Counterfeit products hit direct selling industry in India: KPMG-Ficci study

direct sellingThe Rs 75 billion direct selling industry in India is currently facing a challenge of fakes. Branded products meant for direct selling are sometimes seen being sold through retailers, a practice that carries the risk of counterfeit goods, said a study conducted by the KPMG-Ficci released on Friday.“Direct selling products should not be sold through retail stores. However, it has been seen that many retailers become direct sellers and start off by selling the products to customers through their outlets. This leakage of products through traditional retail channels is contradictory to the very nature of direct selling and needs to be adequately addressed. This channel also encourages the sale of counterfeit products, which affects the brand,” the study said.Although a huge chunk of Indian direct selling companies initially started in South India, many of them have pan-India operations today. In terms of revenue generated, Maharashtra, Tamil Nadu, Kerala and Andhra Pradesh have the highest shares. Recently, the industry witnessed greater growth in the eastern part of the country and in many tier-II and III cities with direct selling companies trying to reach out to customers in markets that have remained untapped thus far.“India is a thriving market for direct selling. As per data issued by the World Federation of Direct Selling Associations (WFDSA), the global direct selling industry reported a revenue of $189.6 billion for 2017, with approximately 117 million sales distributors involved worldwide, of which 74 per cent were women. India contributed U$1.5 billion and provided a self-employment opportunity to 5.1 million people. The direct selling industry doesn’t just provide people with entrepreneurship opportunities but is also a great training ground for skill development, and women empowerment. With the appropriate regulations and support, this industry can do great things for the development of the country,” said Pramodh Manda, Regional Advisor – South Asia, QNet International.The KPMG-Ficci report finds that the direct selling contributes around 0.4 per cent of total retail sales. This is far lower than the industry’s market share in other comparable economies (half of China and a tenth of Malaysia). With the growth in consumer markets and an increase in penetration to globally comparable levels, the direct selling industry has the potential to reach a size of Rs 645 billion by 2025 in India, said the report.“Direct selling opportunities are a great way to generate self-employment. The potential for this industry to grow and provide direct and indirect employment, contribute to the economy and help with skill development for women and youth is enormous, provided a clear regulatory framework protects all the stakeholders of this industry. The introduction of model direct selling guidelines in 2016 by the Centre is a step in the right direction. However, till these are codified into an appropriate legislation and adopted by the states, a lot of uncertainty remains,” said Vijay Sardana, Chairman, Task Force on direct selling, Assocham.The direct selling industry in India is dominated by organised players, who contribute around 95 per cent to the market. The market has grown to become a key channel for the distribution of goods and services in the country, especially for health and wellness products, cosmetics, consumer durables, water purifiers and vacuum cleaners. However, it is still underdeveloped as compared to global peers and the variety of brands and products available in the country are lower than those in other economies.Apart from fakes, the direct selling industry in India lacks a systematic policy that clearly defines the regulatory framework of the industry. There is no clear definition for legitimate direct selling to differentiate it from ponzi/pyramid schemes masquerading as direct selling structures. As a result of the lack of clarity, the number of fraudulent activities in the industry has increased and legitimate direct selling is being confused with ponzi/pyramid schemes.
Source: Business Standard