Direct selling: an arrow illustrating growth

The direct selling industry, if you think about it, has been around since the dawn of human civilization. Nearly every era of human history has had some variation of direct selling, whether it’s traders who sold wares directly to the public or street hawkers in marketplaces. The modern direct selling industry, however, could be considered to have been established in the late 19th century.

The longevity of this industry can be credited to a number of factors, including self-employment, a personalised and intimate selling experience, and opportunities to earn extra income, along with the scope of successful entrepreneurship across a large demographic. The direct selling industry is thriving around the world – a $192 billion global industry, it boasts of a presence in more than 170 countries with over 118 million independent representatives.

In step with the times

The industry has experienced steady growth over the years and is expected to have a CAGR of 4.9% by 2020. It has maintained and accelerated growth by adapting to the latest technological and buying trends. The virtual party system, for instance, which is hosted on popular social media platforms and allows the direct seller to showcase products to customers through live online videos, is not only easy to use and faster but also eliminates the distance factor. Many direct selling organisations have also implemented faster payout systems, a key advantage in the gig economy, through e-wallets, to attract millennials. Today, payment processing providers have become an increasing presence in this ecosystem.

The India story

The Indian direct selling industry started in the early ’90s. Since then, it has grown steadily, with many international brands stepping into the market. In recent years, direct selling in India has seen a CAGR of 8.42% from 2013-14 to 2016-17 with an increase in revenue from INR 7472.2 crores to INR 10,324.2 crores. There are approximately 50 lakh people currently employed in the Indian direct selling industry, with 53% of them being women. A recent Assocham and FICCI- KPMG study suggests the industry will generate a revenue of INR 15,930 crore by 2021 and the number of direct sellers in India is expected to reach 1.8 crores by 2025, provided it undergoes reforms conducive to its growth.

Opportunities for growth

By 2020, India is set to have the youngest workforce in the world. With the rise of entrepreneurship and a growing appetite for financial independence, direct selling is also becoming a viable career option for this demographic. To make network marketing attractive to them, companies need to evolve their approach. Developing digital online direct selling applications would be a potent growth strategy due to their preference for this medium. Although most direct selling companies already have a strong online presence, they are yet to fully leverage it by making it more appealing to the younger population. Here are a few ways to do that:

  • With the Indian youth spending 4 to 7 hours a day on their phones, websites need to be mobile phone friendly for better user experience.
  • Engage users on their home turf, social media. Studies have shown that millennials tend to prefer brands that engage them on social media over those that don’t.
  • Emphasise empowerment through entrepreneurship in the marketing pitch by showcasing the creative control and earning opportunities that direct selling offers.
  • Share knowledge and insights with the broader industry through a comprehensive content strategy. Educating and providing valuable insights is a great way to establish expertise and trust.

Challenges

The direct selling industry in India is currently facing issues arising from a misinformed perception among the masses, stemming mostly from hearsay than verified evidence. Even though the industry is slowly gaining acceptance, it could be sped up if some areas of legislation and perception are addressed effectively. To flourish, the direct selling industry in India needs a strong regulatory framework. The Model Direct Selling guidelines of 2016 was a good start, but there’s still more work to create a favorable environment for the industry:

  • The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 by definition means ‘An Act to ban the promotion or conduct of prize chits and money circulation schemes’ Created with the aim of penalising dubious money circulation schemes, at times, it has been misinterpreted and applied to legitimate multi-level marketing businesses, resulting in a hostile business environment for the direct selling industry and their distributors.
  • The direct selling industry is in a dire need of a regulatory environment and in this direction, as a first step, the application of the Direct Selling Guidelines in letter and spirit across all States in India is needed.
  • Consumer disputes should not be mistaken as criminal cases when there are consumer courts to settle disputes related to product grievances within a product refund period.

Even though various associations of the direct selling industry are working towards achieving these objectives, a joint effort from all the leaders in the industry is still needed. Only then, in the long run, an environment conducive to the growth of the direct selling industry is possible, and the Indian economy can enjoy the growth, benefits, and entrepreneurial success that many countries with robust direct selling regulations already do.

The way forward

To gain a better perspective without bias, seek to learn more about this industry and its players through neutral sources. Some key aspects to research into a company are its compensation plans, marketing strategies, products, and the sign-up fee. By educating yourself, you can make an informed decision and whether you want to pursue direct selling as a career or part-time option. A career in this industry is definitely worth considering, given its promising future.

We hope that we were able to provide you with an insight into the direct selling industry, but if you have any other queries, ask us in the comments section.

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