With annual revenue of US$18 billion and more than 900,000 direct sellers, Germany is the largest direct selling market in Western Europe, with an upward growth trajectory spanning more than a decade. Geologically based in the heart of Europe with more than 80 million residents, Germany is treasured for its strong and dynamic economy, innovation, and stable political environment.
Because it’s a growth market with enormous potential, doing business in Germany is at the top of the list for many American direct selling companies who intend to expand their European presence. If you fall in this category, your expansion teams are probably asking, “What should we know in considering the German market?” To answer this question, the German DSA (Bundesverband Direktvertrieb Deutschland [BDD]) recently published a guide for companies who are considering entering the German direct selling market. The English guide, How to Succeed in Direct Selling and Social Selling: A Guide for Starting a Business in Germany, is now available either at Amazon.com (print or e-book) or directly from the German DSA (email@example.com).
The Guide’s Content: From Legal Requirements to Valuable Practical Tips
The BDD organizes an annual Founders Seminar to advise companies interested in entering the German direct selling sector. Publishing the guide was a logical outcome of our work analyzing start-up and expansion inquiries for global companies. The guide helps direct selling companies understand and identify the correct legal form for collaborating with sales partners—such as self-employed commercial agents versus resellers—while explaining the advantages and disadvantages of both legal forms.
In Germany, direct selling companies work with commercial agents to offer uniform consumer pricing and to restrict direct sellers from offering the products on internet platforms such as Amazon or eBay. Direct sellers working as commercial agents are expected and can be required to use the branded, replicated websites designed by the direct selling company rather than the non-standard, unprofessionally designed e-commerce shops set up by direct sellers. In addition, direct selling companies receive the consumer’s contact information and, therefore, may contact them for repeat purchases even after the commercial agent has left the organization.
In contrast, direct sellers working as resellers are free to low-ball prices on the internet, which direct selling companies cannot prevent. For legal reasons, direct selling companies also cannot stop resellers from establishing and maintaining amateur e-commerce shops. Direct selling companies working with resellers do not receive any consumer data and lose the consumer contact as soon as the direct seller resigns. If the consumer enters into a contract with a direct selling company via a replicated website, the direct seller is legally serving as a commercial agent.
The decision to work with commercial agents or resellers greatly impacts the compensation plan. For companies working with commercial agents, the European Union competition law does not allow for mandatory investments of the commercial agent in areas that are necessary to perform their work as a direct seller. Sign-up or renewal fees and mandatory costs for enrollment kits, training materials, or replicated websites are a violation of EU competition law. The guide recommends making the purchase of enrollment kits and other services optional, a practice shown to have no effect on company turnover, especially when starter kits and other optional services are made attractive for the direct seller. So, while small changes in the compensation plan might be necessary to comply with EU law, we have found no measurable influence on the business.
Following the guidelines in the publication will distinguish your company from the so-called bogus self-employment practices, which can have severe legal consequences and may even be a criminal offense in Germany. Just telling a direct seller when and where to appear or how to perform may turn a self-employed direct seller into an employee. Companies using technical strategies and solutions that monitor the whereabouts of the direct seller or an electronic calendar where the company sets the dates of a sales presentation could classify as an employment relationship in Germany.
The guide describes the start-up formalities of business registration, tax office notification, and immigration regulations. It helps explain the requirements of a direct selling contract, the legal organization of a new business site in Germany (i.e., subsidiary, branch of a foreign-based headquarters), and that different taxes apply in every city in Germany. Understanding the unique taxation requirements up front can save money on taxes after launch. American companies often choose locations with international airports, such as Frankfurt am Main or Munich, as the site of their subsidiary. Frankfurt am Main is ideally positioned in the middle of both Germany and Europe. The capitals of neighboring countries such as Paris, Amsterdam, Brussels, Luxemburg, and Zurich can be reached in less than an hour by plane or in three to four hours in a comfortable and affordable high-speed train called ICE.
Legal requirements are challenging to understand. The BDD Guide, designed for the layperson, refrains from using highfalutin legal jargon. With its practical tips and chapter summaries, this guide takes readers through a comprehensive and enjoyable exploration about the possibility of doing business as a direct seller in Germany.
Ready to Enter the German Market? The BDD Awaits You!
The German DSA (Bundesverband Direktvertrieb Deutschland [BDD]) was founded in 1967 and is based in Germany’s capital, Berlin. The association promotes the interests of its over 50 members, their sales partners, and therefore the entire direct selling industry in Germany.
Member companies benefit from legal expertise and advice, the political representation of interests, and a strong network that guarantees a continuous exchange of information and experience. With its three lawyers and three staff members who specialize in direct selling and public relations, the BDD team is the number one address for companies who want to enter the German market.
Find further information (also offered in an English translation) at www.direktvertrieb.de.