There is no other industry in India that has recorded such phenomenal growth over the last few years as that by the Network Marketing industry, also called Multilevel Marketing (MLM) or Direct Selling or Referral Marketing.
Compared to conventional retail marketing, Network Marketing is witnessing stupendous growth in India. It can be seen by comparing the revenue growth of Network Marketing companies with companies that incorporate traditional retail methods.
Take the example of Amway – a Multilevel Marketing company. It has been consistently registering a revenue growth of around 100 per cent year-on-year. Compared to Amway, most other top FMCG companies have struggled to maintain even a revenue growth of around 6 per cent!
There are a few distinct factors that make Network Marketing an effective retail method for marketing consumer goods. This article explores the key factors that are making the Network Marketing model a runaway success.
Major Direct Selling Players in India
Let us begin by asking the question, “What is Direct Selling”? Direct Selling is a type of retail that involves door-to-door or person-to-person selling by salespeople who Network Marketing companies hire.
The salespeople hired by Direct Selling companies are commonly known as Distributors, Direct Sellers, or Network Marketers. The Directs Sellers are not directly on the payrolls of the Direct Selling companies.
Direct Sellers earn attractive commissions for selling the products or services of the Direct Selling company with whom they collaborate. They are also incentivized for recruiting more salespeople in the company’s sales network – placed under them and called downline. Further, Direct Sellers also earn a percentage of the commissions on sales executed by their downline and downline’s downline. This income earned without any effort is called residual income.
Several Multilevel Marketing companies are operating in India. But the major ones include Amway, Avon, Oriflame, Qnet, and Tupperware. While Amway is mainly into homecare and personal care, Oriflame deals in cosmetics and Tupperware is into kitchenware.
Direct Selling – A Successful Model in India
Direct Selling has been around in India for more than two decades now. It has been a successful retail model of marketing, providing an additional source of income to many. Its growth over the last few years is reflected in the increasing number of Direct Sellers.
The Direct Selling companies sell unique and innovative products. And by continuously introducing new product lines and expanding existing ones is helping Direct Selling companies to grow. It motivates Direct Sellers to stay with the business. It helps and encourages them to create positive word-of-mouth marketing and grow their sales.
What Discouraged Investors Earlier from Joining Direct Selling Companies?
Many companies operated earlier in the guise of legal Multilevel marketing entities but implemented the illegal pyramid business model. These companies duped innocent investors of their hard-earned savings and vanished in no time.
Earlier, there were no regulations or guidelines from the government of India that governed the Direct Selling industry. There were no laws that could punish the fraudulent practices by the illegal companies.
All this discouraged many people from joining hands with Network Marketing companies. Further, a perception existed that joining a Direct Selling company is mainly suited for homemakers, retired personnel, and the unemployed. Many did not consider it as a business but a sort of hobby or side job.
Times have Bettered for the Direct Selling Industry Today
We are in a fast-transforming digital world where transparency exists. We are in an era where social media connects people to people and people to businesses. Today, the Indian government has recognized the contribution of Direct Selling companies to the country’s economic growth.
The Direct Selling industry stood out during the Covid-19 pandemic when others struggled. Direct Selling companies provided millions with self-employment opportunities to those who lost their jobs. The Direct Selling industry contributed substantial revenues to the government of India.
The government of India boosted the Network Marketing industry with several initiatives like Make in India, Women Empowerment, Vocal for Local, Startup India, and Skill India. The government of India also addressed the grievances faced by Direct Sellers and investors in Direct Selling companies.
Is Direct Selling legal in India? Yes, very much. The government of India recently drafted regulations and laid guidelines that safeguard the interests of Direct Sellers. The government has rendered companies incorporating the pyramid business model illegal. Also, all Direct Selling entities must register with a governing body and have a permanent office in India.
The industry has welcomed all steps taken by the government to boost Direct Selling. And the guidelines issued by the Ministry of Consumer Affairs were welcomed by all stakeholders – it will go a long way in fostering a sense of confidence and trust. All steps and guidelines will facilitate the growth of Direct Selling. It will help to increased awareness among people and reduce frauds committed by companies.
Factors Responsible for the Rise of Direct Selling in India
As discussed earlier, Distributors or Direct Sellers play multiple roles in a Direct Selling business. They are at the centre of all actions in the entire business cycle.
Direct Sellers are themselves consumers of the products they sell. They are retailers; they are sales agents. And they are also the advertising media doing it via word-of-mouth or in person. Other stakeholders in a Direct Selling business are, of course, the consumers and the supplier.
Let us now look at factors responsible for the growth of the network marketing in India.
01. Loyal and Tech-Savvy Consumers
When they join a Direct Selling business, Distributors are themselves interested in the products of the collaborating company. They have a big stake in growing the business. Distributors are also influenced greatly by their upline, which inclines them to buy the products they sell.
Today’s consumers are tech-savvy. They prefer comparing and reviewing products online before placing their orders. They are even comfortable when their orders get delivered right to their doorstep. Further, the frequent lockdowns enforced by the government during the Covid-19 pandemic confined people to their homes and placing orders for their daily needs and essentials became the norm. It has enabled the Direct Selling companies to increase their sales and stand out even during a receding economy.
02. The Word-of-Mouth Marketing Strategy Proving Effective
When your friend or relative is your prospect or customer, as the distributor, your recommendations matter. If you share similar tastes or interests with your prospects or customers, it is all the better; it becomes even easier for you to stress the benefits of your product or service and further convert it into a sale.
By hiring salespeople not directly on their payrolls, Direct Selling companies save on overhead costs. By encouraging Direct Sellers to recruit more salespeople, Direct Selling companies save time on recruitment. Direct Sellers also create a sales network under them, Direct Selling companies can spread their word, increase their reach and visibility, and save on advertising spending.
03. Great Service and Product Quality Acknowledgement
Direct Selling companies sell unique and innovative products and are not available off the shelf in any mall, retail shop, or departmental store. The quality of the product sold by Direct Selling companies is acknowledged to be good.
Endorsements by industry experts and the training provided by specialists to Distributors further help create a positive perception in the market. The products, even if a bit expensive, prices are justified based on their quality.
04. More Revenues Generated from More Subscriptions
The onset of the Covid-19 pandemic induced an economic recession and an unemployment crisis. Many people who lost their jobs got attracted to Direct Selling. It showed them the way to attain financial freedom and earn their livelihoods.
Further, the Indian middle class that is ever-growing and looking for ways to earn a second income has become the ideal distributors’ pool.
The commissions and incentives offered by Indian Direct Selling companies are attractive for anyone looking to make an extra income – it denotes success and respect for many!
The existence of a captive consumer base ensures increased revenues which are accelerated by launching new products periodically.
05. Initiatives that are India-Specific
Distributors in India come from different socio-economic backgrounds – from affluent to the lower middle class. The easy alternative source of income offered by creditors – government and private, have enabled and encouraged many to opt for the Direct Selling business.
First-time initiatives adopted by Direct Selling companies like mass advertising and smaller Stock Keeping Units (SKUs) – for example, sachets- have proved cost-effective. It has only gone on to improve the bottom lines of the Direct Selling companies to grow more.
Tie-ups with top players like BPCL, Citibank, Standard Chartered and others by introducing Petro-cards and credit card schemes have added credibility to the Direct Selling business.
Conclusion: There is more to Direct Selling than what meets the eye!
We have seen the evident strengths associated with Direct Selling that is driving its growth in India. However, some conventional marketers have not yet acknowledged it by pointing to the false hope it gives.
Direct Selling is not a get-rich-soon scheme. Nothing in this world comes for free! You need to put in the effort and work smartly. Deploying a combination of offline and online marketing strategies and implementing the right approach to your prospects and customers hold the key to your Network Marketing success. There are more takeaways today for a Direct Selling business than ever before in India. The government boost to the industry, the government guidelines to safeguard consumer interests, the tech-savvy consumers comfortable with buying online are all factors propelling the Network Marketing in INdia.
