Direct selling model involves selling products directly to the consumers to their doorsteps. In return, direct sellers earn a sales margin on products sold and also a commission, if they are able to sell them in bulk to customers like a large business group.
Given that the growth of direct selling facilitates the growth of MSMEs, a majority of production is outsourced to them. SMBStory got in touch with Vivek Katoch, Chairman of Indian Direct Selling Association (IDSA), to know about the industry’s evolution and how MSMEs can benefit from an enhanced collaboration with it.
SMBStory: When did the direct selling model enter India? Where does the industry value stand?
Vivek Katoch: The model entered India in the 1980s, but picked up pace only after 1995 with the entry of companies likes Amway, Avon, Oriflame and Tupperware. Today, the industry’s value stands at Rs 80 billion and is considered one of the fastest-growing industry in non-retail format.
SS: "MSMEs form the backbone of the direct selling Industry." What is your take on the same?
VK: MSMEs are the perfect partners for logistics for direct selling companies. They provide services like storage and warehousing, packaging and labelling, transportation and final delivery, constituting a major chunk of direct selling's chain of operations.
SS: How MSMEs benefit from collaborating with the direct selling industry?
VK: Most direct selling companies procure a wide variety of products from domestic manufacturers. They invest in MSMEs for the right equipment and machines so that they can manufacture for them. In return, Indian manufacturers benefit from attaining exposure and skills to make products of international standards.
SS: What is usually the biggest impediment in the growth of MSMEs? How can direct selling industry help?
VK: MSMEs suffer from a lack of funds. Direct selling companies usually sign long-term contracts with them, which gives them an assured long-term financial stability. In fact, there are many MSMEs that have advanced to cater to global FMCG clients independently after gaining the requisite skills and financial stability through these long-term contracts.
SS: What is the role of the direct selling industry in creating microentrepreneurs?
VK: In 2016-17, the direct selling industry created more than 51 lakh job opportunities in India. The goods produced by the direct selling companies are sold by independent business owners called direct sellers. This way, the industry provides income opportunities to the unskilled or under skilled manpower. To date, It has trained more than five crore people in management, marketing and communication skills.
SS: Any lacuna in policy which has been hindering the growth of the direct selling industry in India?
VK: If the Consumer Protection Bill 2018 that was tabled in the Parliament this year is passed, it can go a long way in the development of the industry. The Bill enforces consumer rights and provides a mechanism for redressal of complaints regarding defects in goods and deficiency in services through setting up of Consumer Disputes Redressal Commissions (quasi-judicial bodies) at the district, state and national levels for adjudicating on consumer complaints.