Direct selling is the selling of goods and services while not being in the quintessential retail space. It can take place anywhere – home or at a social gathering. The product representatives, often referred as distributors or business partners, explain and demonstrate the products. Hailed as one of the oldest form of sales, direct selling has a lot of relevance even today. It was pioneered in the USA way back in the 1880s. Over time, the direct selling model became heavily successful as it involved much lower marketing and distribution costs with direct interaction with customers coming to the forefront; the product portfolio expanded to include personal care, household goods, cosmetics, accessories and various other products. Direct selling saw the rise of women entrepreneurs by giving them opportunities to be self-reliant and owners of their own success. In 2012, the percentage of women in this industry was 75% globally while the ratio is 58% in India currently. The multi-level marketing compensation plans (MLM plans) were then introduced which furthered the evolution of direct selling in the mid-twentieth century; MLM plans permitted consumers to become direct selling partners and be part of the roaring success. Needless to say, MLM plans were widely accepted with a large chunk of companies adopting the same.
Direct selling in India and future forecast
Direct selling in India kickstarted in the 1980s. Post-liberalisation, the industry boomed with many established global players entering the Indian market. From 1995 to 2000, the industry witnessed the entry of few MNCs into India, who sighted direct selling as a great marketing opportunity.
Over the last 5 years, the direct selling market has seen a growth of 21%, climbing from INR 33 billion in 2008-09 to a hefty INR 72 billion in 2012-13. International companies, driven by the proposition of ‘Make In India’, have taken the lead and are focusing on localising product manufacturing or sourcing, and bringing in more product differentiation. The industry is expected to witness significant growth with rising product demand across different customer segments. According to a study by ASSOCHAM, the direct selling industry has doubled since 2011 to reach 126.2 billion crore in 2016 and is expected to further expand at a CAGR (compounded annual growth rate) of 4.8% to reach 159.3 billion by 2021.
According to the study, “Direct selling opportunities can be enhanced in India provided we create a conducive environment which is protecting all the stakeholders within the framework of the regulatory framework”. The prominent markets with the highest global sales are USA (20%), China (19%) and Korea (9%). India’s rank shifted from 22nd in 2014-15 to 20th in 2015-16. Year 2015 marked a new sales record of $183 billion in retail sales. In 2015-2016, every region reported growth with 80% of the countries documenting an increase in new representatives as well as sales. The industry has also contributed to Skill India initiative by imparting marketing and leadership trainings along with soft skills. It has also made generous contribution to various flagship schemes launched by Government of India like Start-up India, Digital India, Make in India, Women empowerment etc.
Over the years, direct selling industry has harbingered a self-employment model. Fuelled by the gig economy and growing aspirations of a young audience, especially millennials, it has been extremely popular and owes its enormous success to the quality of products, bonding and personal connection with consumers and the entrepreneurship model. Also, direct selling has the minimum cost and relatively low risk which enable representatives to give their very best when it comes to personal interactions with consumers; every interaction can be personalised with custom-made demonstrations which in turn help with expansion of network of contacts. The reach of direct selling is expanding at a rapid rate, soon to be in almost every country. This also contributes to an economic boost of a country with trade and commerce advancement. Direct selling in Mexico, which has a similar socio-economic structure and about one-tenth the population of India, has eight times the market size than India.
The self-employment opportunities that come with this industry have been the reason why millions of people can work at their pace and earn a good living. Making a financial contribution to the lives of more than 30 million across the globe, about 220,000 new entrepreneurs take the leap with direct selling every week. The way direct selling has changed the life of average individuals has been enormous as people now have the freedom to improve their entrepreneurial skills and push for success. This trend is only going to accelerate the reach of this industry in future. In fact, thousands of entrepreneurs have taken up the direct selling business as a full time opportunity. Consumer health segment currently dominates the Indian direct selling sector with beauty and personal segment following closely. Wellness and healthcare category are moving in leaps and bounds every year as well.
Year 2020 is expected to witness a renewed focus on health and wellness for direct selling industry. Considering the unhealthy lifestyle changes, stress and the impact of the environment, there is an ever expanding need to move toward healthy living which is dynamic and sustainable. Surely the top ten companies in direct selling will bet their monies on health supplements, personal care and beauty, and home and living products.
The long-term outlook for the industry is positive, supported by rising incomes, favourable demographics, entry of foreign players, and increasing urbanisation. Especially for India, with more clarity setting in for the regulation of the Direct Selling industry, more players in this industry will take advantage of this.
Why direct selling has stood the test of time