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Direct selling companies try to beat recession
Komal Amit Gera in New Delhi/Chandigarh | February 25, 2009 11:20 IST
Bucking the ongoing economic slowdown, Mary Kay Cosmetics Pvt Ltd, the Indian arm of Mary Kay Inc, one of the largest direct selling chains of cosmetic products, plans to invest $20 million (about Rs 100 crore) in the domestic market in the next three years.
The company plans to consolidate its position in the existing markets in the north, west and eastern region, and foray into the southern states by the end of this year. Hina Nagarajan, country manager, Mary Kay, told Business Standard that the brand was launched in India in September 2007 and has a sales force of over 3,000 women.
She added that the job insecurity in the corporate sector in the wake of the recession has brought many women to get the memberships of such direct-selling companies.
She said most of their investment would be in training the workforce as well as consolidating distribution networks and supply chains.
Mary Kay has training centres in Delhi and Mumbai and will open a centre in Chandigarh shortly.
Another player in the same segment, Amway India Enterprises Pvt Ltd, is also positive on its expansion plans. A senior company official said that Amway closed 2008 with 40 per cent growth. "We had a gross sales of Rs 800 crore (Rs 8 billion) in 2007, and closed 2008 at Rs 1,128 crore (Rs 11.28 billion). We look forward to 25 per cent growth in 2009."
"The downturn in the economy will certainly impact growth, but in Amway's context, the impact is limited as we are a recession resilient business. Our plans for expansion are not hit and our production capacities will be enhanced in 2009 to take us to Rs 2,500 crore (Rs 25 billion) by 2012," he added.
"We are confident that even in the slowdown scenario, our consumers will continue to place orders with Amway distributors. We have our fundamentals in place, and having been in the Indian market for over a decade."
Catering to the mass market through its direct selling distributors, Bhilwara-based RCM Business, a subsidiary of Fashion Suitings Pvt Ltd, also expects to retain its customer base. The company has even penetrated into the rural market.
The distributors of the company opined that since they sell the products essentially to meet daily needs, their business has not been affected and they have been able to add new members at the same pace.