Country Focus
July 2010
Potential waiting to be discovered: Country Focus on Croatia and Slovenia
The full potential of direct selling in the neighbouring states of Croatia and Slovenia has yet to be discovered. Judith Wojtowicz looks at the challenges and opportunities that have arisen since independence 20 years ago.
TOGETHER with several other small countries Croatia and Slovenia emerged from the disintegration of the former republic of Yugoslavia. Achieving independence in 1991, the two new states followed separate paths which created the conditions for today’s direct selling industry.
In Croatia, the economy suffered badly from four years of war due to ethnic, political and religious differences which saw thousands killed and brought international condemnation. In the past decade the situation has slowly improved, in part due to the growth of tourism, although it lags behind Slovenia and unemployment remains high.
Slovenia fared better, having been regarded as a sound economy with a well-educated workforce. A short 10 day conflict caused little long-term impact and its historic ties to western Europe (partly through a strong manufacturing and export base) eased the transformation to a modern state.
Nonetheless, long memories of socialism and a desire for security means the concept of entrepreneurship has also been quite slow to take off here, combined with a high level of state control that presents many challenges. In both countries direct selling organisations (DSOs) are working hard to educate the public and demonstrate that the opportunity is open to all and comparatively risk-free.
The global recession has put both countries under pressure with more people out of work and a drop in consumption. In these seemingly ideal conditions, while more people are considering the option of direct selling, red tape and high taxation are holding back growth.
Against this background the Direct Selling Association and Croatian Chamber of Commerce are working to raise the profile of the industry and encourage people to join. “This has been made easier since the introduction of a new bylaw at the beginning of last year that brings the industry into line with the European Union,” said Milica Rakusa-Martulas, Director of the Trade Sector at the chamber. “Registration is obligatory which contributes to the development and enhancement of the image of the industry. Fifteen DSOs are now officially registered with the Chamber of Commerce which makes the industry more transparent.”
Hedi Kovacs, chairman of the DSA said, “The public is more than ever aware that direct selling companies provide a wide range of flexible employment opportunities to all population groups. However the industry here is negatively impacted by high taxation and other burdens which can be a major threat to future growth.”
A similar situation exists in Slovenia where other factors can also be seen as an obstacle despite local success stories such as Matmar Line. Founder Matjaz Marinsek explained that in addition to the legacy of socialism, when direct selling was effectively banned in Yugoslavia, there are many other challenges.
These include a minimum age limit for people wishing to work as a direct seller (currently under review) and limits on the number of hours that can be worked part-time. Part-time work is taxed up to 70 per cent, and the absence of authorised credit checking facilities makes it difficult to verify the credit worthiness of new recruits. In addition, there is a legal obligation for the same item to be sold at the same price to everyone at the same time which can affect incentive or discount programmes.
“Growth has therefore not been as rapid as it could have been although as there are few DSOs operating here the situation for existing companies is positive,” added Matjaz. “The local economy shrank last year by eight per cent and high unemployment has made recruiting easier. I believe
we can play an important part in the recovery if some of these regulations could be relaxed. We can help people to get through this crisis if we work together proactively as an industry.”
Fact File Croatia
- Population: 4.4 million
- Capital: Zagreb
- Geography: Beautiful coastline to the Adriatic Sea, located between Slovenia and Bosnia-Herzegovina in south-eastern Europe.
- Number of direct sellers: 50,000 (DSA members)
- Annual sales: €27.6 million (DSA members)
Fact File Slovenia
- Population: 2 million
- Capital: Ljubljana
- Geography: Border with Austria gives it a strategic location between the Balkans and western Europe. A member of the European Union since 2004. Adopted the euro in 2007.
- Number of direct sellers: 30,000 (DSA members)
- Annual sales: €20 million (DSA members)
