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Direct selling biz under threat from fraudsters, says IDSA

01-May-2004
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Direct selling biz under threat from fraudsters, says IDSA

The Rs 2,300-crore Indian direct selling business is under threat from the large number of fraudulent companies which have jumped onto the direct selling bandwagon in the hope of making a quick buck. Stung by the atmosphere of suspicion and doubt that has now come to envelop the business, the Indian Direct Selling Association (IDSA), the regulatory body of players in the Indian market, has now swung into action educating consumers and is seeking the help of consumer bodies to tackle the menace.

While no firm data is available on the number of such companies which have now mushroomed across the country, the IDSA is pointing out that their existence has posed a severe impediment to the "legitimate" direct sellers who have now been in business since the mid-'90s and include the likes of Oriflame, Amway India, Modicare, Avon, Tupperware and Herbalife.

"Last year the Indian direct selling business grew by 22 per cent, which is much more than any other industrial sector in the country. We are estimating that the business could have been twice the size it is now but for the existence of illegitimate, fraudulent players," Mr William Pinckney, Managing Director, Amway India and Chairperson, IDSA , told Business Line. "Consumers who have come across such players are confused and suspicious about the entire business now with the result that they neither buy direct selling products or sign up as distributors," says Mr Pinckney, who adds that a country the size of India would otherwise have huge potential for such business.

IDSA, which held its bi-annual industry meet in Pune, said it is now linking up with consumer groups to educate them and seek their help in weeding out unscrupulous players in the market. "We are also hopeful that a draft legislation that the IDSA prepared and presented the Government for enactment will come through in the next 6-12 months so that the industry gets a better chance to do business here," Mr Pinckney said.

India's direct selling business has reported a six-fold growth in business in the last six years and has provided direct/indirect employment to an estimated 4,000 people in addition to creating a community of1.25 million distributors. Globally, the direct selling business is worth a whopping $85 billion churned out by 30-million direct sellers across 165 countries.

IDSA members point out that companies trying to imitate the business model of the legitimate direct sellers are defrauding consumers with products which have no proven track record or guarantee while the distributors themselves have to incur high entry-level investments, spend on large inventory and have no grievance redress mechanism against the companies.

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