Home >Companies >Direct selling industry revelling in slowdown

Pune / Mumbai: It wasn’t easy for C. Daphal to return to a modest salary.

In December, as the global demand for automobiles slumped, this design engineer with auto parts maker Johnson Controls Inc., was sent back prematurely from his assignment in Germany. His salary dived from about Rs3 lakh a month, on conversion from euros, to Rs30,000.

“It is tough living on this much money after getting used to a lot of money and so I decided to start working with Amway," says Daphal, who joined the direct marketing firm in Pune after hearing about it from friends.

As India faces its own slowdown, layoffs and salary cuts, the country’s Rs3,500 crore direct selling industry, according to the Indian Direct Selling Association, is revelling in the sudden availability of a growing pool of educated manpower signing on as sales agents.

Achinta Banerjie, vice-president, western region, Amway India Pvt. Ltd, says about 30,000 people have joined the company as agents in the past three months. That’s 30% of some 100,000 agents who have joined Amway India—a unit of US-based Amway Corp.—since March last year.

Beauty products retailer Avon Beauty Products India Pvt. Ltd has seen a 65% growth year-on-year in the number of agents from October to December, its sales director Ajay Rao said.

“Globally, direct selling companies see a 25-30% spurt in people joining up every time there is a recession or slowdown," said Banerjie. “This, combined with the fact that we have lowered entry barriers to sign on with us—the cost of our starter kit is down from Rs4,000 plus to Rs995 since March last—has resulted in a larger sales force for us."

In direct marketing, an independent distributor recruits people not only to buy and sell products directly to those they know, but also to recruit more people.

The new hires, in turn, recruit more people. Each member earns a commission for expanding the network as well as selling the product. These hires pay for a starter kit but also get discounts on products they buy for themselves.

“Economic slowdowns have come and gone before, too, but no one stops buying stuff for everyday needs such as tooth paste and shampoo," said Renu Sharma, a senior agent with Oriflame India Pvt. Ltd who leads 5,000 other agents. “Direct-marketing companies usually step up their activities during slowdown because there are always people wanting to save money by getting some discount."

For direct sellers, this rush of agents is translating into increased sales. Amway sees its revenue for 2009 increasing to Rs1,400 crore from Rs1,128 crore the previous year, while Oriflame recorded its largest-ever sales of Rs1 crore in Pune this January, up from about Rs60,000 in the previous months.

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