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Direct Selling an Emerging Trend in India

Direct Selling an Emerging Trend in India

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Published by The entrepreneur
traditional retail in India is showed decline in growth whereas direct selling industry has shown an incredible growth in last 2 years. Amway and Tupperware are the leading players in direct selling India
traditional retail in India is showed decline in growth whereas direct selling industry has shown an incredible growth in last 2 years. Amway and Tupperware are the leading players in direct selling India

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Published by: The entrepreneur on May 13, 2009
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12/03/2010

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Date:14/05/2009
 
URL:http://www.thehindubusinessline.com/bline/catalyst/2009/05/14/stories/2009051450010100.htm
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Direct selling on the go
While organised retail is slowing down, the direct selling industry is gung ho about its prospects. BrandLine does a reality check on its optimism..
 
 A couple
of Tupperware distributors display their products.
Tunia Cherian
his business has the uncanny ability to bump into you in the most unlikely places. Often it is a friend or relative who has turned a distribution agent somewhere along the way, who chats you up on a range of  products that you may want try out.So, whether it is Amway’s products for the home, its brand of cosmetics and nutritional supplements or the latest range of Tupperware containers, you are soon torn between trying them out and postponingyour purchase.The Indian Direct Selling Association’s (IDSA) projection of 20 per cent growth in 2008-09 is equallysurprising coming as it does at a time when organised retail is witnessing a distinct decline in salesgrowth. Though the actual figures will be released only after its annual survey is formally released inJuly, this is IDSA’s general projection with respect to industry estimates.But direct selling, for sure, is abuzz with activity. During the last few months, the two largest directsellers in the country, Amway and Tupperware, have held press conferences in Chennai charting outtheir future course.While William S. Pinckney, Managing Director and CEO, Amway, spoke about Amway’s future plansfor the domestic market, Asha Gupta, Managing Director, Tupperware, outlined her company’sstrategy to increase the number of its direct selling agents.
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strategy to increase the number of its direct selling agents.The industry as a whole recorded a turnover of Rs 2,851 crore in 2007-08 as against Rs 2,522 crorein 2006-07. These numbers are minuscule compared to that in organised retail, says Chavi Hemanth,Secretary-General, IDSA.Responding to an e-mailed questionnaire, she points out that the direct selling industry is smallcompared to organised retail, not just in India but abroad as well. This could be explained in terms of the realities of direct selling and the fact that these products are not sold over the counter in largequantities, but through one-on-one interactions with the potential customer. It’s not surprising then thatnutritional supplements are among the fastest moving products sold through direct marketing.Hemanth also says it’s important to interact personally with customers in order to better present tothem the qualities that distinguished higher priced products such as Tupperware and AMC cookwarefrom cheaper products available in the retail sector.A share of the pieGiven the impressive numbers one is tempted to ask whether direct selling is making a teeny-weenydent in the overall retail pie...Speaking of the personal care space that he is engaged in, Ramesh Vishwanathan, Executive Director of consumer goods company CavinKare Pvt Ltd, says the volume share of the direct selling business inthis category is still negligible — which is partly why direct selling volumes are not tracked by themarket research agencies, he says.Another marketer echoes the same opinion. He says direct selling is an evolving category in the countryand growth in the business would be driven by a mix of products such as clothes and healthcare andnew categories of business such as nutritional supplements. The turnover of traditional retail products isunlikely to be affected by the growth of direct selling. He adds that this niche business would take off inareas that have problems in distribution and it would essentially speed up the growth of productcategories that are still in a nascent stage in the country.Without revealing figures, Sunil Tolani, General Manager, Hindustan Unilever Network (HUN), saysthe multi-channel business proposition presented by HUN had helped the company register a healthygrowth rate which is “in line with our ambitions”. HUN is the direct selling business of the country’slargest FMCG player, Hindustan Unilever Ltd. Growth, he says, is backed by consumer relevantinnovations and launches, including Ayush Rakshak Rasayana — a healthy morning drink — andAviance skin care range for anti-ageing and skin lightening, besides its focus on training their consultants.Amway India, which recorded a 40 per cent growth in turnover in 2008 to cross the Rs 1,000-croremark during the year, expects Nutrilite, its brand of nutritional supplements that account for half its totalsales, to continue to power growth, along with colour cosmetics, which account for 25 per cent of totalsales.A fitness enthusiast and user of Amway’s nutritional supplements says the products offer bothnourishment and convenience of use especially when working out at the gym. However, he points out 
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that there are several imported brands of dietary supplements in the market.“Despite the cost, I buy these products since it is advisable to consume nutritional supplements whileworking out; besides, they are easy to use,” he says.The products are not cheap — for example, a 500 gm tin of Nutrilite protein powder is priced at Rs1,699 and Daily, a multivitamin tablet, at Rs 1,749 for a bottle of 120 tablets.Chennai-based nutritionist and diet consultant Nimmi Ittycheria John says Amway’s nutritionalsupplements are supported by convincing literature and well-trained dealers and their supplements aretherefore used by people who buy the concept and importantly can afford them.According to IDSA’s Hemanth, India has emerged as an important destination for direct sellingcompanies, particularly in the context of growth in the sector declining to single digits in Europe and theUS.The association, she says, has received a number of queries from direct sellers across the globe; shedoes not, however, name these companies.Expansion modeFor the direct selling companies already in India, it is a time for building on the strong numbers postedin the midst of the economic slowdown.Amway, which is the country’s largest direct selling company, is keen to improve customer access for its products. It is on the look out for suitable properties to open Experience Centres where passers-byand its own business owners can walk in with prospects and customers to try out their various productsregardless of whether they were looking for nutritional supplements, skincare products or colour cosmetics. The company plans to have professional nutritionists, cosmetologists and other experts atthe store in an effort to answer customer queries at the very outset.According to Pinckney, the company is keen to work with its business owners rather than around themin the effort to reach out to customers. Amway India is a wholly-owned subsidiary of the Ada,Michigan-headquartered parent company. The company’s revamped Web site is also intended toimprove customer access to the company and its products. However, even here, the company istreading with care as it is keen to take its business owners along with it.He points out that in the US and Korea, online sales make up more than 80 per cent of the total. Thereare limitations to online sales in India given the lower Internet penetration, not to speak of people’shesitation to reveal their card details on the Net, he explains.Tupperware has also extended its presence at exhibitions and in some retail outlets with the similar aimof drawing consumer attention towards itself.Queried if this reflected a change in the way direct selling is being conducted today, Tupperware’s MD,Gupta says the company showcased its products through temporary kiosks in malls and in exhibitionsto help consumers get connected to its sales force and for brand-building purposes. “This is done witha view to drive more consumers into Tupperware parties and does not in any way suggest a shift in our distribution model,” she sas.
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