Why now might be the time to look at DirectBuy

Posted on July 9th, 2009 – 11:05 AM
By John Ewoldt

I have not been a fan of DirectBuy in the past, the company that lets its members buy thousands of items at cost. You may have seen its infomercials with members praising the company for savings $5,000, $10,000 and even more on furniture, kitchen cabinets, carpet and other purchases. The national company has locations in Bloomington and White Bear Lake. What has irked me about the company in the past is the lack of transparency. Only after sitting through a one-hour presentation do potential members learn that the enrollment fee is $4,500 (it may be as much as $5,000 but the Bloomington owner would not confirm it). And members have told me about other fees that you don’t hear about in the infomercials–a 6 percent handling fee and a 17 percent shipping fee on each purchase, as well as sales tax.

But recently, DirectBuy has started offering a 30 day trial membership  as well as shorter-term memberships. I have always recommended that anyone who is considering joining make a list of items to consider for purchase. Write down manufacturers and model numbers to compare in DirectBuy’s catalogs or website. In the past, members didn’t have 30 days to make these comparisons. This is more transparent way for new members to know if the large cash outlay will pay off and, in my opinion, it should have been done years ago.

DirectBuy is not a good deal unless a member plans to make many major purchases, such as remodeling a home or furnishing a new home. Without big purchases, members don’t recoup the original investment. I have never been a member and the owner of the Bloomington franchise refused to let me take advantage of the 30-day trial, but members have told me that DirectBuy’s price on carpet, for example, is slightly higher than Jack Rubenstein carpet wholesalers, which has no membership fee and is open to everyone.

To set up an appointment, call the Bloomington location at 952-835-0790 or the White Bear Lake franchise at 651-287-0050.

DirectBuy members, do you think you have gotten your money’s worth?

10 Responses to "Why now might be the time to look at DirectBuy"

Jan Michaletz says:

July 9th, 2009 at 11:59 am

The fact that YOU were not allowed to take advantage of the 30-day trial membership is a red flag to the rest of us. So much for transparency! Although I’ve considered membership in the past, your experience killed the desire.

Andrew Robinson says:

July 9th, 2009 at 12:01 pm

Yes, I have gotten the value many times over, and that’s only the start! DirectBuy is wonderful. The sales staff are friendly, accomodating, and thorough. And shipping is usually not 17% either, unless it is a very heavy item.

Plus, they put out a quarterly catalog with prices even cheaper than cost, and usually with shipping promos (free, or very very small charge), which can really make for big savings.

John Ewoldt says:

July 9th, 2009 at 12:06 pm

Andrew, thanks for the info. FYI, I was told that anyone taking advantage of the 30-day trial cannot purchase items from the quarterly catalog deals. If shipping isn’t usually as high as 17 percent, what is an average then?

Andrew Robinson says:

July 9th, 2009 at 12:41 pm

I am not sure about the 30-day trial and the catalog; sorry I can’t answer that.

As far as shipping goes, it tends to be in the 5-8% range.

Also, regarding the handling fee, not all items are charged the fee. Categories without the handling fee are generally the “ultra-competive” categories: electronics (cameras, DVD players, etc); kitchen electrics; appliances; etc. (These are the same categories where the prices aren’t necessarily cheaper than sale prices at traditional retailers, but the benefit is that you don’t have to wait for a sale to get a solid price.)

Hope this added info helps!

Lori says:

July 9th, 2009 at 5:05 pm

We joined years ago and had to pay a 75.00 fee every year to renew membership. Reminds me of a timeshare, they just keep taking. Not worth the money.

John Ewoldt says:

July 10th, 2009 at 8:01 am

Rick, a current member of DirectBuy, wrote in an email to me that there is also a $99 annual renewal fee to maintain your membership after the $4,500 to $5,000 membership fee upon joining.

Are there any new members out there willing to say how much you paid? Is it $4,500? $5,000?

Andrew Robinson says:

July 10th, 2009 at 8:51 am

$4700, with an annual fee of $99 per year AFTER 10 years.

Cindy says:

July 12th, 2009 at 4:18 pm

Is now really a good time to join Directbuy?

There seems to be lawsuits from coast to coast against Directbuy:

Phil Ganezer et al. v. DirectBuy, Inc et al
Case No. CV-08-8666 GAF
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

On behalf of “all consumers in the State of California who purchased discount buying organization memberships from Defendants,” Plaintiffs filed a class action lawsuit in Superior Court against DBI, an Indiana corporation, The Sequoia Group, a California limited liability company and citizen of California, and Does 1-100, alleging violation of several of California’s unfair competition laws. Plaintiffs contend, among other things, that the defendants falsely represent that their DirectBuy club provides its members the opportunity to buy goods and services directly from manufacturers and suppliers at cost, and that the club otherwise defrauds its members through improper fees and overcharges.

Ponzi et al v. DirectBuy Inc et al
Case Number: 3:2008cv01274
Court: Connecticut District Court

Randall et al v. DirectBuy, Inc. et al
Case Number: 4:2009cv00243
Missouri Eastern District Court

Wilson et al v. DirectBuy Inc et al
Case Number 3:2009cv00590
Connecticut District Court

DirectBuy Inc v. Giacchi et al
Case Number: 2:2009cv00110
Indiana Northern District Court

In an article

http://www.thebostonchannel.com/news/18151130/detail.html

“It was appealing,” said Rhonda Lisio, who paid nearly $4,200 for a membership in 2006. “The thought of saving money and buying directly from the manufacturer.”

But she said she found that the club’s so-called factory prices weren’t the bargain she expected.

“It really didn’t add up to a great savings because they were jacking up the first price that they were showing,” Lisio said.

Lisio’s complaint isn’t isolated. Team 5 Investigates obtained a copy of a recently filed class action lawsuit that claims DirectBuy members actually paid more than the wholesale prices they were promised.

In the suit filed in federal court in Connecticut, DirectBuy is accused of making “false” and “misleading” representations about consumer savings because “unbeknownst to Class Members, Defendants receive tens of millions of dollars in ‘kickbacks’ from manufacturers and suppliers out of the purchase prices paid for products by DirectBuy members, thereby resulting in Class Members paying more than the direct price.”

The suit claims there are thousands of dissatisfied DirectBuy members.

DirectBuy told Team 5 Investigates the suit is “misguided.” They denied all accusations, saying the company never “received any illegal or improper ‘kickback’ of any kind.”

Yet it is undeniable that Directbuy does receive rebates, discounts and other price reductions from their suppliers (there’ just not illegal):

A May 11 Watchdog column on DirectBuy disclosed the rebates, which are kept secret from its members and from those it entices to join through high pressure sales techniques.

http://blogs.courant.com/george_gombossy/2008/05/directbuy-enter-with-eyes-wide.html

“More disturbing to me is that DirectBuy attempts to hide the fact that not all savings it sees from manufacturers are passed on directly to members.

By reviewing the 260-plus page agreement with its franchise owners, I learned that DirectBuy reserves “the right to keep rebates, discounts and other payments from manufacturers and suppliers.”

It also keeps early-pay discounts, and all DirectBuy purchases are paid by the member at the time of ordering.

The agreement also reveals that DirectBuy owns the finance company (Beta Finance) that provides the 17.5 percent loans to pay for the bulk of the membership fees. It also owns the shipping company UCC Distribution Inc., which transports some of the merchandise from the manufacturer to the franchise centers.”

I’ll pass on the $4700 deal for right now.

Sue Hunter says:

July 14th, 2009 at 9:09 pm

I did infact test out the 30-day trial DirectBuy offers due to the fact I needed new flooring in my entire home. After some research I would advise no one to pay the ridiculous fees to become a direct buy member. I priced out an identical carpet from a wholesale compay you wrote about, Jack rubenstein wholesale and not only did I get a better price on the same carpet but there was no need to pay the outrageous DirectBuy fees.

cuedub says:

August 20th, 2009 at 2:40 pm

We became members about 5 years ago when we were building a new home and the joining fee at that time was $3000. We do pay a $99 annual fee. We have made many purchases through DB and like many outlets some areas offer great values and some do not. It depends on how much buying power DB has. TV’s offered almost no vaule (better of going through amazon and getting a bigger discount). Kitchen cabinets were terrible as well. Our lighting and furniture costs were 1/2 of what could be bargained locally at any store. We made back our membership fee ($3000) on our appliances alone. So if you decide to join do your homework. Conclusion for readers…. only join if you are planning to make some major purchases (Remodeling/ building etc.)