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Back Direct selling on the go

While organised retail is slowing down, the direct selling industry is gung ho about its
prospects. BrandLine does a reality check on its optimism..

A couple of Tupperware distributors display their products.

Tunia Cherian

This business has the uncanny ability to bump into you in the most unlikely places. Often it is a friend or
relative who has turned a distribution agent somewhere along the way, who chats you up on a range of
products that you may want try out.

So, whether it is Amway’s products for the home, its brand of cosmetics and nutritional supplements or
the latest range of Tupperware containers, you are soon torn between trying them out and postponing
your purchase.

The Indian Direct Selling Association’s (IDSA) projection of 20 per cent growth in 2008-09 is equally
surprising coming as it does at a time when organised retail is witnessing a distinct decline in sales
growth. Though the actual figures will be released only after its annual survey is formally released in
July, this is IDSA’s general projection with respect to industry estimates.

But direct selling, for sure, is abuzz with activity. During the last few months, the two largest direct
sellers in the country, Amway and Tupperware, have held press conferences in Chennai charting out
their future course.

While William S. Pinckney, Managing Director and CEO, Amway, spoke about Amway’s future plans
for the domestic market, Asha Gupta, Managing Director, Tupperware, outlined her company’s
strategy to increase the number of its direct selling agents.
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strategy to increase the number of its direct selling agents.

The industry as a whole recorded a turnover of Rs 2,851 crore in 2007-08 as against Rs 2,522 crore
in 2006-07. These numbers are minuscule compared to that in organised retail, says Chavi Hemanth,
Secretary-General, IDSA.

Responding to an e-mailed questionnaire, she points out that the direct selling industry is small
compared to organised retail, not just in India but abroad as well. This could be explained in terms of
the realities of direct selling and the fact that these products are not sold over the counter in large
quantities, but through one-on-one interactions with the potential customer. It’s not surprising then that
nutritional supplements are among the fastest moving products sold through direct marketing.

Hemanth also says it’s important to interact personally with customers in order to better present to
them the qualities that distinguished higher priced products such as Tupperware and AMC cookware
from cheaper products available in the retail sector.

A share of the pie

Given the impressive numbers one is tempted to ask whether direct selling is making a teeny-weeny
dent in the overall retail pie...

Speaking of the personal care space that he is engaged in, Ramesh Vishwanathan, Executive Director
of consumer goods company CavinKare Pvt Ltd, says the volume share of the direct selling business in
this category is still negligible — which is partly why direct selling volumes are not tracked by the
market research agencies, he says.

Another marketer echoes the same opinion. He says direct selling is an evolving category in the country
and growth in the business would be driven by a mix of products such as clothes and healthcare and
new categories of business such as nutritional supplements. The turnover of traditional retail products is
unlikely to be affected by the growth of direct selling. He adds that this niche business would take off in
areas that have problems in distribution and it would essentially speed up the growth of product
categories that are still in a nascent stage in the country.

Without revealing figures, Sunil Tolani, General Manager, Hindustan Unilever Network (HUN), says
the multi-channel business proposition presented by HUN had helped the company register a healthy
growth rate which is “in line with our ambitions”. HUN is the direct selling business of the country’s
largest FMCG player, Hindustan Unilever Ltd. Growth, he says, is backed by consumer relevant
innovations and launches, including Ayush Rakshak Rasayana — a healthy morning drink — and
Aviance skin care range for anti-ageing and skin lightening, besides its focus on training their
consultants.

Amway India, which recorded a 40 per cent growth in turnover in 2008 to cross the Rs 1,000-crore
mark during the year, expects Nutrilite, its brand of nutritional supplements that account for half its total
sales, to continue to power growth, along with colour cosmetics, which account for 25 per cent of total
sales.

A fitness enthusiast and user of Amway’s nutritional supplements says the products offer both
nourishment and convenience of use especially when working out at the gym. However, he points out
that there are several imported brands of dietary supplements in the market.
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that there are several imported brands of dietary supplements in the market.

“Despite the cost, I buy these products since it is advisable to consume nutritional supplements while
working out; besides, they are easy to use,” he says.

The products are not cheap — for example, a 500 gm tin of Nutrilite protein powder is priced at Rs
1,699 and Daily, a multivitamin tablet, at Rs 1,749 for a bottle of 120 tablets.

Chennai-based nutritionist and diet consultant Nimmi Ittycheria John says Amway’s nutritional
supplements are supported by convincing literature and well-trained dealers and their supplements are
therefore used by people who buy the concept and importantly can afford them.

According to IDSA’s Hemanth, India has emerged as an important destination for direct selling
companies, particularly in the context of growth in the sector declining to single digits in Europe and the
US.

The association, she says, has received a number of queries from direct sellers across the globe; she
does not, however, name these companies.

Expansion mode

For the direct selling companies already in India, it is a time for building on the strong numbers posted
in the midst of the economic slowdown.

Amway, which is the country’s largest direct selling company, is keen to improve customer access for
its products. It is on the look out for suitable properties to open Experience Centres where passers-by
and its own business owners can walk in with prospects and customers to try out their various products
regardless of whether they were looking for nutritional supplements, skincare products or colour
cosmetics. The company plans to have professional nutritionists, cosmetologists and other experts at
the store in an effort to answer customer queries at the very outset.

According to Pinckney, the company is keen to work with its business owners rather than around them
in the effort to reach out to customers. Amway India is a wholly-owned subsidiary of the Ada,
Michigan-headquartered parent company. The company’s revamped Web site is also intended to
improve customer access to the company and its products. However, even here, the company is
treading with care as it is keen to take its business owners along with it.

He points out that in the US and Korea, online sales make up more than 80 per cent of the total. There
are limitations to online sales in India given the lower Internet penetration, not to speak of people’s
hesitation to reveal their card details on the Net, he explains.

Tupperware has also extended its presence at exhibitions and in some retail outlets with the similar aim
of drawing consumer attention towards itself.

Queried if this reflected a change in the way direct selling is being conducted today, Tupperware’s MD,
Gupta says the company showcased its products through temporary kiosks in malls and in exhibitions
to help consumers get connected to its sales force and for brand-building purposes. “This is done with
a view to drive more consumers into Tupperware parties and does not in any way suggest a shift in our
distribution model,” she says.
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distribution model,” she says.

She points out that the economic conditions have not affected business at Tupperware. “In fact, we
have seen a good growth and we are getting more queries from women who are looking for business
opportunities to supplement their family income in these tough times,” she says.

Direct selling as a profession

Something that Neelam Mehrotra, a house-wife who took up distributorship of Tupperware products
back in 1997, would vouch for. Coming from a naval background, she says, it was difficult for her to
set down roots in any one place. And that was part of the reason why direct selling appealed to her, as
it allowed her the flexibility to actively sell in her free time. She says the process of interacting with other
women and helping them discover the benefits of using the product kept her going. Covering the
Greater Noida and Ghaziabad regions, she has 26 managers and a sales network of 1,000, of whom
around 350 are active weekly.

U.N. Mahesh, a Chennai-based distributor of Amway products for the past 10 years, says his wife and
he took up direct selling in order to make some extra income. They have come a long way since the
early days and now have a wide network of agents across the country. About the impact of the
slowdown, he says there had been little impact since he deals in products of daily use, which cannot be
done without. Ravinath, a pharmacist also based in Chennai, has been running a parallel business selling
Amway for the past five years. He generally sells his products to neighbours, regular customers at his
shop and to people he meets while travelling to work. A trial of this brand had converted him first into a
loyal consumer and subsequently a dealer of the range.

If the projections of companies such as Amway and Tupperware are anything to go by, sales are likely
to swell as more and more people take to direct selling. As Neeharika Katikaneni, among
Tupperware’s top distributors based out of Hyderabad, points out, “With IT taking a beating, even
those with tech backgrounds are joining our ranks.”

Related Stories:
Tupperware India on recruitment drive
Amway India sees 25% growth in sales

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