Direct Selling: A Consumer-Centric Industry And Seeking Effective Regulatory Regime
The Direct Selling Industry must come forward for better compliance and self-regulation to unlock the potential of the industry, that is estimated to grow at the double-digit growth rate in coming years
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Direct Selling is an industry facilitating the consumer at their doorstep with assured quality and service. It constitutes marketing of goods and services directly to consumers on a person-to-person basis, generally in their homes or the homes of others, at their workplace and other places away from permanent retail locations. Direct Selling offers customers the opportunity to see, test and judge a product at their leisure in their own homes or among friends before buying the product. All goods are delivered directly to the customer. It is especially useful for consumers in rural areas and small towns, making available goods and services not provided through outlets in the area. This also creates employment and empowerment for women.
Historical Significance of Direct Selling in India
We may not realize it, but historical and traditional narratives indicate that Direct Selling is not a new concept in India. Since ages, we have heard accounts of weavers, farmers, utensils makers, carpenters, etc. involved in manufacturing and selling directly to their then consumer. It was the time when India was having the maximum GDP in the world and India was the hub of creativity and innovation. Intellectual capabilities supported by direct selling were respected and rewarded even by kings and citizens.
Direct Selling in Modern World
Today, companies across the globe, big or small, are employing various distribution channels to sell their products. Once again, Direct Selling is becoming popular. It is used by top global brands and smaller entrepreneurial companies to market their products and services to consumers.
Companies market all types of goods and services, from FMCG, jewelry, cookware, nutritional, cosmetics, housewares, energy, books and much more. Development of such relationship through manufacturing and selling of such products and services has progressed to such an extent that today, Direct Selling accounts for USD 183 billion globally and about USD 1.2 billion in India. It is a known fact that Direct Selling provides the opportunity of self-employment to about 105 million people globally and to about 4 million people in India, around 60% people engaged in Direct Selling are women.
Direct Selling opportunities have huge potential and can create massive employment opportunity, provided we create a conducive environment which is protecting all the stakeholders i.e. consumers, manufacturers and channel partners within the regulatory framework.
Direct Selling Post- Liberalization
After reforms made in 1991, Indian economy witnessed the entry of global players in India. So far, global companies such as 4Life, Amway, Avon, Herbalife, Jeunesse, K-link, Lambre, Oriflame, Q-Net, Sunrider, Tupperware, Unicity, and others have created huge market shares with their wide range of products ranging from personal care, food supplements to household goods. Until recently, the industry was the fastest growing non-store retail formats, growing over 20% year on year. However, In the absence of any effective regulatory regime, few unfortunate and misleading incidents have happened by fly-by-night operators, reported in several states across India. This has created huge uncertainty and bottlenecks for the industry.
Model Direct Selling Guidelines 2016 ensures that “Consumer remains the King”:
In order to ensure orderly growth of Direct Selling and to create more start-ups and self-employment opportunities in India, an effective and uniform regulatory regime across all states is required. The release of Model Direct Selling Guidelines 2016 by the Ministry of Food, Public Distribution and Consumer Affairs was a first significant milestone for the non-store retail sector which will give a boost to employment and start-ups development in India. As envisioned by the Prime Minister of India, this will also lead to “ease of doing business” for the start-up, women entrepreneurs and direct selling industry in India.
The only way this envisioned thought can be turned into reality is through an effective notarization and proper implementation of these Uniform Guidelines by all the States and Union Territories in India. The process has already begun in the four states i.e. Sikkim, Chhattisgarh, Telangana & Andhra Pradesh. States like Karnataka, Tamil Nadu, and Maharashtra are also lined up for notarizing these Guidelines to help the employment generation initiatives.
Furthermore, recently the Union Cabinet has also approved the New Consumer Protection Bill 2017 to be placed in Parliament and hopefully, it would be approved in the Winter Session itself. The rules for consumer protection have been streamlined to solve consumer problems keeping cost and time efficiency in mind. The new law also aims to encourage ethical business. Direct Selling, on its part, has been established globally as one of the most consumer-friendly formats to improve access to quality goods and services. However, at ASSOCHAM I also propose that all direct selling companies, big or small, should have an effective code administrator/ombudsman to ensure an efficient complaint redressal mechanism for prompt handling of consumer complaints to become an integral part of the industry, not just on paper but also in its true spirit. This will help in the development of Direct Selling Industry.
The Way Forward
The Direct Selling Industry must come forward for better compliance and self-regulation to unlock the potential of the industry, that is estimated to grow at the double-digit growth rate in coming years.
To ensure the achievement of these Industry estimates, the state governments need to adopt and notarize the Model Direct Selling Guidelines 2016 at the earliest to create confidence among the investors. All states need to be in sync with the Guidelines as issued by the Ministry of Food, Public Distribution and Consumer Affairs. We must refrain from different guidelines in each state, this will be contradictory to the Prime Minister’s vision of ‘Ease of Doing Business’ not only for direct selling entities but for the industry at large and reduce the employment generation potential of the sector.
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