Network Marketing in India
Compiled by Pankaj L Shah
World over Network Marketing has become a successful concept that empowers ordinary people to turn into successful entrepreneurs. Basically, this concept is about distributing products directly from the manufacturers to the end consumers, thereby doing away with the traditional channel of distributors, wholesalers and retailers. Thus, the consumers get the entire benefit of direct selling. As per the latest figures, Network Marketing is today a more than US $ 100 billion industry, having presence in 125 countries.
However, in India, the Network Marketing is still at a nascent stage. But, it is expanding at a phenomenal growth rate. The concept, which took roots around 10 years back, India, due to its population and largest independent consumer market in the world, is the most attractive proposition for Network Marketing, provided that it is customized to suit Indian culture as well as requirement.
To grab a bigger pie of this lucrative market reputed MNC companies have entered the Indian market since 1998. It is believed that more than 50 lakh consumers are involved in the industry locally, and the number is getting multiplied at the rate of 5000 people a day. Industry observers, who are highly optimistic about the growth of this industry, estimate the size of the industry to cross Rupees 5230 Crore by year 2013.
India, as an emerging economy, is now poised for an accelerated growth in the Network Marketing segment. Network Marketing in India is a blend of the old and the new where the bullock-cart and modern automobile move forward side by side. The traditional systems of Product based Programmes find their own niche along with Modern Internet based online / e-Commerce Programmes.
Birth of Network Marketing
Not many people are aware that Network Marketing is not some fad but a scientific, organized, proven way of doing business worldwide. Some of the facts about network marketing:
Started in 1941 in USA and has evolved into an industry world over
Network Marketing is well entrenched in over 80 countries
Many NM companies exhibit rapid growth in Annual Turnover [20%
to 300%] Network Marketing is 80 bn. Dollar Industry Worldwide
Over the last six to eight years the NM industry as a whole has grown worldwide. The reason for this phenomenon is simple, there are more people looking either to supplement or replace their income. There are more opportunity seekers in a recessionary period due to the uncertainty of their present financial situation. Many have lost their jobs, had their wages or overtime cut back or simply are concerned that they may be next in line for being laid off or cut back. For some who may be secure in their financial situation, a recession serves as a wake-up call that the party may be over and sitting around every night watching sit-coms isn’t going to work anymore. They will need alternatives and for the first time they will be open to opportunities presented to them via Network Marketing
This being the case, it is exactly why the NM industry has grown well during down economies. That is why now is an ideal time for start-up companies to launch their ventures. There are vast amounts of people that will be drawn to this industry in the next few years. These will be individuals that have yet to consider this industry.
Aren’t buying habits what drive every commercial venture? Over the years the buying/producing habits of the general populous has formed and shaped economies and even complete societies from the dawn of time.
Certainly e-commerce is still a powerful tool for buying and selling and is a channel of distributing products and service that cannot be ignored.
This is where Network Marketing comes in. It has been said that never before has there been two industries better suited for each other than Network Marketing and Internet e-commerce. It is that of combining the high tech tools and convenience of e-commerce with the high touch service of the person-to-person industry of network marketing.
There is much available in the way of technology, which is affordable and extremely powerful, providing a major element to the success of a new network-marketing launch.
Potential & Legitimacy of NM in India
What is Network Marketing? NM is only a method of distribution of goods or services from the manufacturer to the end user. NM is a method of direct selling. The other selling method in direct selling is single level marketing or SLM. In NM you have an opportunity to develop a marketing network from which you will earn commission on the sales of multiple level of representatives.
IN traditional form of distribution the manufacture gives it to the Super Stockist, who in turn gives it to the distributor who passes it on the retailer. Each one on the way before it reaches your hand takes a commission; to this add the advertising budget. The total of all this is roughly 60% of the MRP and in some cases even more. What happens in NM is that since there is no Stockiest , distributor or retailer and since it is word of mouth marketing there is no advertising budget, that 60% budget gets distributed amongst the individual distributors or networkers.
Over decades NM has proven to be a very powerful way to distribute goods and services in the US and Europe. In the 1940’s a company called Californian Vitamins first allowed its direct sales people to also recruit other sales people for a commission on their recruits sales. They created an NM direct sales company. Two of the top salesmen then created the Amway Corporation. Direct sales in the 70’s due to some unscrupulous companies were attacked in the courts. Amway, fought and won, in 1979, thereby proving that NM was a legally justifiable form of business.
“You (direct sales) strengthen our country and economy, by offering opportunity to others. I’ve followed your industry’s growth for years now. Your industry gives people a chance, after all, to make the most of their lives and, to me that is the heart of the American dream” Bill Clinton.
At this point too in India the NM industry is facing similar problems from unscrupulous NM operators who are giving genuine NM companies a bad name. It is only a matter of time that Govt of India and regulatory authorities RBI / MCA along with the IDSA / DMAi will set norms for anyone who intends to run a NM Company in our Country. Few States in India have taken a positive initiative and have set up guidelines governing NM Companies.
There are many companies who have masked money chains, which are illegal in our country, as a NM company. One cannot sell a product eg a pen that cost Rs 20 in the market for Rs 200 and justify it as an NM company.
To clear a few misconcepts of the NM industry. A lot of people believe that it is only the people at the top who earn a lot of money or it’s the people who have joined early make the money. This is not so. In a genuine NM company it does not matter who you join or when you join, you have the same opportunity as anyone above you or anyone who has joined way before you to make as much money or even more than them. It all depends on you effort, your ability to understand the dynamics of NM and your ability to create leaders below you. All this things can be learnt if you have the determination to succeed.
Another misconception amongst people about NM companies is that only new companies begin with NM as a method of distribution. This is far from the truth; take the example of HLL in our country a company that has over 10,000 crs in turnover to have decided to enter into NM. This should lay to rest all doubts in one’s mind about the power and legitimacy of this form of business. A large amount of Fortune 500 companies produce goods for NM companies, only proving that NM companies also focus on quality of their products.
To understand the potential of NM in India and its future we need to first consider the number of people in the industry in various countries and the turnover they generate, statistics show that roughly 3% of the population of those countries are involved in NM.
Percentage of Population doing Network Marketing
For India to reach 3% of its population it would mean 30 million people even if we take 3% of middle class which roughly 350 million peoples it means over 10 million people will be involved in NM which is 10 times the present amount of people involved in the industry. Which should also lead to a 10 times increase in the turnover which will be close to 3 billion dollars or roughly 14,000 crs
One can imagine the boon it will be for the people in this country, which faces tremendous levels of unemployment and business opportunity for the middle class? It is the best and the safest method to create an additional income in the house without having to give up the present form of creating income.
Pankaj L Shah
The Author strongly advocates Network Marketing, as a powerful platform for distribution, however it would be futile to suggest that everyone jump on the bandwagon of starting a NM Company. The author also concedes that it is a highly potential and dynamic method to create additional / residual income for the determined.
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