The Direct Selling industry in India has grown to INR75 billion from INR41 billion in the last 5 years, and is further poised to occupy a dominant position in the international and domestic markets. North Indian markets are in the leading position with a share of 29% in the industry,
Thiruvananthapuram, 18 March, 2016: The Direct Selling industry in India has grown to INR75 billion from INR41 billion in the last 5 years, and is further poised to occupy a dominant position in the international and domestic markets. North Indian markets are in the leading position with a share of 29% in the industry, followed by the South, East, West and North-East with market shares of 25%, 18%, 16% and 12% respectively. Within the southern region, Kerala has been a key market worth INR700-750 million in 2013-14. The growth in this market since establishment has been attributed to its high literacy rate, increasing per-capita incomes, urbanisation and consumption-oriented population, says the FICCI-KPMG ‘Direct Selling: Kerala’ report launched today in Thiruvananthapuram.
South India has been a key market for several direct selling companies, many of them having started their operations in this region. The region has witnessed noteworthy growth in the last few years. Kerala showed tremendous growth in the last decade. However, there has been a consistent wane in the growth over the past 5 years, largely because the state is deficient in a systematic policy that clearly defines the regulatory framework of the industry. No clear definition for legitimate direct selling to differentiate it from fraudulent schemes has significantly wedged the working environment of major industry players. This has led to top industry players such as Amway, Modicare, etc. either curtailing their operations or completely discontinuing their activities.
A glimmer of hope for Kerala lies in the draft of the Kerala Multi-Level Marketing (Control and Regulation) Bill, 2013. The draft lays down detailed guidelines for regulating direct selling activities, to help guarantee that business activities are conducted without any violations of provisions of the PCMCS Act. Key observations of the committee are that there is a dire need for clearly defining direct selling, requirement of a Multi-level Marketing Regulatory Authority, need for clear provisions for the protection of consumer interests and constitution of a welfare fund for the benefit of distributors.
With the positive state resolution and support, the industry is projected to reach a size of INR18-20 billion, at a CAGR growth rate of approximately 33-35% by 2025, driven by high economic development rates, rising demand for consumer goods in urban markets such as Thiruvananthapuram, Cochin and Calicut. Considering the market potential the industry holds, the contribution to the government revenue in the form of indirect taxes is also expected to increase to approximately INR1,900 - 2,000 million by 2025. The potential to provide self-employment opportunities is estimated at 540,000 -560,000 individuals while growing at a CAGR of 18-19 per cent by 2025.
The industry has provided employment opportunities to around 80,000-90,000 individuals, with women constituting 58% of the total in FY14. The industry empowers women by making them more financially independent, equipping them with sales and marketing skills, making them conscious of their rights, in turn giving them the power of decision-making. The companies are also expanding into tier II and tier III cities and rural areas, forgoing their premium tags and targeting mass segments by producing product sachets. The companies also outsource their manufacturing process to Micro, Small and Medium Enterprises (MSME) leading to growth and technology percolation. Kerala has also benefited significantly from their CSR initiatives.
Mr. V Rajagopal, CEO, Kerala Bureau of Industrial Promotion ( K- BIP), Government of Kerala highlighted the overall potential of Direct Selling Industry in Kerala especially from the point of MSMEs. He also added that “Direct Selling Industry has tremendous potential for growth in Kerala and MSMEs can take advantage of the same.”
Mr. Deepak L Aswani, Co- Chair, FICCI Kerala, State Council said that “The stage is all set for the Direct Selling Industry in Kerala to flourish and expand their business potential. The business community, entrepreneur in Kerala should utilize this opportunity”
Mr. Rajat Banerji, Chair – FICCI Direct Selling Task Force also said,” We are thankful to the Kerala Government for bringing out guidelines for Direct Selling in 2011 and in 2015. There are some areas we would like to suggest some changes and seek continued partnership with the State Government“
Mr. Bejon Mishra, Founder , Consumer Online Foundation also said , “ There is an urgent need of bringing a strong regulatory mechanism by the State Government in the interest of consumers & promote Direct Selling in the state to not only enable consumers to access quality products & services but to also help in generating employment.“
Mr. Rajat Wahi, Partner and Head, Consumer Markets, KPMG in India said, “Currently, there is a rising need to sensitize consumers and other stakeholders. We also need to constantly lobby to revisit existing laws, bring regulatory clarity and build an environment of trust. The direct selling industry has significant rewards to offer and we should reap its multiple benefits by bringing in the appropriate legislations.”
The report strongly suggests that there is an imperative need for a governing ministry and clear legislation. It provides a few potential solutions to provide a conducive and sustainable operating environment in India. A series of reforms are required ranging from immediate short-term reforms in the nature of framing state level rules and/or standard operating procedure for law enforcement agencies to long-term measures of enacting a specific governing legislation for the sector or making amendments in the existing Acts/policies. A snapshot has of potential solutions has been provided in the figure.
Established in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is closely interwoven with India’s struggle for independence, its industrialization, and its emergence as one of the most rapidly growing global economies. FICCI has contributed to this historical process by encouraging debate, articulating the private sector’s views and influencing policy.
A non‐government, not‐for‐profit organisation, FICCI is the voice of India’s business and industry. FICCI draws its membership from the corporate sector, both private and public, including SMEs and MNCs; FICCI enjoys an indirect membership of over 2,50,000 companies from various regional chambers of commerce.
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