Direct Selling: A boon for entrepreneurship

Modern direct selling can be considered to have been kick-started in India in 1980s. The industry witnessed major growth post-liberalisation with many global players entering the Indian market. Amway was one of the first major global direct selling companies to enter India in the year 1995, which was followed by companies like Avon, Oriflame and Tupperware in 1996.
William S. Pinckney, MD and CEO, Amway India Enterprises said, “Amway India established in 1995 recorded a turnover of Rs 2,046 crore for FY 2013-14. We manufacture 30 per cent of our products in India.”

Speaking about the firm’s commitment to ‘Make in India’ campaign, Pinckney stated, “Amway is setting up a state of the art manufacturing facility in Tamil Nadu with an investment of Rs 600 crore.”

As per the KPMG report, the direct selling market in India in 2013-14 is estimated to be around Rs 72 billion. Direct selling provides additional income opportunities to a large number of people and promotes micro-entrepreneurship. Currently, over 5 million direct sellers are estimated to be engaged with the industry and the same is projected to grow significantly.

Women Empowerment

Direct selling offers self-employment opportunities to a large number of people, especially women. Direct selling gives women the flexibility to manage their time and balance their work and personal lives. The industry in FY13 is estimated to have provided self-employment to 3.4 million female distributors. Many direct selling companies work towards the empowerment of women.

Mauritius Bruggnik, Executive Director, The European Direct Selling Selling said, “Direct selling industry intends to promote women entrepreneurship. It supports the concept of female entrepreneurship and reduces gender inequalities. In brief, direct selling fuels the freedom of entrepreneurship.”

On the same note, Rajat Wahi, Partners, KPMG, said, “In India, the industry has contributed significantly towards women’s empowerment, skill development, technology percolation and the growth of the SME sector, besides contributing to the exchequer. In addition, the industry also provides a viable form of alternative income, which promotes self-employment. Over five million people are already associated with the industry as direct sellers.”

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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.

Many direct selling companies also invest in providing the right equipment and machines to the SMEs for production. Driven by these initiatives, several SMEs have now developed capabilities to cater to the needs of other MNCs and have commenced supplying to them, in the process promoting India as a manufacturing destination.

“Majority of the direct selling companies outsource production, packaging and distribution of their products, thus generating direct employment across the value chain while enabling the development of the SME sector,” said Dr A. Didar Singh, Secretary General, FICCI.

Ram Vilas Pawan, Minister Food, Public Distribution and Consumer affairs, said, “Investment is very important to fuel Narendra Modi’s “Make in India” campaign. Today, consumers do not prefer to buy the products with ‘Made in India’ tag. So, we are on radar to make the tag consumer friendly and change the consumers’ perception.”

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.

Singh stated, “Though direct selling is a relatively new industry in India, in less than two decades it has provided self-employment opportunities to more than 5 million people, out of which nearly 60 per cent are women. Besides providing additional income opportunities to direct sellers, the industry also generates direct employment.”

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A report by KPMG

Going forward

The report highlighted that the industry has the 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.

One of the key challenges that is plaguing the entire direct selling industry is the lack of regulatory clarification due to which the direct selling companies are mistaken as fraudulent pyramid coupled with ponzi schemes. The absence of clarity is hurting the growth and reputation of direct selling companies in India. But, considering the industry's huge potential, the Government of India is actively working towards creating a proper framework for the entire industry. Sharing his views on the same lines, Paswan said, “We are working towards creating a regulatory framework for the emerging industry like direct selling under our internal trade reforms agenda, through which we can help in distinguishing between the genius and fraudulent players.”