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May, 09 2011

HOME-RUN, KNOWN GLOBALLY

Become a successful entrepreneur from the comfort of your home without investing a penny on outlets or a store. Direct selling provides a good opportunity to investors, especially women, who are keen on working from home.

IN India, direct selling gained momentum in the early 1990s when the country liberalised its regulations for foreign companies to enter the Indian markets. From being a Rs 895-crore industry in 1998-99, the direct selling industry in India is today worth Rs 3,330 crore. By 2012-13, this sector is predicted to reach Rs 71,200 million. Foreign companies like Amway, Avon Products, Mary Kay Inc, Herbalife Limited, Tupperware and Oriflame Cosmetics have become well established and well-known brands in the direct selling segment.

What is it

Direct selling is the marketing and selling of products directly to the consumers without engaging middlemen like retailers and wholesalers. In words of William S. Pinckney, Managing Director and Chief Executive Officer, Amway India, “Direct Selling can be best described as the marketing of products and services directly to consumers in a face-to-face manner, generally in their homes or the homes of others, at their workplace and other places away from permanent retail locations, usually through explanation or personal demonstration by an independent direct salesperson.”

What makes it popular

Manisha Amol, Vice President, Marketing, Modicare Ltd, states, “Our main aim was to help the common man by providing an excellent opportunity. Till date, we have touched one million Indians who have experienced Modicare opportunity.” In the last two decades, the direct selling sector in India has grown immensely. On the demand side, increase in disposable earnings due to dual incomes, growth of metro cities, development of markets in tier II and III cities and more awareness among customers have supported this sector's growth. On the supply side, the factors favouring growth of direct selling are primarily liberalisation and encouragement from the government for FDI. Availability of semi-skilled workforce due to abundance of manpower is another factor. Moreover, direct selling business is directly proportional to the social network of distributor. Bigger the social network, better will be the sales, and Indians are good at maintaining strong social bonds, leading to higher sales.

Modes of direct selling

Direct selling can be divided into:

Single-level marketing (SLM): In this, the distributor (seller) is rewarded for his personal sales. Commissions and benefits are derived from single-level depth, from sales to the distributor. Distributors do not have to sponsor or make a chain of his sales personnel to get more commissions. Therefore, the distributor cannot grow into leadership beyond a certain point. Tupperware, which is into single level marketing, believes in giving equal chance to everybody. It does not matter who joined earlier or later as in MLM. It has a different philosophy, as says Asha Gupta, Managing Director, Tupperware India.

Multi-level marketing (MLM): In this model, sales distributor recruits other sales people under him. He earns extra in the form of commissions and bonuses on the sales that his downline make. Downliners are needed to increase the sales force and generate huge number of sales. More than 80 per cent of players in this sector have adopted multi-level because the structure assists rapid growth of networks that lead to rapid sales volumes.

Most suitable for women

More than three million individuals are involved in this sector, out of which, 2.1 million are women. This shows the growing significance of women in direct selling. This sector provides an apt opportunity to youth as well as home-makers and working professionals for making money while working from home. The distributors work for themselves from their homes choosing their own working hours. Tupperware is run only by women distributors. Even Amway has over 60 per cent of its distributors as women.  As shared by Pinckney, “Direct selling is a part-time business and ideally suited for women, who can utilise some time to sell products to her network of friends and relatives. Moreover, women have a better say when it comes to influencing buying decisions at home.” Adds Amol, “It would be correct to call it a home-based business. It helps women entrepreneurs to develop their personality skills, business acumen and learn while working.”

Growing trends

Direct selling as a mode of distribution is growing in tier II and III cities. More than 50 per cent of the companies with operations in tier II cities have recorded more than 30 per cent increase in sales turnover. A possible reason for this can be that modern retailing is low in such cities, therefore leading to direct selling as a way to reach customers. However, almost 57 per cent of overall revenue for direct selling companies comes from metro cities. Direct selling companies had initially started in south but now have a pan-India presence. However, south India still remains the hub of activity followed by west India.

Nothing comes without challenge

The direct selling companies have to face many challenges in India. Pinckney says, “One of the challenges is the presence of many schemes that masquerade themselves as direct selling opportunities. These schemes are in reality fraud schemes whose intent is to fleece the public of their money.” Another shortcoming is illegal selling of the products in retail outlets rather than person-to-person selling.

Despite this, direct selling continues to offer lucrative opportunities to aspirants. For, the challenges are not much as compared to the benefits.

Box1 Best option for:

= Housewives

= Retired individuals

= Physically disabled

= Students

= Part-time entrepreneurs with a regular job

Profitable segments

= Cosmetics, skin care

= Water purifiers, home utility items

= Home décor and cleaning products

= Gourmet food

Box2

Add-on benefits

= Low start-up cost: One can become a distributor for any direct selling company by purchasing an introductory sales kit which is quite reasonably priced. Says Amol, “The total investment needed to become a consultant is Rs 399 only. There are no hidden costs and anyone over 18 years can become a Modicare consultant.”

= No training: Any entrepreneur can be successful in this sector if he or she has good communication skills and can convince people easily.

= No technicalities: Distributors can be successful without having hi-tech machineries at their homes. Having a phone to remain in touch with clients is the basic requirement.

= Full package: Mostly, all direct selling companies provide their distributors with sales materials, training materials and a business plan.

= Enhances personal growth, development: Being a people business, direct selling adds to better networking skills among the distributors. It also enhances personal life. Amol says¸ “It provides an opportunity for personality development, builds self-confidence and self esteem.”

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