India—Kaleidoscope of Cultures

The Indian direct selling industry officially began in 1995.

If you only had two words to describe India, they could well be vast and varied.

With elevations ranging from the Himalayas to sea level, India’s land mass forms a huge taper, stretching south toward the Indian Ocean. This triangular shape affords the country several thousand miles of coastline, with the Arabian Sea bordering the country on the west and the Bay of Bengal on the east. Between the snow-capped mountains and the tropical rain forests lie great river valleys and deserts.

Home to some of the oldest civilizations, India is a country rich in culture and heritage. Through the centuries, it has been settled, occupied, invaded and conquered by a myriad of peoples, leaders and countries. Although the country has assimilated the diversity well, this flux of various influences has created a population that is anything but homogenous. The ethnic groups in India are estimated to be in excess of 2,000.

India Quick Facts

Size and Population

India ranks as the seventh-largest country in the world in land area. However, when ranked by population, its 1.21 billion people place India second only to China’s 1.3 billion. Relative to the United States, India has almost four times as many people in an area about one-third the size.

Climate

India’s climate is generally considered tropical, but variations across the country range from alpine to temperate to subtropical monsoon.

Religion

Approximately 81 percent of the people are Hindu. India also has a sizeable Muslim population, as well as Christians, Sikhs, Jains, Buddhists and Parsis.

Languages

About 1,700 dialects are spoken in India, making for a truly multilingual country. The constitution of India names Hindi as the country’s official language, but it also recognizes 22 other languages and authorizes the use of English for official purposes.

On the Map

India comprises 28 states and seven union territories. In recent years, a number of cities and states have undergone name changes. Here are a few of the new city names, with the old names in parentheses: Mumbai (Bombay), Chennai (Madras) and Kolkata (Calcutta).

India’s Economic Growth

Thanks to policy reforms in the 1990s, India has one of the fastest-growing economies in the world. Over the past decade, its gross domestic product (GDP) has grown at an average annual rate of 7 percent, and its per capita income at 5 percent.

Among consumer markets, India ranked 12th in 2007. By 2025, it is expected to climb to the No. 5 position, after the United States, Japan, China and the United Kingdom.

Pictured is traffic on one of the main streets in Jaipur, also known as the Pink City. Jaipur is the largest city and capital of the Indian state of Rajasthan.

Approximately 70 percent of India’s population still lives in rural areas, but the trend is increasingly toward urbanization. Contributing to this shift has been the rapid growth of India’s service sector. With a large number of well-educated people skilled in the English language, India has become a major exporter of software services and business process outsourcing. The service sector now accounts for 55 percent of the GDP, with agriculture contributing 26 percent and industry 18 percent.

Due to India’s economic growth, poverty has been reduced by about 10 percent in the decade since 1997. The country’s middle class has grown to include about 50 million people, a number that is expected to grow tenfold by 2025. This increase in earnings has resulted in more disposable income and discretionary spending.

History of Direct Selling

The direct selling industry in India is less than 20 years old, barely a blip on the timeline for a civilization that originated around 2,500 B.C. Up until the reforms of the 1990s, India had essentially followed a closed-door policy. One of the very few known direct selling companies to operate prior to that time was Eureka Forbes. This company introduced vacuum cleaners to India for the first time in the 1980s.
India’s policy reforms set the country on a growth trajectory, which continues today. These changes also made conditions for direct selling much more favorable, and in 1995 the industry officially began.

The Industry Today

Despite a lack of awareness by many people in India of the direct selling concept, the industry has taken root and seems tailor-made for the country. As Bill Pinckney, the Managing Director and CEO of Amway India, explained recently, “Many thought the business model would not work. After a few years, they then said it would not last. The business model does work incredibly well in India, and it has lasted and proven its detractors wrong. Thousands and thousands of Indian entrepreneurs of all ages now earn important income for themselves and their families through the direct selling industry.”

(left to right) Ms. Alka Gurnani, IDSA Manager Communications, and members of the IDSA Executive Committee: Mr. S. Subramanian, Ms. Chavi Hemanth, Mr. Yoginder Singh, Mr. Amarnath Sengupta.

Indeed, the growth experienced by direct selling has been robust, clocking in at 24 percent last year and 17 percent the year before. But the industry is new, and India is a big country. Unlike many developed countries, its markets are far from saturated. According to the latest Socio-Economic Impact Report (SEIR) compiled by the Indian Direct Selling Association (IDSA), the overall share of the direct selling industry in the country’s GDP is less than 1 percent. That leaves a lot of room for growth.

India is a country with the second-largest labor force in the world. At 478 million strong out of its 1.21 billion people, India’s workforce alone is greater than the entire population of the United States. In 2009, its unemployment stood at 10.7 percent, and with its population increasing, generating employment will be key to the continued growth of India’s rising middle class.

Direct selling has the potential to generate self-employment for large numbers of people who previously have had few job opportunities. This would include those living in urban areas where unemployment for young adults is high, particularly for women age 20-24, as well as in smaller areas. With its low cost of entry, no prerequisite educational requirements, and the potentially high returns relative to the amount invested, direct selling is expected to grow at an annual rate of 15–20 percent over the next five years.

Direct selling has had a particularly positive effect on women, helping somewhat to bridge the income gap between men and women. With the income of females averaging around 31 percent of males, India’s income disparity placed it behind Mexico, Russia, Brazil and China as of 2009.

Offering a flexible work schedule, direct selling allows housewives to care for their families while supplementing their household income. The training and experience they receive help them develop business skills and become more knowledgeable in money management. Their increased earning capacity serves to boost the standard of living for the entire family, as well as improve the status and self-esteem of the women themselves.

The growth in the direct selling industry impacts India’s  economy both directly and indirectly. The rise in income levels serves to fuel aspiration levels, which further increases the demand for quality products and services. Customers benefit from the personal service, convenience and access to products that would not otherwise be available to them.

As sales increase, so do the various tax revenues collected. More workers and contractors are hired to help, and ancillary industries, such as packaging and shipping, expand as well. The new technology that’s introduced filters throughout the economy, impacting the various layers, from individual entrepreneurs to manufacturing to the government. And as companies expand, some will use India as their sourcing hub for distribution to other countries because of its strategic location in the Eastern Hemisphere.

Challenges Faced by the Direct Selling Industry

Although direct selling is growing and opportunities abound, the industry still faces numerous challenges.

Fraudulent Companies

Regulations defining what constitutes a direct selling company are unclear, and legitimate companies are often mistaken for pyramid schemes. Certain state and local authorities have taken action against direct selling companies or stalled their operations due to these misunderstandings. In addition, fraudulent and fly-by-night companies sully the reputation of direct selling companies and damage consumer confidence.

Regulations

The entry process for retail businesses can be cumbersome, particularly if the regulation concerning Foreign Direct Investment is deemed to apply to your business. With laws varying depending on the locality, with policies in flux and with no central governing entity in control, the legal maze can be confusing. The IDSA can help companies navigate through the process, although it does not provide legal advice.

Infrastructure and Distribution

Direct selling in smaller towns and rural areas can be more challenging than in the larger cities. Not every part of the country is easily accessible, due to a lack of navigable roads and the limited distribution networks. Many direct selling companies must rely on subcontractors for manufacturing, producing or distributing their products. Often, training is needed in areas such as packaging and quality control.

Additionally, different states have different regulations concerning the movement of goods. Transferring goods from one state to another can be difficult and time-consuming, not to mention costly, with the large number of state-level taxes.

For the direct selling companies who have entered the country, the rewards have been worth the challenges. Direct selling is still new, and the Indian markets are wide open. The growth in the economy has provided consumers with more disposable income for purchasing discretionary items. In smaller cities and areas outside the metros, modern retail stores are not as prevalent, making for less market competition. For these reasons and more, India is a country worthy of consideration for companies seeking to expand.

An Indian woman walks in the Red Fort in Old Delhi, India. Photo by Feng Li

Formed in 1996, the Indian Direct Selling Association (IDSA) is headquartered in the country’s capital of New Delhi. Serving as the chief advocate for the direct selling industry in India, the IDSA works to fulfill a number of roles.

Promoting the Direct Selling Industry

Currently, no one central government agency is charged with the oversight of the direct selling industry in India. As a result, direct selling companies are subject to regulations at all levels of the government—federal, state and local. As might be expected in a country as diverse as India, these regulations can vary widely from one locale to another. The IDSA is constantly lobbying various government entities, proposing appropriate legislation and representing the interests of the direct selling industry.

The IDSA promotes the direct selling industry to consumers as well. Because the industry essentially began in India in 1995, it is still fairly new and rapidly developing. Many people know very little about legitimate direct selling companies and how they operate. Using various means and media, the IDSA seeks to raise awareness of the industry among consumers and provide them with reliable information.

Providing Support for IDSA Member Companies

The IDSA began its operations with only five member companies. That number has grown to 18, with more companies expected to join the association in the near future. The benefits and services the IDSA provides their member companies are many, including the following:

Legitimacy

When companies apply for membership, they must agree to abide by the Code of Ethics of the World Federation of Direct Selling Associations (WFDSA), which the IDSA has adopted. Only after the successful completion of a 12-month probationary period are they then granted full membership in the association.

Member companies have the right to display the IDSA logo, which is akin to the association’s “seal of approval.” With many fraudulent companies operating in India, this hallmark of excellence sets member companies apart and indicates they are legitimate, ethical direct selling companies.

Voting Rights and a Voice

Member companies become active participants in the workings of the association. Their membership entitles them to voting rights for selecting the Executive Committee, which oversees the workings of the association and represents the members to government entities as well as consumers. Member companies may also contribute to IDSA Direct, the quarterly magazine published by the association.

Information and Opportunities

The IDSA works to keep its members in the know and up to date. In addition to the quarterly meetings that it holds for its members, the association also conducts member briefings, hosts various events and conducts press conferences. These activities provide professional networking opportunities and media exposure that otherwise might not be available to companies.

The IDSA Direct magazine (idsa.co.in/IDSA-Direct.html) highlights the latest news and information in direct selling and showcases its members. The IDSA also conducts surveys and prepares reports on various aspects of the direct selling industry. Member companies have access not only to this valuable information but also to secure information on the WFDSA website.

Associate Membership for Suppliers

Knowing the vital role they play, the IDSA offers associate membership to companies that serve as suppliers to member companies. This type of membership helps link the entire direct selling community and makes for improved logistics as well as the fostering of new ideas.

Serving as a Resource for Consumers

Fraudulent companies operating in India are a big problem for consumers. With the direct selling industry being fairly young and still developing, the IDSA helps validate legitimate direct selling companies.

Consumers can contact the IDSA office or go to its website to find member companies and the Code of Ethics by which these legitimate companies are to operate. The IDSA also offers suggestions for resolving complaints that consumers may have with member companies and provides information on whom to contact within the IDSA.

Consumers can learn more about direct selling by accessing the wealth of information available at the IDSA website, including media articles, industry reports and the IDSA Direct magazine.

With a vision to “make direct selling the most respected industry in India,” the IDSA is serious about gaining the trust of consumers.

Information Available at the IDSA Website:

• How to do business in India
  idsa.co.in/images/pdf/howtodobusinessinindia.pdf
• Industry reports
  idsa.co.in/IndustryReports.html
• Copies of the IDSA Direct magazine
  idsa.co.in/IDSA-Direct.html
• A list of member companies of the IDSA
  idsa.co.in/members.html
• Profiles of the current Executive Committee members
  idsa.co.in/ExecutiveCommittee.html
• Code of Ethics
  idsa.co.in/CodeofEthics.html
• Suggestions on seeking resolution from companies or for reporting ethical concerns
  idsa.co.in/CodeConcern.html
• Media coverage of the IDSA, Frequently Asked Questions (FAQs), scheduling a consultation with the IDSA, and other information on the IDSA
  idsa.co.in/index.html
  (Click on the appropriate tab located along the top of the page.)
• Contacting the IDSA
  idsa.co.in/Contactus.html

The Taj Mahal, located in Agra, India, was built by Mughal emperor Shah Jahan in memory of his third wife, Mumtaz Mahal.

Who are the direct selling companies that have established a presence in India? Here’s a brief overview.

Early Entrants

India’s policy reforms of the 1990s marked the beginning of a new era in trade and helped create a more favorable environment for direct selling companies. During these early years, as the industry began to form, only a handful of companies were in operation. One of those few companies was Eureka Forbes, which introduced vacuum cleaners to India during the 1980s. As part of the Shapoorji Pallonji Group, this company continues to operate in India and now provides water purification systems and air purifiers as well.

When the IDSA began its operations in 1996, only five companies were members of the organization: Lotus Learning, LB Publishers, Avon, Oriflame and Amway. All of these companies are still present today, and of the five, Avon, Oriflame and Amway continue to be members of the IDSA.

Modicare is a company that originated in India as a division of the Modi Group. The parent company, Modi Enterprises, was founded in 1933 by Rai Bahadur Gujarmal Modi and has grown into an industrial conglomerate with operations around the world. Samir Modi, grandson of the founder, studied abroad in preparation to help oversee his family’s operations. After observing the many accomplishments of Indians living in other countries, Samir Modi resolved to create a company at home that would provide opportunity to all Indians, regardless of caste, color, religion, gender or academic qualifications.

Recognizing the potential that direct selling has to provide such economic opportunities, he established Modicare in 1996. The company sells a wide range of products from personal care and beauty to automotive and home care.

Companies Present Today

The positive economic conditions in India continue to attract a growing number of companies from various countries. Current IDSA membership includes several international companies, such as the Chinese company Tiens/Tianshi, and from Malaysia, K-Link Healthcare and Daehsan Trading. Another member, AMC Cookware from Switzerland, has a strong presence and recently celebrated 15 years of operations in India. AMC operates in 40 countries, including the United States. Using the party plan to sell its cookware, the company has already entered 52 Indian cities. Growing at an accelerated rate that has averaged 20-22 percent over the last five years, the company still sees plenty of room for expansion.

Oriflame, the Swedish cosmetics company, was one of the original IDSA members and continues to enjoy great success in India. Fredrik Widell, Managing Director of Oriflame India and past Chairman of the IDSA, sees India as being one of the most important markets for his company in Asia. He says, “We are looking at tripling our business from India in the next 3-4 years,” and then adds, “We see a huge growth potential here.”

Another IDSA member is Hindustan Unilever Network, the direct selling arm of Hindustan Unilever Limited. Since its inception in 2003, the company has grown to include partners in more than 500 cities and towns, with 30 offices across the country. Its training academy has been a boon to consultants, helping them develop skills, leadership and character.

Other international companies have also found India desirable. CNI (Creative Network International) Enterprise from Singapore, a 22-year-old company, has operations all across Asia and in other parts of the world as well. Elken International, founded in 1995 in Malaysia, now has business ventures in six countries in the Asia Pacific region. Altos Enterprises, an Indian company, began its direct selling business in 2000 and plans to expand its operations.

Adding to the current lineup of direct selling companies in India are several from the United States. Offering a wide variety of products, these companies include 4Life Trading, Forever Living Products, Sunrider International, Tupperware, Mary Kay Cosmetics, Jafra Ruchi Cosmetics, Herbalife, Avon, Amway and Max New York Life Insurance.

Avon was among the first direct selling companies to enter India after the country’s economic reforms were enacted during the 1990s. Today, its operations are flourishing, and its growth rates are stunning—around 55 percent last year and on track to be over 60 percent this year. Entering India and beginning business operations was not a particularly difficult process for Avon, according to Hemant Singh, the Managing Director of Avon India. For companies desiring to do business in India, he suggests they obtain legal counsel to learn the laws that apply and then get the permission needed from the Foreign Direct Investment Board before beginning operations.

Integrating Into the Culture

Key to the success of direct selling companies in India seems to be their ability to integrate and become a part of the fabric of the country.

As in many countries, direct selling has proven especially attractive to the women of India, providing opportunities that previously were unavailable. Currently, an estimated 70 percent of all consultants are women, with several companies almost exclusively comprising women. Mary Kay Cosmetics, with its unique focus on women, has meshed well with this environment.

As Renuka Dudeja, Associate Director for Public Relations of Mary Kay Cosmetics India, says, “Our mission is to enrich women’s lives by offering them a business opportunity where they can earn unlimited rewards while still maintaining a balance between their family and work.” This has held direct appeal, and she notes further, “Our culture and mission have been warmly embraced by women in India.”

Customization has contributed much to Avon’s success in the Indian market. As Singh points out, “The color tones in the North and in the South are very different.” Avon has customized its cosmetics to allow not only for skin tone variations but also for regional preferences in the color palette.

Jewelry is special in India and has wide appeal to girls and women of all ages and from all economic levels. Avon jewelry has proven popular, but as with the colors of its cosmetics, Avon recognizes that Indian tastes are not homogenous. The company hired top designers to create custom designs and recently launched its Indian Diva collection, which it presented during its Avon Fashion Tour 2011 in Delhi.

AMC Cookware has taken integration even further, immersing itself in the Indian community. With a company slogan of “Eat Better—Live Better,” AMC has worked to enrich the lives of its consultants and their customers. Thanks to the 45 professional dieticians and nutritionists the company employs, consultants can pass along healthy cooking ideas and important nutritional information as they demonstrate AMC’s cookware products.

With 98 percent of its consultants being women, most of whom are housewives, AMC realizes how significant training can be in their lives. The company’s academy provides extensive training programs and honors attendees at every level of achievement. A special ceremony is held for those who complete the entire four years of coursework, and graduates receive an AMC Diploma in Management. As David Stanley, Managing Director and CEO of AMC Cookware India, explains, “This is a big thing. Graduates bring their entire families to the ceremony. Their achievements become a source of pride for the whole family.”

Stanley has been an executive with AMC during the development of operations in India, and is cheerfully optimistic about expansion. His advice to other direct selling companies seeking to do business in India is “come soon!”

Focus on the Future

With India’s economy still growing despite the international slowdown, several company leaders have expressed their belief that conditions are in place to prosper. In fact, Avon’s Singh considers them ideal for direct selling. “India is a big place,” he says. “The opportunities are huge, and there is so much room to grow.”