Click here to order the October 2013 issue in which this article appeared.
Direct selling goes strong in Europe, 2 per cent growth last year despite the economic downturn, but it has not yet reached the same strengths as in the US. As Vincent Vega puts it in Quentin Tarantino’s cult film Pulp Fiction, “…it’s the little differences.” As Vince was surprised to be able to buy beer at McDonald’s in Paris, direct selling companies will have their fair share of surprises doing business in Europe.
One surprise is that you cannot roll out your compensation plan throughout Europe. Multi-level compensation plans are looked upon with different eyes depending where you are. Certainly, they are legal in Europe thanks to a European law on Unfair Commercial Practices. The law contains a black list of banned practices, such as “pressure sales” or “operating of a pyramid scheme.” The latter is defined as a scheme whereby a consumer receives compensation primarily from recruitment rather than sales.
Sometimes, authorities give a very wide interpretation to this definition, mostly because they do not have much knowledge about the functioning of our compensation plans. Other times, the direct selling associations have their own rules on compensation plans. For example, in France and Scandinavian countries, the DSA Code of Conduct rejects commissions on recruitment fees. So check your compensation plan with the national regulator and preferably with the local DSA before entering a market.
One other little difference is how we deal with food and dietary supplements. Our Vincent Vega was surprised to be able to freely buy hashish in Amsterdam (and the police are not allowed to search you!); he would have also been surprised by the many dietary supplements banned by authorities in Europe. These bans are bad for our business because it is the fastest growing product category for direct selling, with over 8 per cent growth in Europe.
Linked to dietary supplements is the issue of claims. Europe’s “father state” approach has resulted in a mandatory list of claims that companies can use. Claiming that a product can cure cancer and make you slim is likely not going to be allowed, so make sure your marketing material and websites are in order.
Notwithstanding these little differences, the figures published this summer leave no doubt that Europe is a solid choice for investment in direct selling. By the end of the year, trading conditions will become better with the new European consumer law that will enter into force. From December 2013 onwards, there will be for the whole of Europe one single cooling-off period and one set of information requirements for order forms, to name a few.
Due to good market prospects, we see an increase in US companies investing in development of their European market. As a result, Seldia has welcomed two new US member companies this year, Morinda and Kyäni. More applications have been received and are currently being reviewed.
The perfect way to keep up to speed with the European market and network with peers is attending the Annual Round Table on the Future of Direct Selling, held on 2 October in Brussels, Belgium this year. This event has been the single most relevant event for direct selling in Europe. The conference covers relevant regulatory issues as well as commercial issues like the challenges of logistics, the use of social media in a multi-linguistic Europe and the behavior of the direct selling consumer.
If you missed this year’s conference, make plans now to attend in 2014!
Maurits Bruggink is Executive Director of Seldia, the European Direct Selling Association.
