North Indian markets dominate the direct selling space in India, with a share of 29% of the Rs 7,500 crore industry. South Indian markets are a close No. 2, with a share of 25%, followed by the East at 18%, west at 16% and North East at 12%, respectively.
Within the southern region, Kerala has been a key market worth Rs 70-75 crore in 2013-14. The growth in this market since establishment has been attributed to its high literacy rate, increasing per-capita incomes, urbanization and consumption-oriented population, says a FICCI-KPMG report on direct selling.
The direct selling industry in India has grown to the current level from Rs 4,100 crore in the last 5 years, and is further poised to occupy a dominant position in the international and domestic markets.
The report states that south India, which has been a key market for several direct selling companies, has witnessed noteworthy growth in the last few years. Although Kerala witnessed good growth in the last decade, there has been a consistent wane in the growth over the past 5 years, largely because the state is deficient in a systematic policy that clearly defines the regulatory framework of the industry. Lack of clarity on the definition for legitimate direct selling to differentiate it from fraudulent schemes has led to top industry players such as Amway and Modicare to either curtail their operations or completely discontinue their activities.
However, the report noted that a glimmer of hope for Kerala lies in the draft of the Kerala Multi-Level Marketing (Control and Regulation) Bill, 2013. The draft lays down detailed guidelines for regulating direct selling activities, to help guarantee that business activities are conducted without any violations of provisions of the PCMCS Act. Key observations of the committee are that there is a dire need for clearly defining direct selling, requirement of a Multi-level Marketing Regulatory Authority, need for clear provisions for the protection of consumer interests and constitution of a welfare fund for the benefit of distributors.
Rajat Wahi, partner and head, consumer markets, KPMG in India said, “Currently, there is a rising need to sensitize consumers and other stakeholders. We also need to constantly lobby to revisit existing laws, bring regulatory clarity and build an environment of trust. The direct selling industry has significant rewards to offer and we should reap its multiple benefits by bringing in the appropriate legislations.”
The industry is projected to reach a size of Rs 1,800-2,000 crore, at a CAGR growth rate of approximately 33-35% by 2025, driven by high economic development rates, rising demand for consumer goods in urban markets such as Thiruvananthapuram, Cochin and Calicut.
V Rajagopal, CEO, Kerala Bureau of Industrial Promotion (K- BIP), Government of Kerala said: “Direct Selling Industry has tremendous potential for growth in Kerala and MSMEs can take advantage of the same.”
The report strongly suggests that there is an imperative need for a governing ministry and clear legislation. It provides a few potential solutions to provide a conducive and sustainable operating environment in India.