: The very nature of the sales pitch used by Direct Buy says something very, very negative about the company and what it is selling. The way I was treated was not appreciated and I do not want to patronize a company that uses such high pressure sales tactics. After all, the medium really is the message. But Direct Buy has been around a long time, and its franchises are still in business. Maybe a lawsuit will bring it down.
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The views expressed
in this article are those of Joel S. Hirschhorn only and
do not represent the views of Nolan Chart, LLC or its affiliates.
Joel S. Hirschhorn is solely responsible for the contents
of this article and is not an employee or otherwise affiliated
with Nolan Chart, LLC in his/her role as a columnist.
If you think Madoff ran a large scam, here's another example that has ripped off millions of people for several decades, to the tune of 10s of billions of dollars:
Amway is a scam, and here's why: Amway pays out as little money as they can get away with, so they support the higher level IBOs ripping off their downline via the tool scam.
As a result, about 99% of IBOs operate at a net loss, while the top 1% make several TIMES more from their Amway tool scam than from the Amway products. This was made illegal in the UK in 2008, but our FTC is unable to pull their heads out of their butts to stop it here.
Read about it on my blog, I suggest you start here: http://tiny.cc/D5oJh and forward the information to everyone you know, so they don't get scammed.
I have used direct buy for about 5 years now. I saved the $4000 I paid for the membership in the first year on purchases like Hunter Douglass blinds a gym quality exercise machine and some Minka Aire light fixtures., later I saved even more on Canton Speakers(50% of retail), Onkyo reciever(beat 6th ave, etc), Craftmaid cabinets, and high quality carpet($3/sq ft vs $5 at local discount carpet place). Overall I am very satisfied with the membership. My complaints are the use of catalogs is a bit cumbersome and learning what they have to offer is somewhat difficult. Also an 8% handling fee on some but certainly not all items adds to their profitability not my savings. (Profits don't bother me but to say in the sales pitch the $4000 covers profits and overhead is misleading, they still need to charge over the wholesale price in some instances to keep lights on and their desired profit margin).. I noticed the handling fee was not completely consistant between the 2 Direct Buy locations I have shopped at.) Overall I get full manufacturer warranty and support for similar or better prices compared to shopping internet sites (great peace of mind - low price and low risk). My experience is the best price (and perhaps risky in my view) internet site can beat direct buy prices by a few percent on say electronics but not usually. Also things like household items, i.e. carpet, granite, cabinets, furniture you will likely save a lot at direct buy. for example 15k of cabinets at Lowes or Home Depot will be about 11k at direct buy. For the most part Lowes will not beat them because they use a higher multiplier than Direct buy I think .38 vs .25 and companies like Craftmaid send out a standard supplier catalog. Bottom line if you are building a house, finishing a basement or spend a good 10k to 20k on some nice things you will probably benefit with the membership, but it will be more work for you to shop there...they do have a website with the products but it is limited in its scope and usefulness.
I missed that you were quoting someone else that was a previous employee.
As far as not knowing anything about the 30 day membership thing I just went on to the website and under FAQ it explained everything so maybe people need a little more research before going to Direcbuy just because you had a bad experience does not mean everyone will.
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