Direct selling is one of the oldest, most traditional forms of selling globally, involving a direct interaction between the seller and the buyer. Today, it is a successful industry operating in over 100 countries with a market size of USD 182.8 billion.
The direct selling industry in India is estimated to be Rs.74 billion (2014-15), and forms only around 0.4 per cent of the total retail sales. This is far lower than other comparable economies (one-half of China and one-tenth of Malaysia). With growth in consumer markets and increase in its penetration to globally comparable levels, the industry has the potential to reach a size of Rs.645 billion by 2025, according to a recent KPMG report.
Modern direct selling made its entry in India in 1990s. The industry witnessed major growth post-liberalisation with many global players entering the Indian market. The Industry has registered a growth rate of about 6.5 per cent in 2014-15 as compared to 4.3 per cent in 2013-14.
Various studies have reported that the direct selling industry has created a positive impact on several social and economic parameters in India:
- Additional income opportunities: Direct selling provides additional income opportunities to a large number of people and promotes micro-entrepreneurship. Currently, over 5 million direct sellers in India are estimated to be engaged with the industry, and are projected to grow further with the growth of the industry
- Women empowerment: Direct selling offers self-employment opportunities to a large number of people, especially women.The share of women in the industry has been around 60% on average for the last 3 years. However, a recent survey found that more Indian men are joining this business as a way of self-employment and entrepreneurship.
- Development of the SME sector: Many direct selling companies rely on SMEs for manufacturing their products. In a lot of cases, the direct selling companies impart the manufacturing know-how, technology and processes to enable the SMEs to produce excellent products. Several SMEs have now developed capabilities to cater to the needs of other MNCs and are supplying to them, promoting India as a manufacturing destination
- Employment generation: Besides providing additional income opportunities to direct sellers, the industry also generates a large number of jobs. Majority of the direct selling companies outsource production, packaging and distribution of their products, thus generating direct employment across the value chain.
- Training: Direct selling plays a vital role in uplifting and developing skills of individuals that join companies as distributors by providing them with extensive training to improve both their business and inter-personal skills.Indian direct selling companies offered training to their sales representatives in the range of 200 man hours per quarter to around 22,000 man hours/ quarter in 2013-14.
- CSR initiatives: In terms of responsibilities towards society, direct selling companies have been in the forefront. Many of the companies involved in direct selling actively contribute towards social activities that serve causes as varied as health and nutrition, homelessness, education etc.
Growth and Revenues in 2014-15
- Wellness and healthcare products are the most popular category of products in Indian direct selling contributing 42 per cent of the sales revenue for the industry. Cosmetics and personal care products contributed 34 per cent, homecare products, 11 per cent and consumer and household durables seven per cent.
- While there is a 6.5 per cent growth in the direct selling industry all over the country, Southern India has recorded a negative growth of 1.8 per cent, owing to loss of consumer confidence due to fraudulent practices.
- Northern region has contributed around Rs.2,388crores to the gross sales in 2014-15, registering a growth rate of 10 per cent.
- Eastern and North-Eastern regions have contributed around Rs.1433 crore and Rs.1035 crore respectively to the gross sales, registering growth rates of 6.5 per cent and 15.4 per cent respectively.
- The Western region has contributed around Rs.1273 crores with a growth rate of 6.4 per cent.
Challenges with Growth
The survey found that regulatory uncertainty is impeding the growth of direct selling companies and that has created formidable hardship for genuine players in this arena. It states,
“Recent untoward incidents in terms of unwanted harassment (including imprisonment) and other related investigations have severely impacted and shaken confidence of not only the Direct Selling players but of consumers too.”
According to the survey, majority of direct selling companies and stakeholders in India want industry status and a separate legislation for the industry. The direct selling industry’s potential to reach a size of Rs.645 billion by 2025 driven by growth in consumer markets and increase in the penetration of direct selling to globally comparable levels is contingent on creating an enabling environment for the industry, and mitigation of some of the challenges it is facing today.
Players in the industry believe that if the government sees the direct selling industry as its partner, the industry has massive potential to grow and benefit millions in the country.