Direct selling catching up in India

By P. Vikram Reddy

HYDERABAD, MARCH 18. Turnover and growth trends in direct selling in India have been impressive, a pointer to the tremendous potential this concept has. More importantly, that the trend is fast catching up here too.

Though the direct selling industry has existed for over 15 years in India, the entry of international companies and their activities in the last five years has given greater visibility to the industry, which is still considered to be at a nascent stage in India.

Yet during the last two years, the trends have been encouraging to the supporters of direct selling, whose basic philosophy is to eliminate middlemen in the sale of commodities, and instead provide employment to a large number of trained sales staff, who sell products directly to consumers either through group meetings or by hosting tea gatherings at their homes.

According to the Indian Direct Selling Association (IDSA), the total turnover through direct selling in India in 1998-99 was $140 million. As against the expected growth of anywhere between 30 and 50 per cent, it registered a growth of 38.5 per cent for a turnover of $200 million in 1999-2000. For 2000-01, the growth is projected at 40 to 60 per cent.

Similarly, the growth in the number of sales people has been impressive during 1998-2000. From a five lakh strong direct selling force in 1998-99, it has grown to seven lakhs in 1999- 2000, a clear 40 per cent. For 2000-01 this is projected to grow by 50 to 60 per cent.

Does this indicate that the traditional industry is losing its market share to the new philosophy of taking goods directly from the manufacturer to the consumer? While it may not be so large as to create panic or alarm the well-established traditional players, it has created a place for itself in the hearts of the people.Interestingly, the IDSA says during 1999-2000, it received as many as 27 queries from national and international companies expressing interest in opening a direct selling business, or to start a new division for direct selling within their existing businesses in India.

Set up in 1992, the IDSA is an association for companies that sell products directly. It was started by two companies `Lotus Learning (exclusive distributors of World Book)', and `LB Publishers and Distributors (exclusive distributors for Time Life Books)'.

In 1995 multinational companies such as Avon, Amway and Oriflame joined the association. Since then, some more like the Tupperware, Herbalife, Modicare and Sunrider have joined the association. Of its nine members, three are fully Indian companies owned and run by Indians and three are wholly owned subsidiaries of foreign companies. All of them manufacture in India either through their own facilities or through contract manufacturers.

Another significant development is the emergence of direct selling as a women's bastion. The direct selling industry in India comprises 72 per cent women, 24 per cent couples, and four per cent men. In the U.S., this is 69.7 per cent women, 10.4 per cent couples, and 19.9 per cent men.

In two years, Amway, has emerged as India's leading direct selling company and registered a turnover of about Rs. 250 crores (September-August). It has ambitious plans of reaching a target turnover of Rs. 1,000 crores, much before its originally targeted year 2004.

The company has invested over $35 million in India of which $6 million is in the form of direct foreign investment, and $4 million is for transferring technology, free of cost, to contract manufacturers. It has over 32 offices and a reach of 352 locations, and by 2001-end it envisages an office in every city with a population of 10 lakhs and above. It has trained 3.60 lakh distributors last year, overwhelming majority of whom were women.

Against this background the industry expects to grow at 50 to 100 per cent rate for the next 3-5 years. Given the socio-economic conditions, the fact that a large proportion of the country's women are housewives, who can spare some time to take up concepts such as direct selling, and the growing need and realisation to supplement family incomes, are seen as encouraging factors for its growth potential. Viewed against the backdrop of a $80 billion global direct sales turnover already achieved last year, the future appears bright.

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