This week Luca Pozzoli takes us to the Italian direct selling industry. Luca is a direct sales executive. He has been in leadership positions in the industry for over 20 years as Managing Director and Area Vice President in party plan companies like Tupperware and PartyLite. He was the President of Avedisco (Association of Direct Selling Companies Italy) between 2007-2010 and subsequently, Univendita (Union of Italian Direct Selling Companies) from 2010 to 2013.
Guest Post by Luca Pozzoli
Direct Selling in Italy: La Vita è Bella! (*)
The General Picture
Italy is one of the top direct selling markets in the world, both by sheer size and growth figures. As reported by the World Federation of Direct Selling Associations, in 2015 total retail sales accounted for $2.9 billion, recorded +9% growth vs. 2014 and compound growth rates of 3-4% for the last decade.
Today, there are 514,500 direct sellers in Italy, and two associations represent the industry: Univendita, with 17 members having sales of €1.6 billion, and Avedisco, with 37 members having sales of €0.6 billion. There is a clear and stable (for once in Italy!) regulatory environment. With the 2005 law regulating direct selling with a special contract for sellers, income taxes are levied at source. Not only that! There is an income threshold clearly stating the difference between occasional and professional sellers and there are severe provisions against pyramid schemes.
The economic scenario is also very favourable to direct selling with a high percentage of women not working (actually the lowest level of women participation in the labour market in EU, 47% vs. EU average of 60%), low salaries and a real need to supplement the income. A general positive view of direct selling is present as a tradition deeply rooted in history and lastly, we see a relatively low penetration of online sales (but rapidly growing).
La Vita è Bella, then? Not everything is so appealing as it seems, particularly for incumbents in the market. This is because Italy is difficult to enter, not easy to understand and hard to grow in numbers. Notwithstanding the good intentions of Prime Minister Matteo Renzi, the country is still battling with a cumbersome bureaucracy that makes it difficult and costly to open and run a company, with high level of complexity that can discourage even the most optimistic executives.
Understand the Differences
In addition, a key factor to succeed is understanding the differences. Italy is at least three countries in one: 1) The industrial north with working women, small flats, few social connections; 2) The middle size province, in the north and centre, with good level of living, high income but less dynamic; 3) The underdeveloped south, striving to grow and reach the rest of the country, still poor with low purchasing power for customers, with a lot of people willing to start the activity but facing many difficulties in their job, with lousy infrastructures and services.
Failing to understand these differences will create serious problems in the possible ways to develop the business, starting from the correct product pricing, the size of starter kits, the ideal format and wording of a recruiting bid.
Last but not the least, it is hard for a new company to grow fast in numbers. Italy is a mature market with some really strong companies. Vorwerk Kobold is the absolute leader with a highly professional sales force, an enormous brand awareness (with the Italian name Folletto) and the financial resources to be able to sponsor a Serie A soccer team like Fiorentina. Other strong companies include Avon, Herbalife, Vorwerk Thermomix, Just, Stanhome, Amway, Tupperware and AMC. All traditional direct selling companies are well established, with a long history and tradition and it is absolutely not easy to compete in this crowded market. Competition is for parties if you are a party plan company, for recruits and sales leaders for everybody in our industry who wants to develop a sales force base.
If you want to succeed, you need to offer something strong in terms of product (yes, Italians recognize quality!), and a proven selling method to ensure earnings and satisfaction to your prospective consultants. The profile of direct sellers (mainly women, aged 35-50, married with children) suggests a lot of potential for real “social selling” companies offering online tools and social media specific to attract millennials into the industry. This is valid as well for existing companies who are slowly moving towards the adoption of technology and to try to get away for old fashioned “push” systems to start experiencing new ways to contact consumers and consultants.
Italy is full of opportunities, not only for outside companies but also for inborn entrepreneurs to fully exploit the country traditional strengths, like fashion, clothing and accessories and the incredible food sector, particularly wine, olive oil and coffee where the Italian quality could easily spread to the rest of the world. And don’t forget, La Vita è Bella!!
(*) Life is Beautiful!