EMPLOYMENT & WOMEN EMPOWERMENT:

A labour-intensive industry, Direct Selling contributes significantly to employment ? self employment. According to a recent report released by PHD Chamber of Commerce, the number of direct sellers in India in 2010-11 stood at 4 million. According to ICRIER report on socio economic impact of direct selling, Industry leaders are of the opinion that by 2020, 15 million people will be involved in direct selling.  

ICRIER Report the same report has also brought out a very interesting observation on how direct selling had helped Japan to counter the negative impact of the global slowdown on employment by providing an alternative source of employment outside regular jobs. No surprises then that India?s direct selling sector, just 16 years old is already the 11th largest in the world in terms of the number of direct sellers. There is unanimity among stake holders that there is enormous scope to provide employment through this sector ? especially women ? who make up over 50% of the total direct selling work force. Over the decade it has been noticed across the nation that in the direct selling business, women have been playing active role. The share of women employees have always been more than 50%.  However with rising cost of living especially in metro cities, Indian men are looking upto this sector as an earning opportunity.  

SOCIO ECONOMIC IMPACT OF DIRECT SELLING:

The recent ICRIER Report has also shown that the direct selling industry has a positive socio-economic impact as well ? both direct and indirect. Directly, the direct selling industry provides wages and salaries to the employees of the direct selling companies and commissions/bonuses to the direct sellers. It also contributes to the tax revenue of a country. The survey found that in 2008-09 the direct selling sector contributed `409 crores in 2009-10 whereas the secotor has contributed `647 crores in 2010-11 through direct indirect taxes. Indirectly, it leads to the growth of ancillary industries, investment in the supply chain, development of sourcing network, growth of the packaging industry etc.

CHALLENGES:

Inevitably, there are challenges that this nascent industry faces in India. The greatest challenge being the absence of a regulatory framework, which has resulted in mushrooming of many fraudulent schemes masquerading as genuine direct selling opportunities. This vacuum has also made it difficult for direct selling aspirants as well as regulatory agencies, to differentiate the good from the bad ones.

In the absence of a regulatory framework, the Indian Direct Selling Association (IDSA), a self regulatory body of direct selling companies in India has drawn up differentiators to help people look for some key parameters before making a decision.  

DIRECT SELLING LEGITIMATE COMPANIES ILLEGITIMATE FINANCIAL PYRAMIDS

Direct Selling means the marketing of the consumers generally from home or workplace i.e. locations away from permanent retail locations. It is done through explanation & demonstration of the products by a direct seller. Pyramid Schemes are illegal scams in which people at the bottom of the pyramid pay money to a few people at the top. This is done to advance to top positions and benefit from payments made by other people later on.

They offer genuine business opportunities. It involves quality sales plan of good products at a reasonable cost of entry. Pyramid schemes involve products which are cheap to produce and have no established market value. New miracle products, exotic cures, mattresses are some of these. At unreasonable cost of entry into the company of scheme, it is a major deferent.

The cost of Entry is reasonable. Cost of entry is extremely high. Plans are entirely performance based. No Plan or Pyramid Plan.

Recruitment is neither compulsory for continuing business nor for receiving entitlements and commission which is always based on product sale. Recruitment is mandatory for continuing business and for commission pay outs.

Business is by sale of products. Recruitment is optional. Commission based on recruitments only.

Remuneration to all distributors is through Direct Selling Companies only. Remuneration or payments is through members. There are negligible pay outs by companies.
Direct Seller joining the business can exit the business within reasonable time. Investment is refunded as per the company provisions in the Initial Contract. Exit policy in place for termination of contract. No refund or exit policy exists.

Products have 100% buy-back guarantee to ensure protection of end-consumer as per company policy.    Products usually do not have a buy-back policy. Actually they are never meant for the end-consumer or the distributor.

Rigorous Product & Product Sales Training is done. Incentives based on sales of products and sales performance are offered.    There is no emphasis on product or product Sales training. Emphasis merely lies on collection of money from new recruits.

Every sales person has to abide by the Industry Model Code of Ethics.    There exists no Code of Ethics.

The ICRIER Report identified four broad areas where policy interventions can provide a conducive and sustainable operating environment. These include (a) providing a clear definition of direct selling, (b) streamlining the FDI policy, (c) enacting a governing legislation for the sector, and (d) appointing a nodal ministry or a single point of contact.
Towards this end, the Indian Direct Selling Association has been in conversation with various ministries ? Ministry of Commerce, Ministry of Finance, DIPP, etc, to enact a regulatory frame for the direct selling industry. The IDSA has submitted draft legislation based on existing DS laws prevalent in other countries including Singapore, Malaysia, USA and UK and Japan.  

In conclusion, in the light of the high employment generation potential of this sector, especially of women, and its positive socio?economic impact, it is important to note that any policy decision should take into account the effect of the policy on employment in a country where unemployment rates are high.

By William S.Pinckney

(The Author is
MD & CEO of Amway India Enterprises)