Network Marketing in India
While growing up, I often saw my mother holding meetings at our home, wherein she’d give demos of some products, mainly related to health and beauty, to a group of men and women from our locality.
When it started, I was too young to understand the concept of ‘network marketing’, but as time progressed, I got fascinated by the work and began participating in these meetings, though as an observer. I learned that my mother was a part of this multi-level marketing company called Amway and she was creating her own distribution network.
This is how I first got introduced to the network marketing, or direct selling or referral marketing, industry in India. While people, in general, were too skeptical of the concept back then, and this is almost 12-13 years back, there is still a hint of negativity around network marketing in India due to the scams and frauds the common people have experienced.
AN OVERVIEW OF NETWORK MARKETING IN INDIA
Over the last decade, in conjunction with the global boom in the MLM industry, India has also witnessed a change in perception and more and more individuals are becoming network marketers to accentuate their incomes or to transition from employment to entrepreneurship.
During the period between 2011 and 2016, India saw the direct selling industry double in value to reach 12,620 crores INR (Indian rupees). As per a study released by ASSOCHAM, the Association Chambers of Commerce and Industry in India, the average annual sales of a network distributor or a direct seller is $300, or INR 20,000 as compared to the world annual average sales of $1700 per salesperson.
A country of about 1.3 billion people, the scope of growth of MLM industry is absolutely unlimited. A lot of negativity has surrounded this industry in India until recently. However, things are turning around. As a testament to the acceptance of MLM businesses, the Karnataka High Court in its judgment dated 15 February 2017 acknowledged direct selling as a legitimate, global industry.
A BRIEF HISTORY OF NETWORK MARKETING IN INDIA
The MLM industry saw its beginning in India with the entry of the European giant, Oriflame in the year 1995. Amway India too was given approval by India’s Foreign Investment Promotion Board and started operating commercially in 1998.
The history of network marketing in India is plagued with scams and Ponzi schemes, hampering the authentic growth of the legitimate direct selling industry. The biggest setback came just 5 years ago in the form of Saradha Scam in Kolkata which led to multiple suicides of investors.
About 1.7 million investors lost a shocking $5 billion, which resulted in bringing the legit MLM industry to a standstill. There was a huge scandal about lawful MLM firms like Amway India also being a fraud and led to the arrest of Amway India CEO as well.
The state of Kerala was the first to legally accept direct selling as a legitimate form of business after multiple strikes and agitations by the state trade unions. Even then, due to the absence of a framework on the national level, the genuine MLM businesses were often under the scanner of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, which aims to cease all money laundering and fraudulent Ponzi schemes.
The MLM businesses saw a ray of sunshine in the form of a circular released by the central government to the heads of state stating the ‘Model Framework for Guidelines on Direct Selling’.
The advisory states that no MLM scheme will be considered illegitimate if the scheme involves enrolling of subscribers as traders of certain goods and services and receiving direct and indirect compensation for the same. It also mandates a written contract between the agency and the subscribers.
Another victory for the network marketing industry came in 2017 when the Karnataka High Court accepted the same as an emerging global industry and acknowledged their difference with respect to chit scams.
Since then, a lot of MLM businesses have cropped up, creating a revolution in the Indian networking marketing domain, including Amway, QNet, Avon, Modicare and a many more.
THE FUTURE OF NETWORK MARKETING IN INDIA
According to a report released by FICCI, the Federation of Indian Chambers of Commerce and Industry, and the leading research firm KPMG, the network marketing industry is expected to grow to approximately INR 645 billion (approximately $93.98 billion) by the year 2025.
The network marketing industry in India has seen an exponential growth in the past five years due to a conducive legal environment provided by the Indian government.
More than the company you are associated with or the product you are selling, the success of MLM businesses depend on the people. India has no dearth of people looking for employment and as more awareness is being spread, more and more people are coming forward to start their own business and be their own boss, which is exactly what network marketing offers them.
Network marketing offers more women to be a part of the business world and promotes micro-entrepreneurship. According to QNet India, the share of women in the industry has been over 60% and is still growing.
Therefore, with the negative aura around the industry diminishing, there is a huge scope for the network marketing business to boom in India.
IS NETWORK MARKETING LEGAL IN INDIA?
The concept of network marketing or direct selling gained traction in the 1990s. In India, until then, the law in place to protect investors and individuals against pyramid schemes and other fraudulent money scams was the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
The Act was enforced particularly for the Ponzi schemes and for companies that exploited people by recruiting paid agents without having a tangible product to sell.
While the Act does not include direct selling under its purview, its definition does little to distinguish between legitimate and illegitimate network marketing businesses. Therefore, even though network marketing is legal in India, there is a lack of a properly defined legal framework that acknowledges the same.
To make the operating environment more amiable and regulatory for the reputed and long-standing MLM businesses like Amway, Avon, Oriflame, Tupperware, etc, the government of India released the Direct Selling Guidelines in 2016, stating a legal framework for the states to regulate the network marketing industry.
The guidelines seek to strictly monitor the activities of the MLM businesses and protecting the people against any scams, while also encouraging the legitimate businesses to expand their scope of operations in India.
TOP 5 MLM COMPANIES IN INDIA
MLM businesses are spread across multiple domains — pharmaceuticals, beauty products, food products, electronics, etc. Since the advent of network marketing in India, various international giants have set up their shop here to take advantage of the humongous population and the opportunity for rapid growth.
Here are the top 5 MLM businesses in India, working legitimately under the purview of Direct Selling Guidelines issued by the government and providing employment to hundreds of thousands of people.
Amway India is the wholly-owned subsidiary of Amway Corporation, the largest international multi-level marketing business that sells beauty, health and lifestyle items.
Amway entered India in the year 1995 and got approval from India’s Foreign Investment Promotion Board to commence operating commercially in the year 1998. Since then, it has employed millions of people as its distributors, creating a robust network of ambassadors pitching its much relied on health and wellness and beauty products.
Amway India is a member of the IDSA, the Indian Direct Selling Association, along with being a member of Confederation of Indian Industries (CII) and FICCI. Starting with about 6 products in the year 1998, Amway India now sells over 140 products across various product lines. It also operates 140 retail stores spread across the country.
More than a million distributors are actively associated with Amway and over 60% of those are women. It aims to triple its revenue by the year 2025 with the new guidelines on direct selling in place.
Tupperware is one of the largest companies in India that conduct their business through direct sales. Tupperware is the manufacturer and seller of high-quality plastic containers and other crockery items.
Founded in 1948, Tupperware is headquartered in Gurugram in India. It mainly constitutes of women as its distributors and is also listed is the Fortune 500 Companies list.
Tupperware also operates through retail stores in India and employs over three million members worldwide, in about 80 countries. It has been operating in India for over 30 years now.
Avon initiated its business of selling beauty products through network marketing. It was founded in 1886 in the U.S. and has been included in the Fortune 500 companies list as one of the largest direct selling companies employing women.
The products include skin care, fashion, fragrances, body care and similar product lines. With an annual revenue of over $9 billion, Avon is a company dedicated to women and operates in over 100 countries.
The network distributors of Avon are known as Avon Beauty & Fashion Advisors.
Modicare is one of the most popular homegrown direct selling companies in India with a huge network of distributors earning their livelihood through its products.
Founded in 1996 by K.K Modi and Samir Modi, it was the first Indian company to launch the concept of multi-level marketing. Modicare deals in multiple product lines including health and wellness, beauty and home care products.
A lot of people jumped on the direct selling bandwagon thanks to Modicare which offers business opportunities today for about three hundred thousand people as its distributors. Modicare has lower-priced products and has a membership plan that is relevant to the Indian population due to which it has been able to connect with so many people.
Oriflame was founded in 1967 in Sweden and has now completed over 17 years in India as a direct selling company. It sells beauty and personal care products and is highly reputed as an MLM business worldwide.
Oriflame operated businesses in about 65 countries worldwide with an annual sales turnover of over €1.5 billion. It employs about 3.6 million independent distributors that work as network marketers to sell its products.
In India, Oriflame also sells its products through its website and is one of the oldest MLM businesses that enjoys a solid reputation.
TOP NETWORK MARKETING EARNERS IN INDIA
The reports for the highest earners in India through network marketing are widely scattered and unreliable due to the long-standing negativity around the industry. Due to the scams and multiple illegal activities in terms of pyramid and Ponzi schemes, a genuine list of top network marketing earners in India hasn’t been released.
However, there have been a few names that have come up, associated with the top MLM businesses. For instance, Mr. Surya Sinha, associated with Forever Living Products (FLP), one of the largest MLM businesses in India, is considered to be a prominent name in the network marketing industry in India. He has also written multiple books on his network marketing models and consults with global companies.
As the industry gets more regulated and there are proper frameworks in place, there will be more comprehensive reports on the top network marketing earners in India.
THE FINAL WORD
India is on the cusp of a network marketing revolution due to more and more people getting attracted towards the concept of entrepreneurship or micro-entrepreneurship (additional income through direct selling).
With the government understanding and recognizing the legitimacy of the direct selling industry and giving it a boost through legalized frameworks and setting it apart from the PCMS Act, 1978, network marketing industry will see a huge growth in the future in India, already benchmarked to reach about $98 billion by 2025.
The liberalization in terms of foreign investments is also a major reason for the global giants to set their network channels in India, expanding the value of the industry overall in the country.
There are still some cases wherein businesses resort to cheating the investors and the common man by promising them high returns by investing a small amount. However, with the legal system tightening its clasp around such scams, the frauds are getting weeded out and the authentic, legal MLM businesses are rising to offer the people genuine opportunities of scaling up their incomes.