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.
Thanks alot to FICCI’s efforts and great support for our MLM industry.
Thanks all of you for reading the Blog! It give us encouragement and conviction. We at FICCI are striving hard to bring clarity to the table. I am sure you all will grace our event Mark’e’Dir on 17th April at FICCI New Delhi
we appreciate the FICCI’s positive approach towards Direct Selling Industry.Our all MLM industry people are very happy and thankful for your great support.Many -many thanks again.
Best wishes from FDSA
Thank you so much for all the appreciation and your valuable suggestions. Look forward to your continuous support and presence in FICCI event on direct selling, “Mar’e’Dir” – Bringing Market to Consumer on April 17th 2013 at FICCI Federation House, New Delhi.
Please feel free to contact me for any further assistance.
Thanks & regards,
DIRECT SELLING – A BOON FOR ECONOMY & SUPPORT TO THE GOVERNMENT
In the last 67 years of independence, the economic condition and standard of living of common man has gone from bad to worse. Common man is nowhere in the main-stream of system. Leave aside savings, basic needs of life cannot be met with single source of earning. Direct Selling has come out as a perfect option to combat hardships of life.
Direct Selling strengthens the common man and helps the nation and the economy of the following 9 ways:
1. Direct Selling supports illiterate/ poorly educated/non technical people. They cannot be absorbed in any other trade.
2. Direct Selling gives employment to people at their native places. They are not compelled to migrate to metros/cities for earning their livelihood.
3. Direct Selling shapes-up personality of youth and sharpens leader quality.
4. Direct Selling has no fixed sales out lets. To distribute commission to respective purchaser, all sales are accounted and total tax amount is deposited to government.
5. Since all sales are documented, accordingly all purchases are carried out on record.
6. Direct Selling companies make their profit by selling the products. The profit part is being shared amongst distributors as commission – which is a standard norm of marketing industry.
7. Direct Selling has brought large number of people in tax net from interior/remote areas by way of PAN.
8. Total TDS & Service Tax is deposited in the government treasury.
9. Direct Selling supports to numerous small/medium quality product manufacturers who cannot maintain expansive marketing force to sell their products.
Dear Shilpa ji,
we are heartily thankful for your efforts and support to millions of common people in India, who ironically have been pushed to live in lowest social segment, with no hope of growth in independent India. It is FICCI’s voice that has come to their rescue via Direct Selling business and government is looking positively for making appropriate legislation.
Thanks a million……
Direct Selling Distributors Welfare Association
Dear Mr. Vats,
Thank you for the appreciation. FICCI, as an Industry body, is always on forefront to address the issues & concerns of our Direct Selling members. We are also coming up with an event, “Mark’e’Dir” on April 17th 2013 to highlight the concerns of this industry to all the stakeholders.
You have done very good effort and this will go longway for protecting genuine MULTILEVEL Marketing Companies and help in isolation of flyby night operators.I am thankful from my bottom of heart.
Its gives immense pleasure to read your article and the contents there in. As a very common Indian I would Salute you for your concern. Its is the human birth right of all to atleast arrange the basic requirements for their survival. To do that legal and ethical way is required. If our Govt. is unable to provide solutions to that , then it will be really difficult to decide what is Right and what is Wrong. There can be no better ways for the “Aam admi” to opt for ,other than participating in a legal ethical Net Work marketing company. Yes Mam— there is no question of giving a slightest of opportunity to the illegal and fly by night companies. But in a process of evicting these companies, kindly ensure that the legal companies are not disturbed, operationally. The problem lies in the basic understanding of the so called Leaders of our country who are incharge of such matters. In our way of democracy where a person is simply elected by his face value and his political back up—-where his educational or social qualification is not considered, these things will go on.
Its for perhaps you people — organisation like FICCI can make them understand to some extent.
Can anyone show a flawless business house in India ( exceptions are always there). A business house anywhere in the planet earth sells their products with a high margin of profits. If we see seriously it is the customer who feels the heat.
Thanks anoce again for your concern which is a National debate today.
Stunning regards to you.
Thank you its very encouraging to read your comments! I am certain together we can bring the change
My heartiest thanks to Ms. Shilpaji and your team for taking initiative to bring the notice of the Government Authorities to make appropriate Rules and Regulations to keep alive the genuine Direct Selling Companies in India. Millions of hardworking Indians are enjoying their profession as Direct Seller through this industry. Your initiative is well appreciated.
N J Mathew
Good keep it up…….!
No words are adequate to convey our thanks & gratitude to FICCI for taking the initiative to bring a regulatory framework for the Direct Selling Industry. To ban the entire industry for the fault of a few unscrupulous operators would be akin to throwing the baby with the bath water. Thousands of families are dependent on the extra income from this business to realise their dreams.
Congratulations Shilpa and Fmcg team. It is important that genuine players who follow all the laws of land and who provide employment to millions of hardworking Indians do not suffer and there is more clarity among all stakeholders ,consumers, Government et al.
The Initiative is well appreciated. We all know that direct selling has provided with opportunity for many for survival and additional income.. we have to create awareness about the genuine company and others. A mechanism to inquire and expose the non genuine co’s with help the industry to grow better and save people by not associating with such firms.
Shilpaji, Heartiest Wishes for you to get success in the Mission for Direct Selling Business. As per your Information provided I think Govt. must seriously think & protect the Genuine Direct Selling Companies as the Revenue stated & Employment generated is very High. Thnaks to FICCI & Your Team & look forward for a Healthy Direct Selling Business in INDIA.
1. MLM is not illegal as per any law.
2. PCMC Act is not applicable for MLM, as it is a 1978 Act and MLM started in 1996.
3. To earn quick and fast money is not illegal provided if it is earned legally and ethically.
4. As per the freedom of trade, any person can do business in India. MLM is a marketing strategy adopted for generating sales through recommendations and word of mouth publicity.
5. To give / pay commission to any person for getting a sale is not illegal.
6. In a MLM business, each and every sale is recorded and there is no scope for showing under sale. Because every sale has a sponsor, who is eligible for commission. The sponsor will ensure that the sale is recorded officially to get his commission and thereby this act will see that proper sales figures are given to tax authorities.
7. The MLM system is misused by few selfish persons, showing this, the entire system cannot be blamed.
8. MLM is legal in several countries like Malaysia, Philippines, USA, etc.
9. The court must direct the government to form a committee consisting legal experts, financial experts, tax authorities, people representatives and form a guidelines, similar to Chit fund companies, co-operative banks, micro finance, Insurance companies etc and a registration process must be made mandatory to avoid the system misuse.
10. Amway is one of the MLM marketing business plan, which is restricted to Amway alone. Other companies have similar marketing plans and not the same marketing plans, and hence other companies activities must not be compared with Amway.
11. There are few companies, who got interim orders to run the business given by high court like Jeevanseva, RMP, TLC, etc. Here the courts did not find any irregularities in their MLM business activity. This means that all MLM companies are not same.
12. To assume all MLM companies same and to project them as illegal is arbitratory. Individual MLM company business plan must be studied and then decided weather the business plan is legal or illegal.
13. MLM business is similar to other business, they also take registration as a firm or as a company, open bank account, get PAN and TAN registrations, take VAT registrations, etc formalities required to run a business in India.
14. MLM companies also sell products and services which are legal in India. They do not sell any illegal product or services.
We appreciate your concern with regard to the Direct Selling industry in India. Your support to the industry is much needed to strengthen its arms and provide a legitimate platform to all the direct sellers in the country. We wish you and your team a great success in all your endeavors! Thank you for all the efforts that you have been putting with respect to the industry.
Shilpa ji, we appreciate the FICCI’s positive approach towards Direct Selling Industry. Need of the hour is, the government should start looking Direct Selling akin PPP system. For example, this industry addresses two top priority national issues in government agenda – (1) employment to illiterate/ poorly educated/non technical people and (2) employment to people at their native places and arresting migration to metros/cities.
Once again thanking you for your valuable support.
Best wishes from FDSA.
Thank you Ms. Shilpa ji.
I appreciate your sincere efforts and initiatives taken from FICCI on our Direct Selling Industry. I am sure your help in stream lining the Direct Selling Business in India will provide a comfortable business environment to all genuine companies.
Thank you Mohit, the endevour is to have clarity so that legitimate businesses do not suffer.
Sincere Thanks to FICCI and FMCG Division in particular, for this Write-up .This will definitely act as an Awareness Forum for Genuine DIRECT SELLERS in the Country……………