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IDSA demands clear industrial classification for the sector to drive out fly-by-night operators

Hyderabad|India|May'2012: In an initiative to create awareness on the direct selling sector, Indian Direct Selling Association (IDSA) hosted a Knowledge Forum in Hyderabad. This was addressed by Mr S Subramanian, Chairman, Ms Chavi Hemanth, Secretary General and Mr Devadas, Treasurer, IDSA.

At the Knowledge Forum, Indian Direct Selling Association (IDSA) also released the Annual Survey 2010-11 on the Indian direct selling industry done in association with PHD Chamber of Commerce and Industry.

Chavi Hemanth, Secretary General, IDSA highlighted the differences between the fraudulent companies taking the advantage of ignorant consumers in India and the legitimate Direct Selling Companies which has played an important role in Socio-Economic impact.

Chairman and Secretary General, IDSA both explicated their concerns about the mushrooming fly by night operators under the garb of direct selling sector.

Hence, in purview of above, IDSA is conducting ‘Knowledge Forum’ for the first time in Hyderabad to create awareness and educate people on what is the difference between genuine direct selling company and illegitimate pyramid schemes.

Mr S Subramanian, Chairman, IDSA informed that the industry is estimated to double by 2014-15 reaching upto INR 108.4 billion from the current level of INR 52.3 billion in 2010-11. The industry is slated to grow at an average of more than 20% in the next four years”.

Mr S Subramanian further informed, “Direct selling companies have been active in contributing to the social and economic development of the country, with over Rs.6.5 billion paid as taxes to the Government exchequer by IDSA member companies alone”.

The survey findings states that the products sold through this segment are appealing to consumers for its high quality standards. Direct selling sector helps cater to consumers who would want to have products of their choice delivered at convenient locations other than at usual retail stores.

Mr S Subramanian expressed that “As the direct selling industry offers alternate employment opportunities, it has contributed significantly in employment generation for the country over the years. This year (during 2010-11) the total distributor base of the Indian direct selling industry stands at around 4 million marking a growth of around 24% over previous year. Out of this 3.2 million distributors have been employed by member companies generating a growth of 25% and 0.8 million distributors have been employed by the non-member companies generating a growth of 22% employment”.

Chavi Hemanth, Secretary General, IDSA stated “IDSA collaborated with PHD Chamber in furthering an on-going process of monitoring the direct selling sector in India. The report assesses the current state of the direct selling industry in India across several key parameters encompassing revenues, sales force employed, product category coverage, distribution reach and most importantly the contribution of this industry to the government exchequer. The report also addresses the challenges faced by this sector and the overall future outlook.”

Ms Chavi Hemanth mentioned that the survey indicates that the industry has displayed a robust 27% growth at INR 52.3 billion in 2010-11 turn over. The robust growth in the segment has been contributed by 28% growth in organised and 17% growth in the unorganized segments of the industry during 2010-11. The industry grew at 24% during 2009-10, 17% during 2008-09, 13% during 2007-08 and 9% during 2006-07.

She also stated that out of the wide variety of product sold through the organised direct selling industry, products related to wellness contributed to the highest share of sales (40%) while cosmetics and personal care products (32%) were also very high in demand.
Further she mentioned that on an average, the direct selling firms earned profits of around 21% during the last three years. As per the survey, the main drivers of growth in this sector are high quality standards of products, reliability/durability and good demonstrations and trainings.

Ms Chavi Hemanth expressed that the industry is exploring new opportunities using the social media tools to reach out to large consumer base. “Though the industry is two decades old but with focussed efforts and strategise of our member companies over last five years, direct selling has emerged as a medium for the sale and marketing of product and services across a range of consumer needs, with the associated industry encompassing a size of Rs 52.3 billion for 2010-11”.

Mr S Subramanian said, “The Indian direct selling industry has contributed largely to the growth of Indian SME sector by way of outsourcing their manufacturing process to these enterprises in order to produce the products domestically. The companies own manufacturing facilities produce only 30-35% of the total produce, the remaining is majorly sourced through contract manufacturers which are SMEs”.
The forum was concluded by IDSA representatives and mentioned that that this year also, the momentum has continued and number of direct sellers has also increased.

-May 2012

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