IDSA moots regulatory framework for direct selling cos

The Indian Direct Selling Association (IDSA) is mooting for regulatory guidelines for the direct selling industry in the country to help reduce ambiguity in terms of operations.

"Currently, there is no regulatory framework that defines the direct selling industry in the country. We have been in talks with a couple of ministries to come up with a regulatory framework that would guide the sector in the longterm.", said Chavi Hemanth, secretary general, IDSA. She pointed out that the biggest threat to the industry now are the 'fly by night' operators who make some quick cash by impersonating products of leading brands. As a result, consumers loose both faith on the brand and their money too. This, in turn, affects the credibility of the industry.

The main issues that concern the industry include random sales of products outside the direct selling network, lack of entry barriers for unscrupulous entities, and fraudulent schemes by such entities that mask themselves as direct selling opportunities.

The retail industry, on the other hand, has well laid out norms and legislations. As for example, currently the government caps foreign direct investment (FDI) in single-brand retail at 51 per cent, while FDI is prohibited in multi-brand retail.

Industry insiders said that as it is the industry is facing challenges related to retention of human capital, limited clarity on quality and availability of products as well as threat of fake products. "A well laid out regulatory framework would be welcome. This would impart some much needed clarity for industry operations.", Hemanth said.

Currently, the size of the Indian direct selling industry is around Rs 4120 crore which is clocking an annual growth rate of 20 per cent. Of this, the organised sector contributes nearly Rs 3750 crore, and IDSA member companies contributed nearly Rs 2350 crore in 2009-10. Around 3 million independent sales consultants work in the industry now, around 1.2 million new individuals have joined in 2009-10 alone. Of them nearly 70 per cent are women.

As the industry clocks a steady growth pattern, share of tier-2 and tier-3 cities are on the rise. Their contribution to overall revenues of the industry has grown from 14 per cent to 38 per cent in 2009-10. Healthcare and wellness products is the leading category with a 47 per cent share of the overall revenues.