Can Direct Selling Challenge The Retail Sector

There is no doubt that the retail sector in India is on an upswing and is now being considered to be the next sunshine industry after the Pharmaceutical and IT sectors but as India's direct selling industry gears up for the future in a collective way, observers feel that it might just give the retail sector a run for its money.

Although statistically speaking there is a big difference between the two as the size of the domestic retail sector is pegged at $292 billion. Organized retailing is expected to notch up a 20% annual growth rate by the end of the decade, against 8.5% at present which accounts for 10% of the GDP. On the other hand the direct selling industry currently stands at Rs 2700 crore.

In order to get its act together the Indian Direct Selling Association is in talks with the Ministry of Consumer Affairs to give the direct selling business industry status and design a framework with the dos and don'ts of direct selling in India.

Direct selling industry in India is generally defined as a Low investments and high returns affair. The direct selling industry in India has grown from USD 20 million to USD 600 million in the last 10 years. And with the government likely to come out with a legislative framework for direct selling in a few months from now, more international companies are likely to foray into India in the next two years. So the industry is set to cross the USD 1000 million mark by 2010.

On the other hand all does not seem well for the retail sector as suggested by Crisil report which says that the Indian retail market is the most fragmented in the world, with just 2% of the entire retailing business being carried out by the organized sector. While organized retail makes up for over 70-80 per cent of the total business in developed countries, the Indian organized retail segment pales in comparison with even other Asian countries such as China, South Korea and Thailand.

Almost all large companies worldwide are looking to establish a base or stake in the Indian market. So as India witnesses a phenomenal growth of shopping malls and specialty retail stores, it remains to be seen whether direct selling can work on the negatives of the retail sector and put up some sort of a challenge in the years to come. One way or another, we are surely living in exciting times.
- Contributed by Ankita Sinha