Direct Selling Industry, sector outlook and growth prospects

Business Remedies, Jaipur, Jan 7,2020

Direct Selling Industry has thrived in India for quite some time. Yet, due to lack of regulation, this industry has not earned its due respect till date. We spoke to one of the industry leaders of direct selling in India who explained thoroughly about the business and industry. According to World Federation of Direct Selling Associations (WFDSA) which published the report for 2018:

Global Market Overview

• -Size: Global Industry sales in 2018 was pegged at USD 192.9 Billion
• -Growth: The industry had grown by 1.2% from the previous year
• -3-Year Growth: The global industry has grown at a CAGR of 1.7% from 2015-2018
• -No. of Industry Representatives: More than 118 million individuals are involved in the Direct Selling Industry as Independent Business Representatives
• -Highest selling product category: Wellness products comprised 33% of total global sales in 2018. Followed by Cosmetics & Personal Care products, which comprised 31% of total sales

Indian Market Overview

• Size: India’s Direct Selling Industry sales was pegged at USD 1.8 billion (~INR 13,000 crore) in 2018
• Growth: The industry has grown by 5.1% year-on-year
• 3-Year Growth: The Indian industry has grown at a CAGR of 10.7% from 2015-2018
• No. Industry Representatives: More than 5 Million direct sellers are involved in the Indian Direct Selling Industry
• Highest selling product category: Wellness products comprised 55% of total sales in India in 2018. Followed by Cosmetics & Personal Care products, which comprised 34% of total sales
• Direct Selling Industry in India is expected to reach INR 64,500 by 2025
• Region specific growth in direct selling industry – Rajasthan
• a.Prospects for direct selling business in Rajasthan

In 2016, the Department of Consumer Affairs had notified the Direct Selling Guidelines as guiding principles for state governments to regulate direct selling and multi-level marketing. Currently, 12 states — Chhattisgarh, Sikkim, Telangana, Andhra Pradesh, Odisha, West Bengal, Goa, Rajasthan, Tamil Nadu, Kerala and Mizoram — have already adopted these guidelines. Rajasthan adopted the Central Direct Selling Guidelines in August 2018.

According to FICCI KPMG report on direct selling,

Rajasthan has the potential of INR 50 billion (INR 5000 crore) market by 2025.

Self-employment generation potential by 2025 - 1.3 million (0.13 crore)

• About QNET

QNET is Asia’s leading direct selling company. With more than two decades of existence, we now have operations across 100 countries and corporate offices in 25 countries.

Direct selling is not a new concept for India. We have many international and local players already operating in India. Direct selling is a method of selling goods or services directly to the consumers through direct solicitation or referrals. It is a people-intensive activity and therefore generates substantial self-employment.

QNET is one of the first direct selling companies in Asia to adopt e-Commerce to sell its products online. One can become a QNET Distributor and start buying the products online, consume and enjoy the products, and at the same time earn rewards. They can also sell these products to others who too can buy these products online. QNET Distributors can grow their network and earn more commissions by way of motivating their teams to sell more products. The key is that only sale of products results in commission.

• QNET’s business in India

QNET in India operates through its sub-franchisee Vihaan Direct Selling (India) Pvt. Ltd. since 2011(Global Headquarters - Hong Kong; the company has a wide range of products and services sold through a ~6 mn distributor base, for more than 20 years)The Distributor-base in India is approximately 600,000 from all walks of life who follow the business opportunity of QNet.

• QNET’s strategic partnerships to bring world class products to Indian consumer

The product categories sold through the Distributor network by QNET includes a diverse range of wellness and lifestyle products both in durable and consumable segments. Currently over 60 Products available through QNET’s On-line Store in India are as follows:

• Primary category:
• Durable segment includes a range of high-end luxury watches and premium home care appliances
• Consumables include nutrition and wellness supplements, beauty and personal care range
• Most popular products:
• KENT-QNET Smart RO among consumer durables
• Diaba Health and Busy Bee Monofloral Honey among consumables
• Global Products introduced in India under Nutriplus health category
• EDG3
• Qafe’
• New products (Made in India):
• Overall - Renewed focus on health and wellness category
• Premium CHAIROS 'Signature' watch category launched
• By the end of January 2020, three new health supplements are expected to launch

• Upcoming products -focusing on health and wellness

QNet will launch a new range of premium personal care products for women in the coming year. The brand will be known as BeYouTe which will primarily be into the skin care available for all skin types to effectively handle the ageing, dryness, spots, oil control, sun burn and any further skin damages. Dermatogically tested, the products are safe for skin and has exclusive 360-degree skin protection and repair technology with CM-Glucan.

The other product QNET is coming up in the health and wellness segment is Nutriplus Virgin Coconut Oil. Nutriplus Virgin Coconut Oil (VCO) is cold pressed, unrefined, pure and natural extracted from the fresh milk of high quality, organically grown coconuts. 

• Empowering individuals, generating self-employment

Direct selling is one of the recognized and organized forms of selling globally. The sector has been growing steadily over the last few decades and changing the retail space in many ways. The product range varies from daily use items like green tea, mono-floral honey to holiday packages, to lifestyle products like watches. In fact, there is an exclusive partnership from leading consumer durable companies like Kent RO Systems and Sharp Business Systems for water purifiers and air purifiers respectively. Selling products requires skill-set and training for anyone to become a seller. QNET offers this opportunity to many people who are not professionally trained to be sellers. These include housewives, student and youth, who are otherwise, not trained sales professionals. At the same time, QNET also provides a platform to thousands of young people to become entrepreneurs and live their lives respectfully. It also provides flexible work hour option which is an important criterion for women managing household.

Our distributors do not have to frontload products. They do not have to block cash in inventory neither do they have to create space to keep inventory. At the same time, the products are delivered directly at the buyer’s home. This is very important aspect of our model. This model really works for any person working from home.

QNet has opened an area of opportunity for a lot of people who faced entry barriers due to various reason. Women have truly liked this model. In fact, over 45 percent of our distributors world-wide are women. With hard work and dedication, QNET distributors, have the opportunity to become economically self-sufficient, raising the standard of life for their families and communities.

• Boost to MSMEs and SMEs

i.Over 80% of our products are sourced locally. This also helps generate lot of employment and income for local people. For example, our range of monofloral honey helps in preserving the environment and supporting the local communities. Rural women have found beekeeping to be a great way of providing food security and adequate nutrition for their children.

ii.Even our Swiss watches are assembled in India, only the ‘movements’ are imported from Switzerland. 

• Addressing negative news relating to the brand

In India changing reforms and economic trends allowing new businesses to grow substantially has turned the country into a hub for direct selling. Based on market reports India's direct selling industry grew radically by 7 percent year-on-year and was pegged at around INR 10,000 Crore in 2018. However, while reports showed significant growth in the space, QNET was put in the spotlight for a streak of negativity when our India operations started to grow.

We have been operating in India for more than a decade and a lot of the challenges that we faced in the last decade is more about the lack of legislation of the direct selling industry itself. This phase has also brought a slew of learning for the company in terms of self-regulation, training and compliance. The recent spate of negative news has allowed us to introspect, review and revisit our systems and processes to make them more robust, transparent and compliant to local laws and regulations.

The Honorable Supreme Court of India as of March 2017 has ordered a stay on all proceedings in the matter of QNET and its Indian franchisee Vihaan direct selling Private Limited. Supreme Court of India has issued a stay order and it has prevented any further investigation. This is a strong validation for the company.

The Honorable High Court of Karnataka as of February 2017 as well has come up with a very strong judgment that QNET’ business in no way is an infringement or infraction of the chit fund and money circulation act and cases if any, ought to be relating only to consumer related aspects.

• Trends in Direct Selling Industry for 2020

2020 the focus will be health and wellness for direct selling industry. Considering we all are moving towards a healthier living, the demand for such products is increasing. QNET’s focus in India will be on health supplements, personal care and beauty, and home and living products.

The long-term outlook for the industry is positive, supported by rising incomes, favourable demographics, entry of foreign players, and increasing urbanisation.

The e-commerce industry been directly impacting the micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a favourable cascading effect on other industries as well. With more clarity setting in for the regulation of the Direct Selling industry, more players in this industry will take advantage of this.