Informed decisions are the need of the hour

India is a hotbed of opportunities for direct selling companies with enormous potential for growth. However, with competition in this market segment getting more robust, informed decisions hold the key to gaining an edge in this expanding sector. Speculation is an unforgiving enemy, where not only the shareholders stand to lose but as do the consumers and thousands of individuals (independent contractors), who are the backbone of the direct selling operations. Informed and planned decisions provide an advantage over other industry players and also help the companies grow exponentially.

The key to building a successful company is to get correct and complete information at the right time. To arrive at the fastest break-even and a sustainable business model, one needs to ask the right questions and find the correct answers.

Strategy India, a direct selling consultancy firm, maintains an exhaustive list of MLM operations in the country, which shows that the number of direct products selling operations is between 600 -700 at any given moment. This is barring the MLM Ponzis, which are more than 1500 at any point in time. The government has a list of over 300 companies, which testify to be following the Ministry of Consumer Affairs guidelines on the direct selling sector published in 2016.

Moreover, this number of direct selling operations is on a sharp rise. Due to India’s market size and dynamic models, this sector is heating up. Numerous domestic, as well as international direct selling companies, are making a beeline to start operations in India, brands sold via conventional channels are evaluating the direct selling business model, and new brands are being launched by established direct selling companies to widen their portfolio.

Things to keep in mind to brave this growing competition:

  • Due diligence and planning
  • The uniqueness of Indian market space
  • Adapting and evolving to suit the market
  • Processes
  • Promotions

Understanding the market ecosystem is the first step in establishing a successful direct selling business model. Therefore, due diligence is required before anything and everything else. This includes the selection of only the leading products from the company portfolio and checking the demand for the said products in their current form and the access and infrastructure for the supply chain. Only after evaluating and reviewing all these, should one hire a core local team.

A local team is key to success because India is a unique market with vast regional differences. Also, that is why the decisions need to be made here and now. Often policies, products as well as employees need to be Indian or Indianized. This will help the company grow and reach the largest segment of the consumer base - not limited to one state or region. The regional variations in the Indian market periodically require one to tune the compensation plans and marketing materials from season to season and place to place.

Here, it is essential to keep in mind that the direct selling market is very dynamic, and therefore, strategies need to be adapted and evolved to suit the ever-changing space. It has barely been two decades since the liberalization of the Indian economy, and that is why demand, attitude, aspirations as well as rules are always changing here. This dynamism impacts not only the consumer but the possible future individual contractors as well as the enforcement agencies. Therefore, one should be prepared to make changes as and when the need arises. The changes must be put in place only following thorough research and analysis.

While individual companies like to improvise and improve the existing market models for direct selling, some current processes from e-commerce and modern retail formats can boost the business of direct selling companies. This will also reduce the investment of thousands of work-hours every month, and in turn, will create more business opportunities for companies.

It is also vital to understand that; it is only promotions that can make or break a direct selling company. That is why the promotional strategy should be consistent and symbiotic with the existing ecosystem. This strategy should aim to reward the desired behavior of the ethical business. For instance, lucky draws are not too appealing to either the contractors or the consumers. Promotions should be designed to increase engagement and strengthen the compensation plan by being in sync. While they need to be innovative at the same time, promotions also need to be inclusive of all ages, gender, and economic class, otherwise, they become ineffective.

It is known that there is a lack of precise regulation on the governance and operations of the direct selling companies. This, coupled with the numerous Ponzi-schemes and unethical practices of fly-by-night companies, have added to the misconception of all Multi-Level Marketing (MLM) or direct selling companies, being unscrupulous businesses.

There is an urgent need to counter this negative perception, which is held by enforcement agencies and both existing and prospective consumers and independent contractors. Moreover, to do so, it is essential to understand the prevalent nuances at play in the sector.

Observations based on the trends and evolution of the direct selling market space over the past decade and a half indicate speed is the essence while information is the confidence for nurturing a successful and sustainable direct selling company.