Direct selling, also known as multi-level marketing (MLM), network marketing, or referral marketing, has become an extremely popular sales model across India in the last few decades. Unlike its retail counterparts, in direct selling, products are sold to consumers through demonstration, usually at the consumer’s home or office, and not at a retail outlet. Direct selling can be undertaken by anyone regardless of age, gender, educational qualification, or experience level and is largely dependent on the communication and interpersonal skill of the direct seller (also known as direct selling agent). The success of direct selling lies on the direct seller’s ability to create a personal connect with the consumer.
Moreover, direct selling provides the option of working flexible hours (besides working regular jobs) enabling housewives, students, and small-time job workers to pursue an additional career without much of a hassle. It can be said that the direct selling has been encouraging self-employment among people for years now, something the current Government is pushing to achieve through Stand-Up India programme. No wonder, the direct selling industry in India has seen such rapid growth in the last two decades. While global players such as Amway, Oriflame, Tupperware, Q-Net, and Herbalife have become household names, homegrown companies such as AMC Cookware, Vestige, and Modicare are not too far behind. The 2016-17 Annual Survey Report of the Indian Direct Sellers Association (IDSA) states, “…the direct selling industry in India has grown at a CAGR of 8.42% over the period 2013-14 to 2016-17 when it has grown to INR 1,03,242 million (INR 10,324.2 crores) in 2016-17 from INR 74,722 million (INR 7,472.2 crores in 2013-14). This can be accounted to the growth in the number of Direct Sellers involved which has risen to around 5.1 million in 2016-17 from 3.9 million in 2015-16 showing a robust growth of 30.1%.”
First, the direct selling industry lacked any regulatory directives in the past. Add to this the poor level of understanding of the direct selling model among law enforcement agencies, judiciary, and the media. Although, there has been a gradual change in the outlook of policymakers and judiciary towards the industry over the years, the understanding among junior level officers of law enforcement and the media is inadequate.
Second, there is a common misconception amongst the general public that all direct selling operations are pyramid schemes and/or Ponzi schemes. This notion is in fact in tandem with another age-old business in India, which is chit funds. It is to be understood that both direct selling and chit funds are perfectly legitimate business models which operate under stipulated guidelines laid down by their concerned regulators.
The direct selling sector had been at the receiving end for many years but has gradually evolved over the years. It has the potential to be a major driver in pushing growth and generating employment in the economy. In fact, not just employment but direct selling can also address the issue of improving the female labour participation, which is currently a little above 30 per cent as per World Bank’s report on female labour force participation in India. What remains to be seen is, if the policymakers are willing to give the industry a chance.