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Date:14/05/2009 URL: http://www.thehindubusinessline.com/bline/catalyst/2009/05/14/stories/2009051450010100.htm Back 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 This 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 postponing your purchase. The Indian Direct Selling Association’s (IDSA) projection of 20 per cent growth in 2008-09 is equally surprising coming as it does at a time when organised retail is witnessing a distinct decline in sales growth. Though the actual figures will be released only after its annual survey is formally released in July, 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 direct sellers in the country, Amway and Tupperware, have held press conferences in Chennai charting out their future course. While William S. Pinckney, Managing Director and CEO, Amway, spoke about Amway’s future plans for the domestic market, Asha Gupta, Managing Director, Tupperware, outlined her company’s strategy to increase the number of its direct selling agents.
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 crore in 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 small compared 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 large quantities, but through one-on-one interactions with the potential customer. It’s not surprising then that nutritional 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 to them the qualities that distinguished higher priced products such as Tupperware and AMC cookware from cheaper products available in the retail sector. A share of the pie Given the impressive numbers one is tempted to ask whether direct selling is making a teeny-weeny dent 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 in this category is still negligible — which is partly why direct selling volumes are not tracked by the market research agencies, he says. Another marketer echoes the same opinion. He says direct selling is an evolving category in the country and growth in the business would be driven by a mix of products such as clothes and healthcare and new categories of business such as nutritional supplements. The turnover of traditional retail products is unlikely to be affected by the growth of direct selling. He adds that this niche business would take off in areas that have problems in distribution and it would essentially speed up the growth of product categories that are still in a nascent stage in the country. Without revealing figures, Sunil Tolani, General Manager, Hindustan Unilever Network (HUN), says the multi-channel business proposition presented by HUN had helped the company register a healthy growth rate which is “in line with our ambitions”. HUN is the direct selling business of the country’s largest FMCG player, Hindustan Unilever Ltd. Growth, he says, is backed by consumer relevant innovations and launches, including Ayush Rakshak Rasayana — a healthy morning drink — and Aviance 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-crore mark during the year, expects Nutrilite, its brand of nutritional supplements that account for half its total sales, to continue to power growth, along with colour cosmetics, which account for 25 per cent of total sales. A fitness enthusiast and user of Amway’s nutritional supplements says the products offer both nourishment and convenience of use especially when working out at the gym. However, he points out that there are several imported brands of dietary supplements in the market. businessline.in/cgi-bin/print.pl?file=2…
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 while working 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 Rs 1,699 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 nutritional supplements are supported by convincing literature and well-trained dealers and their supplements are therefore 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 selling companies, particularly in the context of growth in the sector declining to single digits in Europe and the US. The association, she says, has received a number of queries from direct sellers across the globe; she does not, however, name these companies. Expansion mode For the direct selling companies already in India, it is a time for building on the strong numbers posted in 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-by and its own business owners can walk in with prospects and customers to try out their various products regardless of whether they were looking for nutritional supplements, skincare products or colour cosmetics. The company plans to have professional nutritionists, cosmetologists and other experts at the 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 them in 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 to improve customer access to the company and its products. However, even here, the company is treading 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. There are limitations to online sales in India given the lower Internet penetration, not to speak of people’s hesitation 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 aim of 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 exhibitions to help consumers get connected to its sales force and for brand-building purposes. “This is done with a view to drive more consumers into Tupperware parties and does not in any way suggest a shift in our distribution model,” she says.
distribution model,” she says. She points out that the economic conditions have not affected business at Tupperware. “In fact, we have seen a good growth and we are getting more queries from women who are looking for business opportunities to supplement their family income in these tough times,” she says. Direct selling as a profession Something that Neelam Mehrotra, a house-wife who took up distributorship of Tupperware products back in 1997, would vouch for. Coming from a naval background, she says, it was difficult for her to set down roots in any one place. And that was part of the reason why direct selling appealed to her, as it allowed her the flexibility to actively sell in her free time. She says the process of interacting with other women and helping them discover the benefits of using the product kept her going. Covering the Greater Noida and Ghaziabad regions, she has 26 managers and a sales network of 1,000, of whom around 350 are active weekly. U.N. Mahesh, a Chennai-based distributor of Amway products for the past 10 years, says his wife and he took up direct selling in order to make some extra income. They have come a long way since the early days and now have a wide network of agents across the country. About the impact of the slowdown, he says there had been little impact since he deals in products of daily use, which cannot be done without. Ravinath, a pharmacist also based in Chennai, has been running a parallel business selling Amway for the past five years. He generally sells his products to neighbours, regular customers at his shop and to people he meets while travelling to work. A trial of this brand had converted him first into a loyal consumer and subsequently a dealer of the range. If the projections of companies such as Amway and Tupperware are anything to go by, sales are likely to swell as more and more people take to direct selling. As Neeharika Katikaneni, among Tupperware’s top distributors based out of Hyderabad, points out, “With IT taking a beating, even those with tech backgrounds are joining our ranks.” Related Stories: Tupperware India on recruitment drive Amway India sees 25% growth in sales © Copyright 2000 - 2008 The Hindu Business Line
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