With globalization and liberalization of Indian Economy in last two decades, numerous domestic and international companies have been drawn to investing in new modes of business/ business models targeted at the huge domestic market especially in the consumer goods & services. Direct Selling is one of these modes where goods /services are sold directly by the producer/service provider to the consumers. For this different model such as Multi Level/Network marketing, Door to Door Selling, Online Selling, and Tele-shopping are being used. These practices are new and different from traditional retail through shops. In the absence of a proper regulatory framework, retail through these models leads to consumer grievances, trader’s issues, slow growth of the sector etc.
Direct selling is a dynamic and pacing industry that holds the biggest misconceptions in today’s developing India. Although it holds no particular definition, according to a KPMG Report (Dec,2015), it can be broadly comprehended as “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 the direct sellers”. While this seems like the perfect definition, there are several loopholes that can be found depending on which state you live in.
Different States mean Different Laws
Different states have different laws or lack thereof when it comes to Direct Selling. This causes the meaning, intention and perception to change as we cross borders within the country. An industry with such vast potential and the power to positively affect the revenue of the country, we believe, should have clear legislation’s protecting it from being defamed. The lack of lucidity on how the industry functions and how one can reap its benefits is the cause for several people losing out on legitimate business opportunities. It is definitely neither an overnight money making scheme nor is it a channel to invest your money. It is a business model which helps you earn by selling the company’s products directly to your known consumer.
Let us now take a look at how Direct Selling is performing in different states:
With North India taking the lead, closely followed by the South, the Direct Selling Industry is predicted to be worth a staggering Rs.625 billion by the year 2025. (Source: Business Standard). While State-wise regulatory laws are being constructed to lend more clarity to the industry, the delay in making them is causing the industry to face an unnecessary decline in its growth. Let us consider Kerala, for example: Due to the state’s high literacy rate, high urbanization rate and high per capita incomes, the direct selling industry was booming till the year 2010. But due to the lack of legal clarity around direct selling, the industry has been in a state of constant decline since. Gujarat too, with it’s organized business class and one of the highest per capita incomes in India, is predicted to reach Rs.50 billion dollar direct selling industry. However, experts say that this is possible only by enabling environment for the industry and mitigating some of the challenges it faces to today.
Need for a common law
To sum it up, we need national laws that apply to Direct Selling and should be adhered to by all the states. The lack of such regulatory laws are what is holding the Industry from reaching it’s full potential. Once these regulations are put in place, only then will more people be willing to venture into direct selling and benefit from it. The law making authorities must absolutely take on a more holistic approach in making laws for the Direct Selling Industry and in turn help more people to be a part of a promising business opportunity.