With economic development and growing consumerism, the retail sector in India also underwent significant changes. Various store and non-store retail formats have evolved to cater to this growing market and direct selling is one such non-store retail format. Direct selling refers to the selling of goods and services to the consumers away from a fixed retail outlet, generally in their homes, workplace, etc through explanation and demonstration of the product by direct sellers. With direct selling, distributors sell and encourage their buyers to join the network to avail oneself of a commission based on the worth of a product sold. The resultant cash flow enables an individual to break away from traditional income-earning methods. Direct Selling has broadened its scope to not just cosmetics but also high-quality-low-cost products like spices, stationery, sanitary napkins, garments, agricultural additives, aphrodisiacs, weight loss supplements, home care etc. Globally, direct selling is a labor intensive industry and has a positive socio-economic impact in terms of higher employment, women empowerment and skill development.
Direct Selling Industry in India
In India, this sector is one of the fastest growing non-store retail formats, recording a double-digit growth in the post-reform period. The growing Indian market has attracted a large number of Indian and foreign direct selling companies. While direct selling is a relatively new industry in India, yet in just 16 years, it has provided additional opportunity and livelihoods to over 4 million Indian households and has crossed the revenue of Rs 5000 crores. Taxes to exchequer on account of direct selling industry are in excess of Rs 600 crores. Moreover, estimates point that by 2014-15 direct selling business in India would reach a size of Rs 10,843 crore on back of increased consumer spending.
Direct selling also offers self-employment opportunities to a large number of people, especially women in India. The number of direct sellers in India has almost doubled between 2004 and 2009. In terms of the number of direct sellers, India ranked 11th among the top direct selling countries in 2009-10. In future, this sector is expected to offer employment opportunities not only in urban areas but also in rural areas. The direct selling industry not only offers an alternative employment opportunity but has also contributed in terms of increased incomes for those who have entered the industry as direct sellers.
However, since last 15 years there has been a lack of clarity on the legislations governing this vital sector. Recently, an Inter Ministerial Committee was setup under the aegis of Ministry of Consumer Affairs to understand and formulate the requisite legislation governing the Direct Selling Industry. Among other things, the committee is considering to enactment of legislation to regulate the Direct selling / Multi-Level Marketing companies; formulate guidelines for these companies; and promote and to some extent adopt International best practices to protect consumers .
We strongly believe that a clear distinction between “fly-by-night operators” and legitimate business runners should be brought onto the table. FICCI has been relentlessly working on various issues critical to the industry. FICCI FMCG division’s sub-group on Direct Selling aims to address the concerns & issues regarding the direct selling industry. As per the sub-group, some of the parameters identified governing the direct selling businesses are:
- Company engaged in direct selling business must be registered under Companies Act;
- These companies should have all necessary licenses and authorisation;
- Payments must tied directly to product sales;
- Under direct selling new recruits must have the ability to move up in the sales system;
- Companies must repurchase any unsold inventory; and
- Customer should be given opportunity to return the product etc.
Intrestingly, Ministry of Corporate Affairs and Ministry of Finance,Department of Financial Services are observing the sector from a close. They are working towards bringing clarity in the legislations available. Clause 2(c) of The Prize Chits and Money Circulations (Banning) Act 1978 is always been a concern for the industry. In addition some drafts from the above said departments are also critical for the existance and sustainance of this industry.
We hope that with time and with the above measures, direct selling sector in the country will only flourish and add on to the economic growth of the country. With proactive support from the various Ministries we at FICCI are positive about the future prospects of this industry in India.