Archive for March, 2011


Indian Council for Research on International Economic Relations (ICRIER) released a report to the Media titled “Socio–Economic Impact of Direct Selling: Need for a Policy Stimulus” at The Claridges Hotel, New Delhi in the presence of Hon’ble Minister, Shri Ashwani Kumar, Minister of State (Planning, Parliamentary Affairs, Science & Technology and Earth Sciences).
News was covered in major Newspapers

Like to add few major points of the report:
The Background India – fastest growing economies in the world
Expected to be the 12th largest economy by 2015
Growing Consumer Market
India ranked 12th largest consumer market in 2007, expected to be the 5th largest by 2025
Different distribution channels are evolving, modern retail growing –
India has become an attractive destination for foreign retailers and
manufacturers, entry of Indian corporates into retail
Many store and non-store formats have evolved
Direct selling: one of the fastest growing non-store format
Direct selling refers to selling of goods and services to the consumers
away from a fixed retail outlet, generally in their homes, workplace,
etc., through explanation and demonstration of the product by direct
One of the most labour-intensive segment

Overview of Direct Selling in India
Started in 1980s – gained momentum in 1990s with the entry of foreign
Size of the sector has grown by 60% between 2003 and 2010
Products diversified from consumer durables to health and
wellness, cosmetics, personal and household products
From Tier I cities penetration into Tier II and III cities, now targeting
rural areas .Growing at 20% – expected to reach 71,200 million by 2012-13.Number of direct sellers increased from one million in 2001-02 to three million in 2009-10.Genuine direct selling companies in India – only 30

Regulatory Structure
No Nodal ministry
DIPP – FDI policy, Ministry of Consumer Affairs, Food and Public
Distribution – internal trade and consumer welfare
A ‘State’ subject under Indian Constitution
Governed by over 30 regulations at the centre, state and local levels
No sector-specificAct
Consumer Protection Act, 1986 and the Consumer Protection
(Amendment) Act, 2002: protects consumers of both goods and services from unfair or restrictive trade practices, redressal of grievances of
Prize Chits and Money Circulation Scheme (Banning) Act, 1978: checks
prize chits and similar financial schemes based purely on money circulation without any sale of goods and services
In states like Andhra Pradesh, Sikkim and Kerala, direct selling
companies were mistaken to be ‘money circulating companies’ and were
charged for violating the Act

Survey Findings: Direct Selling Companies
Primary survey of 16 direct selling companies
Majority of the companies have pan-India presence and long-term
commitment in the Indian market
80% foreign companies have wholly-owned subsidiary
75% follow multi-level marketing structure
Presence in Tier I (43% share), Tier II (38%) and Tier III (19%) cities
Investment: 70% in equipment, followed by manufacturing facilities
Investment in R&D is low
Survey found that if a stable operating environment is provided, companies could invest in R&D and develop India as a R&D hub
Majority of expenditure in organising events and product promotion
Own manufacturing facilities – account for 30-35% of the products sourced,rest contract manufacturing largely through SMEs
Average spending on training of direct sellers – 8.6 million per annum and on training of employees – 1.5 million per annum

Other Benefits
• Tax contributions
• Reduction in intermediaries in supply chain
• Training and skill development
• Sourcing from SMEs leading to technology percolation

Survey Findings: Direct Sellers
Majority are graduates, fall in the monthly income category of
40,000-70,000, fall in age group of 35-49 years, followed by
18-34 years
Over 68% have small families – convenience of working from
Around 64% take it up as their sole activity, 26% have
additional job
Network expansion; essential part of their operations – almost
80% work in close contact with their downlines
The 180 direct sellers surveyed had 1.28 lakhs downlines, out of
which over 10,000 joined in 2007-08
Margins are around 25%



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