Direct Selling is essentially a form of sales and distribution channel. It refers to the selling of goods and services to consumers who are away from a fixed retail outlet, generally at their homes and workplaces through an explanation, and demonstration of the product by sellers.
In the year 1886, the business of Direct Selling sowed its seeds in the USA with the establishment of Avon. However, it took a shape of a sector in the 1920’s when industrialization and urbanization started transforming the consumer behavior and choices. With industrial revolution of the 1920’s, there was a surplus of production. To vent out this abundance, the companies hired sales persons to mediate between the manufacturer and the consumer. It is one of the oldest modes of sales and is similar to the traditional consumer goods retail model lead by the people and for the people making it the original social network.
With the success of this model, involving lower sales, and distributions costs and greater direct interaction with the consumer, the portfolio of products swelled to include cosmetics, personal care, health, household goods, accessories and other products, over a period of time. By 1925 direct selling global business was between USD 300-500. During the 1970’s, diversification of product portfolio began from cosmetic, appliances, books to health, wellness and household goods started taking place. In 1990’s companies like Avon, Amway, and Tupperware started global expansion and entered India & China.
The introduction of the Multi-Level Marketing compensation plans (MLM plans) opened another chapter in the evolution of Direct Selling. Introduced in the mid-twentieth century, the plan for the first time enabled consumers to benefit from the success by providing them the option to become a Direct Selling partner of the business.
MLM plans became widely accepted and a large number of companies adopted the distribution channel. Few global and Indian companies who have developed over the last twenty-five years are 4Life Jeunesse Global, International Marketing Corporation Natura, Q-NET, Usana, and others.
The success of MLM compensation plans, however, led to a number of fraudulent money circulation schemes globally. The scammers posed as Direct Selling enterprises to gain from the popularity of the Direct Selling MLM plans. It has taken significant time in different economies to distinguish between the two, and recognize Direct Selling as a legitimate business model.
Acknowledging the importance of Direct Selling as a sales and distribution model and its potential for promoting self-employment, governments across the globe have taken firm steps to distinguish it from artificial money circulation and Ponzi schemes. This has primarily been done either (a) by introducing specific legislation to govern the Direct Selling industry, or (b) by recognizing Direct Selling as a rightful business model within existing consumer laws. The industry also self-regulates by the creation of specific and stringent guidelines for its members, which are governed by local associations accredited by a global association.
According to PHD – IDSA The Indian Direct Selling Industry Annual Survey 2015 – 2016 Report, currently, Direct Selling is USD 183 Billion industry globally, engaging over 103 Million Direct Sellers. Asia-Pacific forms the largest Direct Selling market with a share of 45.8 percent followed by North America (20.5 percent), Central and South America (13.7 per cent) and Europe (19.3 per cent).