DIRECT SELLING: CREATING

NEW OPPORTUNITIES
D
irect selling, considered to be a nascent segment sector in India, has been growing strongly and the total number of direct sellers has almost doubled between 2004 and 2009. There are more than 3 million people in India who are involved in direct selling and earn between Rs 500-4 lakh per month depending upon the business they generate. Direct selling industry in India which started in 1990s, was a Rs 4,120 crore business in 2009 and is estimated to touch Rs 7000 crores by 2012-13. Direct selling the simplest form of selling is regaining its importance in corporate profiles. The concept has been in existence for many years, but it is now that not only companies but also general people in rural areas are realizing its potential in true sense. While the companies are trying to increase their direct selling network to take their products into the remotest markets, for rural population, it is turning out to be one of best options to remain employed and have regular income. It is surprising to see that many people in tier II towns in India have membership of brands reaching out with Direct Selling. Interestingly, though they are not too aware of the history and background of the brand, most of them are happy selling it as it gave them a fixed monthly income. Thats the potential of direct selling which simply means marketing and selling of products directly to the customers, with or without permanent retail outlet. In the rural areas, there are hardly any retail stores. The concept of direct selling works best there as it does not require any such arrangements. The direct seller can sell in his/her house, through explanation and demonstration of the products. For those who do not have a job and money to start your own business, direct selling can be a good platform and for those looking for additional income, it is the easiest option to do so. Under this system of sale, direct selling companies offer independent representatives the ability to purchase products at wholesale price and make a profit by selling at retail prices. Also some companies give extra incentive to direct sellers to earn commissions by indirect sales done by new recruits to the business. The business grows based on words of mouth rather than big, expensive advertising campaign etc. which company would not want to do that? Earlier, it was only in the urban cities where direct selling was happening, but today, it has become a common sight in rural places as well. The Indian Council for Research on International Economic Relations indicated that direct selling business has almost doubled in the last five years and is set to grow rapidly in rural areas in India. Today, the system of direct selling is undergoing a sea change. It has become an important part of big companies marketing strategies, which have recognized the potential of dealing with consumers directly. Typically, modern direct selling involves sales made through marketing plan, one-on-one demonstrations, seminars, other personal contact arrangements and web selling. The network has grown big. There are presently over 60 national DSAs (Direct Selling Associations) accounting for more than $114 billion through the activities of more than 87 million independent sales force. The growth has brought many companies lining up their plans to enter this segment. Companies especially into cosmetics, herbal products and consumer durables, are growing their direct selling operations, from metropolitan cities to smaller cities and are trying to expand their feet in rural market. As a result of which, the number of products sold through this route has increased. Direct selling offers selfemployment opportunities to a large number of people, especially women. Some of the companies that have made big in direct selling are Avon Products. Amway, Natura, Herballife, Tupperware, Oriflame, Mary Kay. Amway, which sells around 130 products in four categories-nutrition and wellness, beauty, home care and personal care is the largest direct selling company in India. These are some of the brands that even people in rural areas can identity. The companies have been able to reach out to people even in areas where brands do not matter. Health and nutrition products are most popular in India

THE CONCEPT OF DIRECT SELLING HAS BECOME AN ALTERNATIVE AND LUCRATIVE ENGAGEMENT FOR THOSE LOOKING FOR A RELIABLE SOURCE OF EXTRA INCOME, AND THE CREDIT GOES TO COMPANIES LIKE AMWAY
followed by personal care and beauty products. According to experts, at many smaller and rural places, the income is substantial. People can afford some brands, especially brands related to food, medicines etc. Therefore, the sale grows and so does the network of direct selling. The industry, however, is still fragmented. Not many companies have been able to enter this sector. It is still the traditional direct selling companies that have made big success in the rural areas. Though, the firms have realized the huge growth potential in this industry and more

companies are now looking at cashing on the opportunity. The biggest driver of growth in direct selling is economic growth. India is one of the fastest growing economies of the world. Even at the time of global economic crisis, its GDP (gross domestic product) has been estimated to grow at 6.9% during 2011-12, much better than many parts of the world. In terms of value, the GDP is protected to cross $2 trillion in the next three years. The economic growth has resulted in many changes in the purchasing pattern and consumer behavior. People who used to shop only for necessities are now at discretionary consumption. The companies across various sectors have already realized the potential of Indian market. They are stepping up their efforts to grab the maximum pie of market. There are many companies which are investing in setting up manufacturing units in India and are steam-lining the supply chain. A substantial part of the products are sourced locally from contract manufacturers and this is leading to better branding and packaging. With such efforts, the retail sector in India also has gone through significant changes. Many stores and non-store retail formats have evolved to eater to this growing market and direct selling is one such non-store retail format. Direct selling is one of the fastest growing non-store retail formats, recording double-digit growth in the post-reform period. The biggest advantage of taking such system of sale to rural markets is that it helps in employment generation and that is why the government, which has a largest of enlarging 50 crore people in employment by 2022, supports direct selling. This sector is expected to offer employment opportunities not only in urban areas, but also in rural areas. Indeed employment is expected to be generated in manufacturing and the supply chain as direct selling companies develop India as a sourcing hub. The direct selling industry not only offers an alternative employment opportunity but has also contributed in terms of increased incomes for those who have entered the industry as direct sellers. One of the reasons why it works in rural to be continued on page 3