New Delhi: Direct selling companies in India are losing their biggest strength—people—and this has resulted in growth slowing to below 5% in 2015-16 from more than 22% five years ago, according to a study by lobby groups Indian Direct Selling Association (IDSA) and PHD Chamber of Commerce and Industry.
In 2012-13, companies engaged in direct selling in India had a total of 5.7 lakh people directly associated with them, which has dropped to 4 lakh in 2015-16, the study said, adding that the rate of revenue growth had also declined.
During 2015-16, the industry grew by 4.4% to Rs8,308 crore (revenue). The growth rate was 6.5% over the previous year. In 2012-13, revenue grew by 12.2% and the year before, it rose 22.1%, added the study.
“Lack of proper regulation and slowing economy are the key reasons," said S.P. Sharma, chief economist, PHD Chamber of Commerce and Industry. “Though the Industry has registered a decline in growth rate 2015-16 as compared to the previous year, the situation is expected to improve, especially after the central government issued the direct selling guidelines 2016," Sharma added.
The direct selling industry, which had been lobbying for a separate regulation, only got the regulations late last year that excluded direct selling firms like Amway India Enterprises Pvt. Ltd, Tupperware Brands Corp. and Oriflame India from the purview of Prize Chits and Money Circulation Schemes (Banning) Act 1978.According to the new regulations, such companies should stop charging entry or registration fee from their agents or direct sellers, ensure buy-back of unsold stocks and avoid pyramid schemes.
Vivek Katoch, vice chairman at IDSA and director (corporate affairs) at Oriflame India, agrees. “There was no regulatory clarity and some enforcement agencies had taken action against some companies. That is why the industry has been seeing a downfall especially in south India. Post the guidelines, there has been a rise in the number of direct sellers. This year, we have seen a positive growth," added Katoch.
The IDSA study, released on Wednesday, projected revenue of the direct selling industry to grow to Rs25,826 crore by 2014-25, from Rs8,308 crore in 2015-16. That puts India among the top 10 markets for direct selling companies. The industry’s revenue stood at Rs7,958 crore a year ago.
A different study by lobby group FICCI and consulting firm KPMG, released on 30 November 2016, said the industry has the potential to reach Rs64,500 crore in revenue by 2025 with the right policy stimulus.
Harveen Ahluwalia contributed to the story.