Unfolding the Rise of Direct Selling Formats in India: An Explanatory Analysis

Abstract

The Indian direct selling industry has been analysed using a framework developed from the environmental theory of retail evolution, relationship marketing theory, and Porter's five forces model. The developed heuristic framework provides a basis as to how retail institutions adapt to changes subject to the changes occurring in the firms' environment subject to the constraint that firms in the long run earn profits by maintaining long-term relationships with the consumers such that the so-called consumers turns into the patrons of the company. The identified factors in the firms’ environment are consumers, competitors, suppliers, public policy factors and information technology factors.   Through the descriptive analytical analysis, it has been found that direct selling in the Indian context has evolved due to the changes happening in the direct selling’s operational milieu wherein these firms adapt to changes that happening in India’s macro and microenvironment. The opening up of the economy, and changing consumer demographics have been the driving force behind the direct selling industry in India. However, the public policy factors through the enactment of regulations have been a key catalyst that helps the business in protecting consumers' interest, warding off illegal competition, with the support of MSME coupled with advancements in information technology that transformed the business operation whilst ensuring transparency. Though the environment has been conducive to the growth of the direct selling industry, the industry has faced huge setbacks in terms of litigation.