With DirectBuy, it will cost you a lot to save

Your town or city might have been blanketed recently with newspaper ads and TV commercials for DirectBuy. The nationwide buying club, with headquarters in Merrillville, Indiana, promises members access to 700 brand-name manufacturers of home goods and the opportunity to buy merchandise with no “hidden store markups and middlemen costs.” Ads invite you to an open house, where you’ll see “confidential” wholesale prices. “We can’t show you the brand names and we certainly can’t show you the prices,” read one ad. What it also doesn’t show you is DirectBuy’s steep membership cost.

The Real Deal
To evaluate the pitch, we went undercover at two DirectBuy franchises in New York. Both gave us the same hard sell and offers of up to 70 percent off retail prices if we were to join. Only after an hour and a half of sales pitches and video testimonials from members did we learn the membership fee: $4,900 to $4,990 (plus tax) for three years and then $190 a year for seven more. Financing is available at 17.75 percent.

After the fee disclosure, we discovered that we had to sign up on the spot or never come back. We couldn’t bring DirectBuy’s “confidential” prices elsewhere to comparison shop, the representatives said, because this would likely anger retailers who might then retaliate against the manufacturers by refusing to sell their merchandise.

The fine print in the DirectBuy contract says you cannot return items, cancel orders, or terminate your membership. When we asked if, after plunking down $5,000, we could cancel and get a refund, a salesperson said, “You’ll have to check state law.” A review of New York state law revealed that the three-day cooling-off period for canceling contracts wouldn’t apply in this case.

Tacked onto the cost of merchandise—which you select from catalogs since DirectBuy has limited showrooms—are a 6 percent handling fee, shipping fees, and tax. Goods are typically shipped only to your local center, so you might pay additional fees to actually get your new stuff home.

Just how good are the prices? We compared them against those of other retailers. Prices for electronics and appliances were often only slightly better than those at online retailers and in some instances higher. For example, a 46-inch JVC flat-screen TV selling for $2,586 on DirectBuy’s site cost $2,095 elsewhere. We did find deep discounts on flooring and high-end furniture. In fact, one member we interviewed estimated that she saved about $50,000 over several years on furniture and a kitchen remodel using DirectBuy. Yet the club did poorly on some basics. We found a Kohler bath faucet for $300 less on a kitchen-and-bath Web site.

Some DirectBuy members complained to us about poor customer service and long waits for merchandise. But since DirectBuy outlets are franchises, service varies by location. Most outlets have a good record with the Better Business Bureau, though some have a poor one or have been suspended from the BBB.

The Bottom Line
The lack of price transparency makes it hard to evaluate whether you’ll save by joining DirectBuy. But even if you were to save 25 percent on purchases after joining, you’d need to spend more than $20,000 just to recoup your membership fee. DirectBuy might save you money if you’re furnishing a house from scratch or doing a major renovation. But since you can’t shop around beforehand, you’ll be joining blind.—Chris Fichera

This article first appeared in the September 2007 issue of Consumer Reports Money Adviser.

Comments

[Kevin]

I'm very wary of the belief that they are offering substantial discounts on high-end furniture (among other things).

In my experience high-end furniture can often be bought for significant discounts simply by negotiating with the sales staff, and/or waiting for sales.

While your source likely believes she saved $50,000, I sincerely doubt that is an honest figure. She may have saved $50k over retail, but who pays retail, anyway?

[Randy]

I think this analysis of DirectBuy is fair to a point. Yes when I made my visit to DirectBuy I had to decide to join that day but they beat the retailers by a mile. I bought kitchen cabinets that only seven years later were falling apart. These cabinets had a lifetime warranty so I called the dealers I bought from and they sent someone out to look. I was told that this was not a manufacturing defect and therefore was not covered by warranty. Appalled and angry after spending $20k for these cabinets I counted it as a loss and decided to replace. Anyway, looking online I found DirectBuy. Went to the open house and, while there, I noticed that one of the brands they carry was what I already had. I expressed my dismay at having bought these cabinets and the salesman told me he could have their rep call me. I wasn't interested and just wanted to see what they could do for new cabinets. They showed me a book of cabinets other members bought and I could have easily saved 50% or more seven years ago. So I sign up. Next day our salesman calls and says he spoke to the rep and he will be calling me, as the guy claims he cares greatly about this. Yeah yeah. Later that afternoon the rep calls and shows up two days later. Remember I didn't buy my cabinets at DirectBuy. Well guess what, they replace the cabinets at no cost to me!!!! Crazy, huh? Well I tell everyone now. I will avoid retailers now at all costs. DirectBuy won me over. Try getting that service anywhere else.

[Don]

Randy, your post about how well DirectBuy serviced you must be balanced with the few thousands of complaints online.

[Suzanne]

I agree with the article that in order to recoup your membership fee you will need to spend alot. We joined Directbuy because we were doing an addition on our home. For us, it has worked out because we purchased kitchen cabinets. I had an owner of a Kitchen design store tell me that the same brand/cabinets, considered high end in his store, would have been atleast $20k more. With directbuy we were able to go with a custom line of cabinets and not have to compromise on anything. That wasn't the case at a local home improvement store. We spent far less at Directbuy
then we would have at the local home improvement store and got exactly what we wanted.

[Brandon]

I honestly would never have joined DirectBuy my self. Fortunately, my parents were long time DB customers from the UCC days and they got some discount to buy us the membership for a wedding gift.

Besides the initial cost, the $190 yearly "maintenance" fee is really steep. It really puts the pressure on you to use the membership or you're just throwing money away. It's an endless pit. If you're not in the position to use the membership to a level where you'll save $190 a year in purchases you're wasting your time. And the 6% handling fee often cuts into that.

That being said, we've gotten some good deals on furniture and are currently looking at flooring and cabinetry. These are things with enough markup to make it worthwhile. It's real benefit is home furnishings which typically have a healthy markup. But I've also found myself spending just as much as I would have elsewhere but ending up with higher end purchases than I would have originally invested in.

Absolutely stay away from electronics. The electronics market doesn't have a significant markup and the real purchasing power comes at places like BestBuy that can do large volume purchases. They have started to pick up some high end audiophile lines but I haven't had the time to compare the prices to what I can negotiate at a high end audio store.

Additional points. Do your research. They say they have to shoot down you doing comparison shopping, sure. But if you don't go to the store and test drive or see the actual merchandise you're just a fool. Buying something site unseen is just asking for trouble.

Don't be afraid to refuse it if it's at all damaged. Usually this requires inspection in their loading bay.

Be patient / plan ahead. It can sometimes take months to receive your order. If you're an impulsive buyer this isn't the club for you.

[John]

I joined Direct Buy but the initial cost was substantially less and was in the neighborhood of $2,300 with annual costs of $99. I know I have recouped my total investment in the several pieces of furniture and appliances purchased. We comparison shopped for all buys and came out ahead.

[Phil C]

I have been a member of Direct Buy for about 20 years now. It is true that the membership (I was quoted cost $3,595.00 last year in Atlanta) is steep if you are only looking at electronics or appliances which are very competitive in retail stores with low mark ups but for Kitchen Cabinets and or Flooring, I bought and had Brazilian Cherry hardwoods installed for a fraction of retail quoted cost, these types of purchases alone will save many times the membership fee! along with my recent purchases of Cuisinart pots and pans and leather goods I have saved many times over the annual $199 renewal charged here. You must be renovating or furnishing a home in order to save initially.

[Melissa]

Have an open mind & decided for yourself but here is my take......

DirectBuy has been given good & bad press. I am a member and would like to clear up a few misconceptions. First of all DirectBuy is not for everyone. It is not a retail store. DirectBuy is a purchasing agent library where members have access to about 800 manufacturer & supplier catalogs. In addition there are samples of flooring, cabinets, upolstrey, window coverings and some others things. Members get to purchase their items at cost, no retail markup.

If you are a person who is not willing to do a bit of work to save money then it is not for you. My DirectBuy provided me with a class so I could use all the catalogs & the service staff is always willing to answer questions if I come across something difficult. If you suffer form instant gratification & can not wait for your items to come then it is not for you. But if you like incredible selection and can be a bit patient then DirectBuy would be a great fit for those who like to save their money.

I paid off the membership with my savings that would have normally gone to retailers. It took me about 6 months. Now every time I buy something I take the savings that I would have normally paid retailers & put it in my travel account!

Regarding the pricing I still do price research before I purchase (old habits die hard) but 95% of the time DirectBuy wins- When I signed up the salesrep informed me that some items just don't carry a high markup & are sometimes sold below costs in the regular market- DirectBuy does mark the catalogs with a "Marginal savings Tag" so members are aware of these items and can do their price comparisons. I have saved anywhere from 25$ a pair on sperry-top sider shoes to $100.00's on sporting equipment (boxflex weights & bats, gloves) to household items such as Lenox & kithcenaid to 1,000's on furniture & cabinets and this is with all the shipping, handling & tax figured in. Most retail consumers don't understand that shipping & handling is in their retail product prices as well & that is on top of the markup.

I don't think that you need to be doing a large remodel to make it worth it, that's only if you want to recoup your membership overnight- I have made friends with a lot of other members that I see on a regular basis & some have recoup'd their membership overnight, some (like me) in 6-9 months others it took 1-2 years of purchases. But that's still a good investment considering most everyone purchase things their entire lives.

As far as the sales process goes.. it was informative I was given plenty of real life examples to make my choice. I read a lot of blogs about the buy now or never come back so I was prepared & asked the rep up front. She did inform me that once I did go through presentation & was shown the confidential pricing I would need to make my choice afterwards. If I decided no then I would have to wait 7 years before returning- however you feel about that it's just their way of doing business. I was willing to live with it because I understood the payoff that I would be able to buy things at cost for the rest of my life.

I had already done my research so I was prepared & after the presentation they answered all my questions to my satisfaction - I have been extremely happy with my choice. Yes there is the occasional back order or damaged merchandise that shows up but this is not DirectBuy's fault and they have always been willing to resolve the issue.

Customer service is decent at my DirectBuy they take about 48-36 hours to respond but I understand that in order to get questions answered they sometimes are waiting on manufacturers to get back to them.

They have most brands out there and many that retailers do not offer. For those few items that they did not have I found some others just as good from other manufacturers. The one thing I really wanted that they did not carry I bought in retail which was fine because I saved so much money on my other purchases I could afford to splurge.

DirectBuy is not perfect but neither is retail or any other Venture in life but I have found it a fantastic tool to save money! I hope this review is helpful to those on their way to DirectBuy!

[David Schwartz]

Really, it's 100% completely obvious that DirectBuy is a scam. Even the people defending DirectBuy don't dispute the clear and obvious evidence that DirectBuy is a scam.

1) They use the type of high pressure sales tactics that *only* scams use. I know of no legitimate business that locks you in a presentation for hours with a personal salesman.

2) They demand you make a huge financial decision immediately and back that up with threats. They don't just try not to let you have time to make a reasoned decision, they literally will not let you have time.

3) They provide you no opportunity to assess the value of what you are buying prior to committing. They only permit you to change your mind where they are required by law to do so.

4) They disclaim any verbal promises and don't give you a chance to review the written promises.

So it's a scam. Obviously so. There's not even any doubt. These three things are the clear hallmarks of a scam.

Not every scam tells outright lies. Some use more subtle deception that may even be legal. Not every scam outright steals money from every person. Even in a Ponzi scheme, some of the first people to join may make money.

Note that the people *defending* DirectBuy don't even dispute the facts that make it a scam. They just say it's not a scam because some people benefit from their membership. That argument doesn't even make logical sense. If nobody benefited from DirectBuy, they wouldn't be in business.

It's just not likely to be you.

[Millicent Neal]

My husband and I are looking into using Direct Buy to purchase draperies and furniture for our home. We usually purchase high end merchandise, so I did a tour of the Direct Buy showroom. I would say, if you are not in the market for luxury items and can use less expensive things then don't go to direct buy. However we plan to spend several thousands of dollars, and I feel we may come out ahead over a period of time with Direct Buy. My big drawback is that you have to know what you want before hand, since there is no way of making selections in the store. Then you are paying a very high membership fee to begin. Next you must deal with the manufacturer about problems. Since, I worked retail for years and know the price markup, even on so call discount and sale merchandise, Direct Buy to me offer something worthwhile to use, for people who are looking to purchase a lot of stuff. I don't think it is a good deal of household who just need a few things, that cost less than $1,000.

[Diana]

My husband and I recently went to a DirectBuy open house in California. He knew it was a sales scam the moment we walked in, but we stayed for the presentation anyway. After an hour and a half, they finally get to the 'membership fees' and it was $6000 for two years, and $300/yr for the next eight years.

That's when we walked out.

After reading other posts about handling fees, no returns, etc, I believe the whole DirectBuy idea is a bad idea.

[Jim]

Just want to say thank you for the article. About time that direct Buy is exposed for being a scam. I made the mistake of joining and have to say that this company is worse to do business with than any other company. I hope that consumer reports goes back there or maybe 20 20.

[Deana]

I joined Direct Buy when it was UCC about 11 years ago with my first husband. It cost $2200 with $100 a year for 10 years. We bought a bedroom set and saved $1000 over Seamans pricing (and I always thought they were pretty cheap) and then a dining room set $1000 less than we saw it retail. After that, all savings were free. A few years later I remarried and built a house and we bought another bedroom set, 26 light fixtures, and lots of Kohler (4 bathrooms and a kitchen) and a huge jacuzzi tub all through Direct Buy. We saved over $5000 on Kohler over Home Depot prices. The light fixtures everyone comments on as they are really unique and you never see them in the regular lighting stores. The nice thing about DB is that they can access the small manufacturers who can't handle having their inventory in 1000 stores so you can have some interesting items that others haven't seen. You can go onto the website for the manufacturers to see where they may have stores locally that have the product you are interested in, so I'd go there and make sure the quality if good. The flip side is that you can't return it if you don't like it, but you can if its broken. I ended up ordering one part I didn't need, so I sold it on ebay for a few dollars more than I paid for it. Like previous comments, its not worth it if you only need one or two pieces of furniture, but if you are going to be redoing a few rooms or building a house and can afford to wait the 12 weeks (some items take a lot less time - the lighting fixtures all took about 3 weeks), then its great. We also got a crib, our wedding invitations, a watch, some cabinets and a jacuzzi tub for my father-in-law. I probably ordered more but that's all I can remember for now.(With the savings on the tub, we had enough to pay for buying the renewal). Also, we were able to print prices of tvs and exercise equipment and then go into stores and have them beat the prices and deliver it and put it together for us, so DB came in handy that way too. Overall, we have saved over $15K and that is a very conservative number.

[Andrea]

We just joined on Sunday, and are wondering if it will actually benefit us. I have not done research as yet, but wonder if you can cancel in Michigan, based on state law.

Thanks!

[Jim]

Direct Buy may not be a complete scam but it is very scam-ish. Remember, existing members get discounts and fee reductions if they sign up new members...so take what they say with a "grain of salt". The internet has freed us all. With proper research we all can get really good deals on most if not all items.

[wayne]

My wife and I set an appointment for DB On 12-6-07 for 11:00 a.m. - when we arrived they did not have our name on the "schedule" but let us in anyway. Red Flag!

The sales staff was cold but direct to the point, which I appreciate. My first and only question was about the membership fees - $5900 start-up! Scary monster!

The good news, we did not sit through the 90 minute sale pitch and got out with a free cup of coffee! Make sure you ask about the fees up-front!

If you are looking for discounts I suggest the Internet. Lots and lots of companies offering considerable discounts. Should be interesting to see how long DB lasts in this day an age of the information Super Highway.

My heart goes out to the franchisees stuck with a white elephant.

[nora]

I just joined direct buy yesterday 12/8/07 and now I want out of my contract. Anyone out there know how to three day rule work in
WA state? Help I don't want my spouse to find out about this.

[Eric]

After reading all this I am still unsure if it is possible to make it pay off when building a new house. I am not a member yet but would be making lots of purchases such as fixtures,cabinets,flooring,and windows. It sounds like buying experience varies at different showrooms. Does anyone know hown Oklahoma City rates?

[Larry]

All the folks who keep on saying it's a scam just don't get it. DIRECTBUY IS NOT FOR EVERYONE.
If you're planning on spending around $20,000 on stuff like furniture, kitchen cabinets and flooring then you'll save the membership cost pretty quick.
Absolutely, do your homework. Go to the Directbuy open house with some quotes of stuff from other places so you can check while you are there.
And I believe that even though they will not tell you ahead of time, they WILL refund the membership within a limited time. Just ask to speak with the owner.

[Fed Up WIth Scam]

Ever wonder why the savings aren’t all that great or that there are no guarantee of savings in the membership agreement - that’s the agreement between the member and the individual franchised location?

You have to do some research, I may be wrong and it seems that one answer might be contained in their publicly available UFOC - Uniform Francise Offering Circular - for Directbuy. It contains disclosures on how they operate and that they do in fact received discounts and rebates without passing them on to the franchised location and the stores. These discounts and rebates include volume incentive discounts, quantity discounts, and pre-payment discounts, among others. Also, contained in the UFOC is a copy of their Standard Franchise Agreement. Conataind within that are contractual clauses that allow the franchisor to keep all discounts and rebates without passing them on to anyone. They can say that they pass them on though when and if caught, they are contractually allowed to do so. Crafty euh?

Here are Two service companies collect and sell copies of franchise offering circulars:

FRANDATA Corporation, 1725 Eye Street, NW, Suite 600, Washington, D.C. 20006, (202) 336-7632, www.frandata.com (generally US$2 per page)

FranchiseHelp, Inc., 101 Executive Boulevard, Elmsford, NY 10523, (914) 347-6735, www.franchisehelp.com (US$190 for complete UFOC and exhibits)

Look it over carefully.

Hope this helps everyone who wants to do some research.

[Mario]

Not a scam, just not a wise investment. Direct Buy infomercials air early in the a.m. when you're zombied out, leading you to believe you should join ASAP. Those who are members are just leaving us their comments which pretty much say if you are filthy rich and have money to burn, then, go ahead and join. If you are not stinkin' rich, this club is not for you. Well let them have their club. The rest of us will shop around, use the internet, and be better off for doing so. I can't believe I was actually watching the Direct Buy infomercial.

[Dan]

I agree with Consumer Reports:

"The lack of price transparency makes it hard to evaluate whether you’ll save by joining DirectBuy."

Some quotes I found from DirectBuy's Membership Agreement:

IMPORTANT MERCHANDISE TERMS:
- The Club disclaims all warranties regarding the merchandise
- Any need for subsequent repairs or service, after receipt of merchandise, is members’ own responsibility.
- MERCHANDISE MAY NOT BE RETURNED.
- The entire merchandise price plus handling fee, estimated freight and sales tax is required as a down payment at the time of placing an order with the Club.
- Suppliers reserve the right to change their prices without notice.
- From time to time some suppliers and services are dropped and others are added
- Only the supplier has the right to cancel an order.

http://edumacation.com/DirectBuyMembershipAgreement

No Warranty, No Price Guarantee, No Returns, No Guarantee of any Savings, 100% purchase price due upon ordering, "Suppliers" (I thought DirectBuy
was dealing direct with manufacturers?) can change prices or cancel at any time, and no guarantee of "Supplier" availablity.

Not a scam?

Tons more information I found at

http://edumacation.com/DirectBuy

I would like to see cr do a follow up on this outfit.

[woodworker businessman]

For those that say they are/were looking to buy high end cabinets. Were you looking for them at the big box storesprior to directbuy? If so, then you were not looking for high end. The big box store can't stock high end cabinets. Only a reputable cabinet maker can give you custom high end cabinets. But when you do so there are NO shortcomings. You tell them what you want and you have to approve the look before you pay.

Work done by professionals is done on a percentage of completion basis, no professional would ever ask for 100% of all fee in advance.

They will not fall apart as to a professional, reputation is everything and one bad comment from a former client is one too many.

I can almost guarantee that direct buy can not offer true high end quality custom products as any saving as true high end products can't be discounted. The professional cabinet makers who do this work are under high demand by people willing to pay for the work. I'm speaking from 20 years experience. I turn away more work than I can do in each year.

Keep looking for bargains, but don't confuse them for high end.

[Doug]

SCAM its a scam, I joined sorry I did, kitchen cabinets through them $10,800 & sum change not counting delivery & other charges, through home center around $12-13,000 for kraftmaid or thomasville take the 10,8000 & add membership fee & I just paid way more for kitchen cabinets. save your money, take a vacation & shop retail!! ohh I like the slogans they use " dont stay in retail jail, join directbuy & save" yeah right!!

Doug

[amy]

joined several months ago at the shreveport store. everyone very nice and very helpful. building a ouse in 2008 and buying furniture and appliances. Feel like I will save money and recoup the initial investment. so far I can save $2.00 A square foot on hard wood floor alone. Will update you on how its going