Direct selling needs regulation

Direct selling encompasses marketing of products directly to consumers through explanation or demonstration of the products, away from permanent retail locations. Various non -store formats like e-tailing, catalogue selling and teleshopping have evolved across the world due to rapid technological developments and fall under the broad term of direct marketing.  

The Indian Scenerio

Albeit it is a new sector in India, it ranks 11^th among the top direct selling countries in 2009-2010.  Avon, Amway, Oriflame, Tupperware and Modicare etc, are some brands which have made their successful niches in India where others have dwindled away for reasons like advertising, bad infrastructure, improper training etc. Yet India is a lucrative market as new brands are coming to try their luck. The share of direct marketing, which is growing at 20 per cent, has improved remarkably over the years with promises of making the figure bigger further. “Employment generating potential of Direct Selling needs to be explored further. There was an increase of 4.84 per cent in the number of direct sellers during recent economic slowdown”’, informed Ashwini Kumar,  Minister of State for Planning, S and T, Parliamentary Affairs and Earth Sciences at the event held today to release report  on “Socio-Economic impact of Direct Selling: Need for a Policy Stimulus” by ICRIER and sponsored by “ Indian Selling Association” and the “World Federation of Direct Selling Associations” as he further added, “ “By completing this well-structured research studies, ICRIER has provided insight into various interplays of the direct selling sector which will help address policy issues and shape the future of the sector through cautious planning and proper regulation to meet future needs of growing India. One of the important aspects policy should look into is the streamlining of rules and regulations for the sector, so that genuine selling companies can be differentiated from the fake ones and fraudulent activities can be barred.

Companies are spreading operations from tier 1 to smaller cities (38 percent and 19 per cent of the revenue is generated from tier 2 and tier 3 cities) and are even trying to explore rural markets.

Socio Economic impact

“Apart from giving direct employment opportunities, it also gives indirect employment opportunities to manufacturing and supply chain as many foreign direct selling companies are considering India as their sourcing hub”, informs Chavi Hemant, Secretary General of IDSA.

Innovation enters Direct Selling

Innovation is the key for staying in the market and for attracting new customers; no wonder companies are adopting new ways and leaving no stone unturned to make their brand visible and competitive. They are signing brand ambassadors, making TVCs and adopting other ways of promotion to reach new customers.

Oriflame surprised us as it tied up with Rohit Bal recently to introduce designer clutches and totes to Indian market which they flanked with a fashion show last couple of months as also celebrated their anniversary. It is a clear indication that they are stepping up the ladder of success and meting out ingredients of good life to Indians. “They are reasonably priced, beginning from 1400 INR”, shared Marcus Sandstorm, Managing Director, Oriflame.

Trade Barriers

There are certain barriers that are hampering the growth of Direct selling in India. There is a  need for a proper definition of retail and wholesale trade to allow smooth FDI . Again if FDI policy is clubbed with domestic regulations, makes it cumbersome and nontransparent.  The regulation should be separate from the FDI policy to strengthen India’s position in international negotiations where FDI is covered under market access or entry level barriers while domestic regulations are addressed separately and this way one will also avoid differential treatment.

There is also a need for a Governing legislation: because in spite of  a large number of regulations, India doesn’t have a comprehensive Act as in the case of Malaysia. India should have a comprehensive Act focusing on banning fraudulent practices such as pyramid schemes.

Moreover, a Nodal agency will help hearing of grievances of this sector. “India lacks the basic infrastructure and there are constrains in supply chain management, so a proper regulation is the need of the hour”, avers Hina Nagarajan, Country manager, Mary Kay Cosmetics Pvt Ltd.

Manisha Anmol of Modicare Limited agreed to the above while Sandstorm and Michaela Beltcheva, Vice President Government and Legal Affairs, Oriflame India ltd. stressed that after the minister’s promise they are expecting some action in the direction of proper regulation for the sector to encourage genuine direct selling companies”.

 Well, seeing the growth potential, I hope the policy making bodies will heed to the genuine demand of Direct Selling companies and for a conducive environment for area by working soon towards smoothening concerns like clear definition of direct selling, streamlining FDI policy, governing legislation and a nodal ministry.

(With inputs from ICRIER)