Network Marketing, also referred to as Direct Selling or Referral Marketing or Multilevel Marketing (MLM), has been active in India for more than two decades. However, it has often been misunderstood. It is mainly due to some people’s negative experiences about a handful of Direct Marketing companies. And this gets generalized.
However, the misconceptions of Direct Selling have been laid to rest during the Covid-19 pandemic. When most industries struggled to sustain their operations and revenues, the Direct Selling industry stood out. It provided livelihoods to millions and showed them a way to attain financial freedom.
This article aims at busting the myths about Network Marketing. It discusses how Network Marketing is boosted by the Indian government and is very much legal.
A Brief About Network Marketing
Multilevel Marketing (MLM) is a promotional business strategy. MLM companies employ people not directly on their payrolls to sell their products or services.
The salespeople employed by MLM companies are commonly known as Distributors or Direct Sellers, or Network Marketers.
Multilevel Marketing, as the name suggests, follows a hierarchical structure. It follows a business model where the person’s aim on a higher level is to sell the company products or services and expand the network by recruiting members under them – popularly known as the downline.
As a Direct Seller, you earn an attractive commission for the sales you execute. You are lucratively incentivized for the salespeople you recruit.
You also earn a percentage of the commission on the sales made by your downline and their downlines. This income you earn without any effort from your side is known as the residual income.
Busting the Misconceptions About Network Marketing
Over the years, several illegal and fraudulent companies have operated as MLM companies in India. These fraud companies were known to implement the illegal pyramid scheme that lured and duped innocent people. It earned a bad name for the industry.
The MLM industry has come a long way. But there remain a few misconceptions that have discouraged many from joining the Network Marketing industry. Listed below are some of the misconceptions that we try to bust.
Misconception 01: To join a Network Marketing business, you have to invest big to get good returns.
Truth:
You require an investment to start any business, and the same goes for your Network Marketing business. However, unlike any other traditional business, Network Marketing does not require your life savings! And reputable MLM companies offer several different options to meet your investment capacity.
Misconception 02: Network Marketing is all about selling.
Truth:
Network Marketing is not just about selling. It involves mentoring and training to generate a duplicatable business system. You can consider it as micro-franchising. Just like how you can be the boss of your team, you can help others whom you recruit – your downline in MLM terms, do the same.
Misconception 03: In Network Marketing you have to work hard for long hours.
Truth:
Whether it is a big, medium or small company, you certainly have to put in efforts to succeed. It is also true as a self-employed Network Marketer. However, in Network Marketing, you get free coaching and support from the partnering company.
The beauty of Network Marketing is that you can work flexibly at convenient hours. Your earnings are directly proportional to your efforts. You do it right and professionally; you will earn more in less time!
Misconception 04: Network Marketing is neither respectable nor reputable.
Truth:
The products and services sold by Network Marketing companies are unique and are of high quality. The products sold by Network Marketing companies are usually not found off the shelf in any departmental store or nearby shops.
As per the latest Direct Selling statistics, more than 18 million people in the US work in the Direct Selling industry. And their sales are worth over USD 34 billion in sales. These people would not have been into Direct Selling had it been not respectable. And these people would not have made the huge sales had they been of poor quality.
How to Identify Legal Network Marketing Companies in India?
Multilevel Marketing is a legal form of business in India. A legal Multilevel Marketing company in India adheres to and operates under the government’s legal guidelines.
India is a large country. It becomes quite difficult when differentiating a legal MLM company from an illegal one. Some of the features that identify a legal Multilevel Marketing company in India are shown below:
- Unlike illegal Multilevel marketing companies, a legal MLM company promises a fixed time to achieve financial benefit.
- Unlike illegal Multilevel Marketing companies, the products offered by a legal Multilevel Marketing are of high quality. The legal MLM companies back their products with a certificate of quality.
- Unlike illegal Multilevel Marketing companies, a legal MLM company offers a fixed compensation package that includes commissions and sales and recruitment incentives.
- Unlike illegal Multilevel Marketing companies, a legal MLM company provides a well-defined plan and strategy to carry out the business.
Direct Selling Model Guidelines Introduced by Government of India
The laws relating to MLM companies in India were earlier treated under the Prize Chits and Money Circulation Schemes’ Act 1978. However, the increasing number of MLM industry frauds compelled the Indian government to introduce Model Guidelines for Multilevel Marketing or Direct Selling in 2016. The new guidelines include the following provisions:
- All Direct Selling companies in India need to submit an undertaking within 90 days of starting operations to the Department of Consumer Affairs.
- The Direct Selling company will not force the consumer to buy products or services beyond what they can afford.
- Participation should be free. The Direct Selling company should not ask for any participation fee like entry fee or registration fee.
- As per Section 10 of the Indian Contract Act 1872A, the Direct Selling company must give a written contract to every participant in the business mentioning material terms of participation.
- The Direct Selling company is required to lay down a refund and cancellation policy of membership.
- The Direct Selling company must implement a purchase and buyback policy.
- The MLM company needs to lay down information about Direct Selling operations and policies.
- The Direct Selling company needs to have a physical office address for its operations mandatorily.
- The Direct Selling company must record the method of calculation of its compensation plan and other remunerations.
- The MLM company must maintain a CIN with PAN and provide an identity card to the participant.
Initiatives that are Boosting the Network Marketing Industry
The Network Marketing industry shot into the limelight during the deadly Covid-19 pandemic that induced an economic and unemployment crisis. The Network Marketing companies provided livelihoods to millions who lost their jobs. It also contributed substantially to the government revenues.
Having noted the contribution of the Direct Selling industry and its usefulness in generating self-employment compelled the Indian government to look at the industry seriously.
The government took several initiatives like Make in India, Vocal for Local, Women Empowerment, Skill India and Startup India to boost the industry.
How Direct Selling Companies are Aligning with Government’s Initiatives and Vision
The Network Marketing companies have collaborated with local manufacturers to sell their products and services. It is in line with the government’s initiative of Make in India and Vocal for Local.
The Network Marketing industry employs women that is more than half of its workforce. It is in line with the government’s initiative of Women Empowerment.
The Network marketing companies provide free training to those partnering with it. It is in line with the government’s initiative of Skill India.
Conclusion: Network Marketing in India is legal. Join confidently.
In the above discussion, we have busted the myths about Network Marketing. We have seen how the government has boosted the MLM sector. We have seen the steps taken by the government to safeguard the interest of investors in MLM companies. We have also seen how the Direct Selling companies are contributing significantly to the government revenues. And we have seen how Direct Selling companies are nicely aligning with the government’s initiatives and vision.
Our discussion points to one thing – Network Marketing is very much alive and thriving in India and legal. All you need to do before joining hands with an MLM company is to ensure that it complies with government guidelines and regulations discussed above.
When you join a Network Marketing company, you should ensure that you are comfortable and compassionate about the products or services you will sell. Ensure that the products are unique and of high quality. It will enable you to sell them effortlessly. And finally, a word of wisdom – do not pay any heed to the Direct Selling business’s misconceptions. Multilevel Marketing is not a get-rich-quick scheme. Putting sincere & dedicated efforts, implementing smart online & offline marketing strategies, and expanding & mentoring your downline smartly, will help you succeed in your Direct Selling journey.
