Multi-level marketing involves selling goods directly through distributors. Multi-level marketing does have certain practical issues. First, it depends on the rate of growth of the distributors and also their ability to do business. Nutrition, wellness etc. are good sectors to do network marketing. Leading players in India include Amway, Tupperware and Medicare. HUL, Amul and Godrej are other such e-tailing initiatives.

1. Chapter-09
Multilevel Marketing and Direct
Distribution

2. Multilevel Marketing
• Multi level or “network” marketing are a
way of selling goods or services through
”distributors”
• These “distributors” are unlike distributors
in the normal sense of the term or
distributors one comes across the supply
chitin of FMCG/Pharmaceutical
Ch-09 Multilevel Marketing and Direct Distribution

3. Network/Teamwork Marketing
• If one signs up as a “distributor’ he will receive
commission on the “sale” he makes and also on
the “sales” that are made by “distributors”
appointed by him.
• The recruited” distributors” are known as the
“down line”
• In pyramids like network commotions are based
on the number of distributors recruited.
• The sales are to the recruits and not to customs
Ch-09 Multilevel Marketing and Direct Distribution

4. Issues in multilevel marketing
• Depends on the rate of growth of the
distributor base and also on the
distributors being able to do business
• Pyramid may break up in case of products
that do not have customer base, and
hence end up in dissatisfied “distributor”
holding stocks they purchased as part of
the “distributor” deal
Ch-09 Multilevel Marketing and Direct Distribution

5. Good sectors for Direct Marketing
• Nutrition
• Wellness
• High end personal care products
• Herbal products
• Specialized types of items that sell more
on word of mouth and personal conviction
Ch-09 Multilevel Marketing and Direct Distribution

6. Turnover of Major Organizations in
India
• Amway Rs. 580 Cr
• Tupperware Rs. 100 Cr
• Medicare Rs. 100 Cr
• HLL-Network Rs. 100 Cr
• Oriflame Rs. 65 Cr
• Avon Rs. 65 Cr
Ch-09 Multilevel Marketing and Direct Distribution

7. Issues in multilevel marketing
• Chain moves on the basis of networking
• Worldwide Direct Marketing is over US $
100 billion
• In India it was Rs. 2500 crores in 2003-04
• Direct Marketing sector was growing at
20%
Ch-09 Multilevel Marketing and Direct Distribution

8. Avon
• US $ 8 billion. Turnover
• Presence in over a hundred countries
• 4 million distributors worldwide
• Operates in India with a head office at Delhi
• Imports the formulations from US and get the
skin care, beautify care manufactured at facilities
in Assam and Panvel
Ch-09 Multilevel Marketing and Direct Distribution

9. Avon
• Products are supplied to distributors through
couriers
• Main objective is to reduce the cost of the
distribution
• Route is Avon-to-Beauty Advisor-to-Beauty
Representative-to-customer
• Beauty representative gets a 20% discount on
buying Avon products while a beauty advisor
gets a 20% discount plus a points on volume
discount, based on volume of sales which
progresses on a slab wise basis
Ch-09 Multilevel Marketing and Direct Distribution

10. AVON
• Inventory is replenished at the beginning
of each month
• Storage at multi location is avoided
• Reduced cost in distribution is passed on
to the “distributors” as high commission
Ch-09 Multilevel Marketing and Direct Distribution

11. Sangam Direct-HLL
• People in suburb of Mumbai like thane,
wishes to buy groceries and items of daily
necessity, can long on to the appropriate
internet site www.snagamdirect.com and
place an order, or even can place an order
over the phone
• Site stocks 3500 SKUs
Ch-09 Multilevel Marketing and Direct Distribution

12. Sangam Direct-HLL
• One objective is to connect with
customers
• Order after receipt is sent to the
warehouse or franchisee at the back
end via interconnect computer network
• The franchisees are only service
providers like C &FAs, the ownership of
the products remaining with the
company Ch-09 Multilevel Marketing and Direct Distribution

13. Sangam Direct-HLL
• The scope of these initiative lies in its
size
• The number of SKUs handled are in
thousands, and are growing ultimately
with a scope of becoming a virtual
hypermarket.
• The sales are driven buy frequent
offers.
Ch-09 Multilevel Marketing and Direct Distribution

14. Direct Marketing Format-Key
Implications
• Competes directly with the kirana stores at
one end, and the other end with value for
money based store such as Big Bazaar
• For retention of customers volume based
and repeat purchase discounts are offered
Ch-09 Multilevel Marketing and Direct Distribution

15. International Experiments
• Net Grocer
• Peapod
• These formats to integrate stores/product
brands, direct marketing skills, and the
shopping habits of customers to drive
profitable volumes
Ch-09 Multilevel Marketing and Direct Distribution

16. E-Tailers in India
• Godrej and Amul sites provide customer
net purchase services
• Godrej has arrangements with
fabmall.com
• Amul leverages its distributor network to
service orders received on the net,
whereby dealer is also kept happy
Ch-09 Multilevel Marketing and Direct Distribution

17. P & G and Direct Marketing
• In the form of house demonstration cum sales
• Product demos at shops and retail outlets to
induce trails among target groups
• Stocks are routed to the direct marketing agency
through its distributors, for demo and sale to
customers
Ch-09 Multilevel Marketing and Direct Distribution

18. Common Concern In Direct
Marketing
• The performance cycle between the point
of sales and the immediately preceding
stocking points has to be as short as
possible
• Try and involve the channel partner in
inventory management, so that the stock
holding spread across the chain
Ch-09 Multilevel Marketing and Direct Distribution

19. Summary
• Multi level or “network” marketing are a way of
selling goods or services through ”distributors”
servicing end customer for some commission
• Pyramid may break up in case of products that
do not have customer base, and hence end up
in dissatisfied “distributor” holding stocks they
purchased as part of the “distributor” deal
Ch-09 Multilevel Marketing and Direct Distribution

20. Summary
• Nutrition , wellness etc. are good sectors
for network marketing
• Amway, Tupperware and Medicare are
leading players in India
• HLL, Amul, and Godrej are other e-tailing
initiatives in India
• P& G, and HLL are also not left behind
Ch-09 Multilevel Marketing and Direct Distribution