"Direct selling isnt taken as a serious business opportunity in India yet"

Written by Alokananda Chakraborty | Updated: Aug 11 2009, 06:07am hrs
The overall economic slowdown notwithstanding, Swedish cosmetics group Oriflame is gung-ho about the prospects of the direct selling industry in India. We hope to see the industry grow almost double the size in next three years, Fredrik Widell, managing director of Oriflame India, told Financial Express. The company has a turnover of 1.3 billion globally (2008), of which Asia contributes close to 7%. Its India catalogue has about 650 products, which it hopes to beef up by adding another 150. Alongside, it will increase its manufacturing capacity at the Noida (in Uttar Pradesh) plant, which produces about 20% of the products sold in India, by 10-15%. In this interview to Alokananda Chakraborty of FE, Widell discussed some of the problems plaguing the industry and the way forward for Oriflame.

As India faces layoffs and salary cuts, the countrys Rs 3,500-crore direct selling industry is faced with a sudden availability of a growing pool of educated manpower signing on as sales agents. How has this development impacted the prospects of the direct selling industry in India

The direct selling industry is a fast growing industry in itself. Recession has not affected our growth as we had already been growing at a steady rate. We have managed to maintain our growth even in the downturn. But this does not imply that direct selling companies fare better in recession. During this economic down- turn, we are seeing people from different segments joining us but there is no absolute spurt in the number.

Has this rush of agents translated into a sizeable increase in sales in the industry

We have seen more consultants joining not because of the recession but because of the growth and income opportunity in this business. And the number has been increasing steadily. Oriflames business grew 40% in the last financial year and we hope the growth momentum to carry forward in the coming year.

What is the experience globallydo you see a spurt in the number of people joining up during a recession or a slowdown

A recession is never a positive situation for any sector in any country. As no business operates in isolation, everyone in such an environment gets affected. In the West, as direct selling is a more evolved industry, there is a relative difference in the number of people who turn to it as an income opportunity. In developing nations such as India, direct selling isnt still taken as a serious business opportunity by most people.

Why do you think your direct selling model works so well in developing countries In any case, how do you deal with economic uncertainty in emerging markets

The direct selling model works well in both emerging and developed countries. However, in developing countries, there is vast talent and people are more than willing to take up independent business opportunities. And even consumers are now eager to experiment with new products to spruce up their appearances. Our business model is based on friend-to-friend, which acts as a grace for us, as people tend to rely more on recommendations from their known ones.

The Indian Direct Selling Association (IDSA) has been in talks with the Ministry of Consumer Affairs to give the direct selling business in India industry status and design a framework of dos and donts. Where do you stand now

The direct selling industry in India lacks legislation. Legislation is necessary as it can work better to protect the interest of the member companies, consumers and to improve the current set up. As chairman of IDSA, I can say that together we are in talks with the government to set up a proper rulebook that will improve the functioning of the whole process.

The direct selling industry in India is bogged down by a lot of negative perception brought upon it by fly-by-night operators. Do you think time is ripe for an industry regulator

Many in India have had this experience of being duped by such small-time fraudulent companies. This has shaken their belief in the business model of direct selling companies. This happens due to the lack of legislation at the government level. At IDSA, we have a stringent set of rules and criteria to allocate membership of the body. IDSA scrutinises companies based on their business practices and policies and the member companies follow the World Codes of Conduct for Direct Selling stipulated by the WFDSA (World Federation of Direct Selling Associations). IDSA is now aggressively involved in promoting the direct selling industry and we are beginning to feel the positive currents.

How can you leverage new channels, tactics and media to drive customer engagement and intimacy What steps have you taken to link these divers to your teams compensation

Oriflames core focus has been on providing proper training to our consultants. We train them about the company and the business well enough to go out and talk to the world about us and build their own businesses.

We have recently been exploring the new medium of out-of-home advertising and also a few radio and outdoor campaigns besides the print medium where we reach out to our consumers at the right place at the right moment. We believe in investing in our consultants, making them skilled and ensuring that they earn more and grow professionally and personally.

The direct selling industry in India is generally defined as a low investments and high returns affair. Can it challenge the retail sector in India

Direct selling and retail aim at consumers with different needs and purchase patterns. The strength of direct selling is that consumers can shop from a wide range of products and sample them without stepping out of their homes. More so, the seller here is a business consultant who is interested in a repeat transaction adding value to the relationship.

The direct selling industry will continue to seize market share in India and more people will now turn to this opportunity as a source of their additional income or even a full time career.

Most large direct selling companies worldwide are already in India or are looking to establish a base or stake in the Indian market. How would you assess the growth potential over the next five years

The direct selling industry is predicted to boom in the coming years and this large opportunity is attracting key players from across the world. They see a lot of potential in the country. Indians, unlike the earlier perception of being savers rather than spenders, are ready to take up a business challenges to increase their disposable income.

Assessing the current scenario, we hope to see the industry grow almost double the size in next three years.