Direct Selling & Network Marketing

Direct Selling is a segment not much familiar to us. But, the fact of the matter is that Direct Selling (DS) was happening for a long time now. Remember in the 1990’s Marketing Executives visited our homes one after the other with various products? They used to demonstrate the products in front of us. They have been selling the products for almost half of the market price. Ever thought what was the secret behind it? How could they sell items at a  throw away price like that?

Concept of Direct Selling

Say, the cost for which the manufacturing company sells a product to its authorized supplier is Rs.40. It will pass through many levels of distributors and will reach the wholesale agent of the region. From their the item will come to the local retailer.  He would charge Rs.100 from the customer. This is how the traditional markets operate.

So there is a clear margin of 60% which is shared by all these supply chain links and advertising agencies. Whereas, in Direct Selling, the product will be delivered directly to the customer from the company outlet. As per the systems adopted by the companies, the customer will get it for Rs.50-90. The profit would be shared among the customers- the network of customers. This is the reason why Direct Selling is also known as Customer Empowerment when it is done through Network Marketing or Multi-Level Marketing (MLM).

Concept of Network Marketing

Network marketing is actually a very noble concept. Put simply it’s an arrangement wherein people help each other. The beauty of it is there is no envy or jealousy among participants. On the other hand, everyone wants the other one to flourish as the growth of the other one will certainly aid growth of the self too. One’s growth depends on the growth of the other. It’s a win-win situation for all. No losers in the game! All are Winners!

When bureaucracy works on centralisation of power and distribution of it through a flow chart of subordinates, Network Marketing works on decentralisation of power by giving more importance to Teamwork. The trend of the time is to win together and gain equally rather than gain according to the level of position in a Pyramid hierarchy that leaves only insignificant gain to those in the lowest level. When hierarchies encourage moving up and getting ahead or growing, stress, tension and anxiety become the byproducts. But the focus in Network Marketing is on how to best serve the people leaving no chance for developing a stressful atmosphere. On the other hand, a congenial atmosphere prevails in the network. Therefore, many businesses are changing over to this style of operation.

A Typical Network

See that some have networks under them and some do not have anyone under them. Those who have a network under them are business owners and they get a benefit out of the sales volume created by those in the network. Those who do not have a network are just consumers. Obviously they are not interested in the business angle at this point of time. Certainly, they may change their mind and start building a network of their own on a future date. Right now, without a network, they enjoy the 10-20% discount in the MRP, which is their only benefit.

Doing More With Less Effort

Despite the higher level of efficiency and talent one may possess, she/he would have a constraint that only 24 hours are there a day. This constraint is universal. But one can overcome this constraint through Network Marketing. It allows anyone to duplicate oneself into many persons. That is, at a time you can have many copies of you working for you.

The concept of “Free Enterprise” is creating something from nothing. Network Marketing makes it possible to create an Enterprise from literally zero investment. Is there any other option for those who have encountered big losses due to Covid-19 pandemic to get on with life and achieve a better lifestyle for self and family?

Copyable and Duplicable

Suppose you are an employee and due to some reasons are unable to go to work for a month or two. Your income naturally stops as you won’t get your salary. In Network Marketing that will not happen. You will continue to get an income as even in your absence many copies of you are still working. This is the power of Network Marketing. Network Marketing helps you to create an income not dependent on you. This income would continue and grow indefinitely with or without you.

Arithmetic Growth Vs Geometric Growth

A Paisa-a-day example is the best way to explain network marketing.

If you start with 1 Paise on the first day and double it every day, how much would you have on the 30th day?

Day 2 you will have 2 Paise, Day 3 you will have 4 Paise, and then 8, 16, 32 and so on. On the 30th day it would be ₹53,68,709.12. Quite a sum, isn’t it?

This is how the network works. If I teach you I have doubled. If both you and I teach someone else, we have doubled. And it goes on and on. The result will be amazing and unbelievable.

Low Start Up Cost

There was a saying: “It takes money to make money.”
It’s absolutely true in the case of traditional business. In fact, it’s inconceivable to start a business without investing reasonably. And the size and turnover of the business would depend on the size of investment. More investment means more turnover and high profit. Even people used to say that there is only one way to make money without investing and that is winning a lottery. But, the truth is there is another way to make huge money without any significant investment and that is Network Marketing.

The No Much Encouraging Past of Direct Selling in India

You may ask me why go for Direct Selling and Network Marketing when they are legally banned or prohibited. My answer is very simple and straightforward. Neither Direct Selling nor Network Marketing was ever made illegal or prohibited in India or anywhere else at any point of time. The problem is we are mixing up things and not distinguishing clearly between Direct Selling-Network Marketing and Money Chain-Pyramid Schemes.  It is true that Money Chain business and Pyramid Structure of organisations were under legal scrutiny and were prohibited in 2012 in some Indian states. The companies engaged in those illegal operations claimed themselves to be in the business of Direct Selling and Network Marketing in order to escape legal actions and public wrath. Or, in other words, those companies engaged in money chain and pyramid schemes took shelter behind the banner of Network Marketing while continuing their illegal operations. As a result, many direct selling companies ran into problems during the period from 2011 to 2104.

Amway India- problems in Andhra Pradesh
Amway India- problems in Kerala

Guidelines Issued by Govt. of India

Based on recommendations of an inter-Ministerial committee constituted to study the problems in direct selling, Govt. of India issued guidelines to states and union territories on 9-Sep-2016. 

Guidelines Issued by Central Govt.

A clear definition of Direct Selling and Network Marketing was drawn in Clause-1 of this document.

Prohibition of Pyramid/Money Chain Schemes

Clause-8 of the Guidelines issued by Central Govt. reads as given below.

It’s evident from the above clauses that Pyramid Schemes and Money Circulation Schemes were prohibited and Direct Selling and Network Marketing  were permitted. Over and above, States and Union Territories were advised to formulate Monitoring authorities to monitor and regulate the activities of Direct Selling/Network Marketing entities.

Appointment of State Level Monitoring Authorities

Clause-9 of the Guidelines reads as given below.

Therefore, every state government shall have a Monitoring Authority to monitor the activities of Direct Sellers. Issues arising in Direct Selling shall be dealt with by the Department of Consumer Affairs at the Union and the respective state governments.

Future of Direct Selling in India

Financial gurus affirmed as early as in 2015 that 21st century is of Direct selling and Network Marketing. When they predicted in 2015 amazing growth (turnover of Rs.64,500 Cr) of this sector by 2025, there was no indication of Covid-19. (Read a report of 08-Dec-2015)

When a turnover of Rs.64,500 Cr. by 2025 for Direct Selling industry was predicted in 2015 there was no any sign of Covid-19 pandemic. The pandemic came all of a sudden in the beginning of 2020. It changed everything including the employment, education system, lifestyle, thought processes and behaviour of human beings. While businesses in most segments were affected very badly, companies in Pharmaceuticals, Wellness, Direct selling, eCommerce etc marked remarkable growth during the pandemic. As such, there are indications that the actual turnover of Direct Selling would be much higher than the predicted Rs.64,500 Cr.

During the pandemic, we have seen a massive inflow of manpower to Direct Selling. Those who lost jobs or those who could not open their small scale business firms due to lockdowns imposed from time to time, entered into Direct Selling/Network Marketing business that was feasible even in the pandemic period. Also, the facts that such businesses could be launched without making any investments and were totally riskfree increased the appeal. To sum up, there is no other business opportunity available at this point of time other than Direct Selling/Network Marketing that anyone can get into without investing any fund or without any risks or fear of loss.

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