Bhoomika Singh
As India continues to grow at a rapid pace, so does the direct selling market in the country. Direct selling refers to the practice of selling products directly to consumers without the need for a physical store or retail outlet.
In India, the direct selling industry has grown by leaps and bounds over the past few years, thanks to the rise of digitalization and e-commerce.
SME Futures spoke to Sujit Jain, Chairman & Managing Director, Netsurf Communications Pvt. Ltd., one of the leading direct selling players in the country, to get an insight into the current scenario of the market and how it has evolved thus far.
Edited excerpts-
What is the current size and growth rate of the direct selling market in India?
The direct selling business has been present in India for more than 25 years. It has gone through multiple phases, faced its challenges and has evolved to the stage at which we see it today.
According to a report released by the Washington-based World Federation of Direct Selling Associations (WFDSA), the Indian direct selling industry had reported retail sales of US$ 3.25 billion in 2021 (around Rs 27,650 crores) and maintained its 12th place in the global rankings. It also reported a growth of 7.7 per cent in 2021 and had a CAGR (Compound Annual Growth Rate) of 15.7 per cent from 2018 to 2021. It ranks sixth in the Asia Pacific region.
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At the same time, the popular product categories in the direct selling industry are the same in India and globally as well. ‘Wellness and nutraceuticals’ dominate the rest of the categories with a share of 59 per cent. It is followed by the ‘cosmetics and personal care’ categories with a share of 22 per cent in the overall revenue in India.
What are the key factors driving the growth of the direct selling sector in India?
There are many factors behind the growth momentum of this market–
Entrepreneurship & India:
India has entrepreneurship in its genes. Almost every Indian was an independently working artisan before the British era began in India. Hence, an opportunity to work independently in today’s economic situation works well in India.
Supports employment and education:
Public education and employment are the fields that still pose a challenge for us in India. I believe that direct selling could be a way to overcome these challenges if used in the right way.
Rural reach:
Fortunately, direct selling is not just an urban phenomenon. It can take the income opportunity right to the grass root levels across rural segments. In India where we have more than 50 per cent of the population residing in the tier-2 and tier-3 parts, having an income opportunity right there means a lot. It also means that the workforce migration towards cities can be reduced by offering the right direct selling business opportunities to the people in their hometowns.
Growth of SMEs:
The SME sector in India is booming, given the fertile economic environment in the last few years. The growth of these SME players provides a great opportunity for the direct selling companies to make better products to offer for direct selling. We see a lot of research and manufacturing starting in India that will help the industry to grow in terms of product development.
Technology:
Technology has penetrated well across India due to the Digital India initiatives by the government. Direct selling has evolved into a business that is no longer door-to-door but is now screen-to-screen. Technology has saved the efforts, energy and time of the direct sellers, enabling them to conduct their businesses more efficiently. Today’s direct sellers retail their products online and get the profits transferred into their bank accounts. Today’s consumers buy direct selling products online and get them delivered to their homes. I always believed in using cutting-edge technology and I think it will be the key to success in the direct selling business.
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The direct selling industry has created a positive impact on several social and economic parameters. It has transformed millions of lives in India, empowered women, generated employment for many and has helped people to obtain better livelihoods for themselves.
What are the key challenges faced by the direct selling companies in India?
The direct selling business is an opportunity for the aspiring micro-entrepreneurs in India to become independent micro-business owners with minimal investments. Its success largely depends on the key element of ‘communication’. Hence, where communication plays a key role on such a large scale, it is essential to have a proper regulatory role played by the government to support the consumers, the direct sellers and the direct selling companies.
Until a few years ago, every state in India issued guidelines to control the direct selling activities in their states. It posed a great challenge in front of every direct selling company to come up with a single business plan that would fit in with the guidelines issued by every single state. However, as a direct selling company, we are still expecting recognition for ourselves as an ‘industry’ in India. It will help businesses to gain trust and will encourage people to opt for these income opportunities, bringing about economic transformations at the grass-root levels in India.
What is the regulatory environment for direct selling in India and how does it affect the sector?
There were many fly-by-night players, chain marketers, Ponzi schemes, and multi-level marketing schemes prevailing in India. The regulatory environment was necessary to make sure that the consumers and the direct sellers (who are investing in the companies to earn an extra income) are protected. It was also necessary to ensure that the companies were playing fair with the consumers and the direct sellers by protecting their preferences and not dumping the products on them.
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The regulatory environment started coming into existence in September 2016 when the central government issued guidelines about the conduct of direct selling businesses. In December 2021, the central government issued a further set of rules under the Consumer Protection Act 2019. These rules notified the states to set up a monitoring committee to supervise the activities of direct sellers and direct selling companies. These new rules will help the industry to be regulated and will provide more clarity to the direct selling industry and distinguish it from the multifarious pyramid marketing and money circulation schemes that are abounding everywhere.
How has the business model changed over time in this sector?
The business models in the direct selling business may not change over time. But we will see a change in the way in which these businesses are conducted and in the methodologies of these businesses. The role of technology in business models will get bigger with time and it will change the way in which they are run and operated. The technology that is being used for product distribution, retailing, and training the direct sellers will evolve. However, the basic business models might remain the same.
Can you tell us about the key trends and innovations in this sector?
The rise in technology and the pandemic have disrupted and upgraded almost every industry in India. It compelled people to perform using digital platforms. Direct selling companies are no exception to the same.
Today, many direct selling companies have e-commerce portals to attract new consumers. They offer mobile apps to their direct sellers to make it more convenient for them to run their businesses. The entire business eco-system has now shifted to digital platforms, and it has brought convenience and ease for both- the direct sellers and the companies. Hence, with the latest AI and data science innovations, I believe that technology will be trending for a long time in direct selling.
In terms of product development, as we belong to the FMCG product category, I can foresee that the key will be the customisation of the products. The consumer will prefer the products that ‘understand’ him/her. Many players are already marching in that direction.
How can direct selling companies in India overcome the negative perceptions about the industry and gain consumer trust?
I think the negative perceptions originate from miscommunication. In the last 25 years, we have observed and learned from the fact that ‘communication’ is the key to this business. If the communication was strong and honest and transparent, then the companies did survive the strongest of storms.
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When we talk about technology and digital advancements, I think we should employ technology to bring in more transparency, honesty and connectivity with our direct sellers, our consumers and with society at large. It will help the direct selling companies to gain trust and to overcome the negative perceptions that people may have about the nature of this business.
I believe that given the right platform with the right kind of business opportunity, direct selling companies have the potential to support the Indian economy, contribute to innovations, backlink the upgradations with the rural areas and contribute to the empowerment of women on a large scale in the most successful manner.
