OPEN APP
Home >Industry >Retail >Consumer shifts upend direct selling biz model

Deepak Chhabra, MD, Tupperware India, is surprisingly candid for a head of a multinational company. He doesn’t evade any questions around the challenges that direct-selling firms such as his have been facing. A clutch of big direct-selling firms, both global such as Oriflame or Amway and Indian such as Netsurf Network, are grappling with a changed milieu that has rendered their people-to-people business unfeasible in its original form.

Direct-selling firms thrived on selling to communities in a non-retail environment mostly through networks, enticing them with products not typically available in stores. Suddenly, their business model has been upended, first by the upsurge in e-commerce and then by covid.

“The direct-selling business has changed forever. If it doesn’t, it will not exist," said Chhabra, whose company sells a range of homeware and kitchenware products. However, the transformation was first prompted by a change in consumer behaviour.

With the unprecedented rise in online shopping, consumer expectations skyrocketed. “They want to order now and get delivery by tomorrow," said Chhabra, underlining the new requirement of speed. However, direct-selling supply chains were longer and deliveries took 8-10 days from the time the order was taken.

Clearly, nobody has that kind of patience. Besides, competition also caught up with most direct-selling firms that prided themselves in selling “unique" products, be it kitchen containers, cosmetics or nutraceuticals. Many clones came up. “They did better than us not because of quality but because of accessibility. They were closer to the consumer," said Chhabra.

If that wasn’t enough, the pandemic struck, shifting the very foundation direct selling is based on: the meet and greet model of referrals, meeting customers, showcasing and demonstrating products. Covid protocols imposed social distancing, making interactions impractical. “Honestly, even before the pandemic, the younger consumers didn’t like to interact with direct sellers, let alone allow them into their homes. So, we were losing them," said Chhabra.

Consequently, all direct-selling firms reviewed their distribution models. They followed the customer wherever she shopped. In the past two years, Tupperware has opened 100 physical retail stores in 50 cities. The brand is now available on marketplaces such as Amazon, Flipkart and Snapdeal. It has its own web store. “So, we did not cannibalize customers that went to our direct sellers but got new ones," he said.

Social distancing forced social selling via WhatsApp, Facebook and Instagram. The company created digital catalogues and promotions. Each direct-selling partner got his/her own name embedded in the link he sent to customers to sell. When a customer placed an order, the request landed on the company website, which could see who generated the sale and the seller got his commission sitting at home.

Amway said it started the digital journey much earlier, adapting to rapidly changing consumer behaviour both globally and in India. “With a sharp focus on social commerce much before the pandemic and in line with Amway’s 10-year global growth vision, we had begun integrating offline to online to drive targeted results. The pandemic acted as a catalyst to further this transformation. This facilitated the smooth transition of our direct sellers and their customers from offline to online," said Anshu Budhraja, chief executive officer, Amway India.

Amway India, best known for its nutraceutical brand Nutrilite, also sells beauty, personal and homecare products through direct sellers. They are also available on the company website.

Last year, the company conducted more than 25,000 online training programmes, reaching more than 20 lakh Amway Business Owners (ABOs) and their consumers. In the past 14 months, Amway’s online sales jumped by 70%.

“We are focused on bolstering our supply chain and home delivery network to fulfil this growing demand for online ordering while continuing to upskill our ABOs in our digital transformation journey. Both online and offline platforms will form key components of our India business and operations strategy, with a tremendous focus on online," said Budhraja.

Chhabra explains the consumer trend: “My mother was comfortable interacting with and buying from direct sellers. My wife is not. If I have to make my wife buy, I have to change."

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pre-ssing issues related to all three. Or just fun stuff.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout