Direct Selling Consultant


Introduction to the Indian Direct Selling Market

The direct selling companies have been growing in high double digits on the low base and are extremely bullish on the future. While the steep growth rates of over 50-100% are unlikely on the higher base, growth will nevertheless remain higher than traditional retail businesses.

Nutrition and wellness products have been a key growth driver in the last 6 years.

The health and wellness products segment is likely to see continued growth as alternative channels for these products are not well established and personal recommendation is critical for driving penetration.

Most existing players are looking at this category to drive growth, besides personal care and household care products.

The success of direct selling initiative of a FMCG company could spur other traditional FMCG companies to emulate the structure and develop a parallel distribution network.

A few issues need to be addressed to encourage the healthy growth of the direct selling industry in the very near future.

  1. High attrition rate -Most directs sellers in the country face a high rate of attrition. Although official estimates put the figure at 30-45%, attrition in practical is estimated to be as high as 70- 90%.

    The reasons for this are:

    • Most of the kits (products if purchased initially) bought by the direct sellers end up being consumed by themselves. Estimates put the percentage of self-consumption at almost 50-60% the total volume.
    • Some even enrol to take advantage of the discount of 10-20% which is a direct seller margin if he sells the products at the maximum retail price. This worked well initially when trials were the sole imperative. In the first stage of expansion, direct sellers are encouraged to use the products themselves so as to motivate others to buy them after they have experienced the products. But in several cases, this self consumption does not translate into repeat purchases.
    • The percentage of "active" direct sellers remains quite low at about 10-30%. Many people who join in the initial frenzy end up returning the kit (starter kit if purchased) within the first month. Overall returns constitute about 1-4% of the total direct sellers recruited.
    • Even among the active direct sellers, only about 10% show reasonably high levels of activity.
    • Delayed ratification  – most people lose patience and drop out before they achieve significant business volumes. The returns (commissions on sales of the products by the team) are very low in the initial stages and build up with time. But most direct sellers do not have the perseverance and discontinue after a few months.
    • Industry majors expect that attrition is given in the industry and would continue even if adequate training and support is provided to direct sellers. It is beneficial to the extent that non performers automatically exit the network.
  2. Price sensitivity  - In India, most direct selling companies initially launched products at hefty premiums to existing brands in the category and were unable to garner adequate volumes. Also large sized packs sold by these companies further discouraged consumers, who were not used to buying in bulk. Realizing the price sensitivity of the Indian consumer, some of the companies are now reducing the package sizes, so that the consumers do not have to spend too much at one time, and thereby perceive the product as affordable. Sachets have been launched by most players, in the personal care category such as shampoos, face wash, etc to expand the consumer base. Also, a few players who initially targeted only the premium end of the market have now also launched mass-market products, offering a total price range catering to all customers.
  3. Perception problems  - Several people believe that direct selling is an unethical business. A few countries have even discouraged the establishment of direct selling companies. Industry participants feel that these perception problems arise due to mistaking direct selling as similar to pyramid schemes.
  4. Emergence of fly by night operators or half baked concepts who set up direct selling business without any prior experience or guidance and are thus not able to succeed also affects the reputation of genuine players.
  5. Low success rate among direct sellers  - Most people who drop out because they are unsuccessful, blame the system rather than their own inability to be a successful seller. With a high drop out of 90% and a very few highly successful people (5-10%), the negative word of mouth publicity is much higher than the positive publicity. This leads to more and more people developing a negative perception of the business. People have therefore tended to focus more on direct selling failures than on successes.

However, this appears to be changing with entry of direct selling consultants who have a reputation and global experience in direct selling. Direct selling consultant provides adequate training and guidance to the direct sellers, thus ensuring a higher success rate among new direct sellers.

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