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Online v/s offline: Direct sellers join fray

BS Reporter/Mumbai 19 Sep 14 | 12:42 AM

After consumer electronics and information technology product makers, direct sellers such as Amway, Oriflame and Tupperware have written to e-tailers, asking them to refrain from selling their products on their websites. The move comes in the wake of e-tailers such as Snapdeal, Flipkart and Amazon aggressively selling products of the above-mentioned firms, offering deep discounts (as steep as 40-50 per cent), which direct sellers say, mars the business prospects of their offline field force, who sell directly to consumers.

A spokesperson for the Indian Direct Selling Association (IDSA), a body that presides over the Rs 7,000-crore industry, and which has put its might behind these companies, says that e-tailers are not authorised to sell such products, since the direct selling model does not permit sale via any other medium besides the field force which has entered into a contract with the respective firm. "Basically through direct selling a company effectively outsources its sales function to people, who in turn get in touch with others interested in the firm's products. These people then conclude the sale with the interested individual and the process continues. What we are doing is promoting entrepreneurship as a result of this model.

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Typically, products sold through the direct selling route are not available through any other channel. How these products are finding their way onto online sites is one part of the problem. The second is the discounting that these sites are indulging in to promote sale of these products.

This hits business of the offline field force. Which is why companies such as Oriflame and Tupperware have written to e-commerce websites such as Snapdeal, Flipkart and Amazon asking them to dissuade sale of their products on these sites," Chavi Hemanth, secretary-general, IDSA, said.

IDSA is also asking the government to intervene and put in place rules and regulations governing non-store retail formats including direct sellers, e-commerce sites and home shopping networks. "This is required to prevent overlap as we are now seeing between e-tailers and direct sellers," Hemanth said.

However, the battle is expected to intensify since e-commerce is growing in India. From $1.5 billion (roughly Rs 9,000 crore) last year, e-commerce as an industry now stands at $3 billion (Rs 18,000 crore) in size and is slated to touch $35 billion (Rs 2.1 lakh crore) by 2020, according to Technopak.

Categories expected to drive traffic will be fashion, accessories, lifestyle products, electronics, mobiles and groceries, says Arvind Singhal, chairman, Technopak.

Companies, however, have been grappling with the emergence of e-commerce. Earlier this year, Lenovo, Toshiba and Nikon put out advisories to its buyers against doing business with e-retailers. Soon players such as Samsung, Sony, Apple and Nokia joined the pack.

These firms have now gone a step ahead, tracking shipments to see if products are finding their way illegitimately onto online channels, where they are being dumped at discounted rates. The move is intended to curb the practice of deep discounting.

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