Country Focus
May 2011
Local Partners Create Thriving Direct Selling Industry in Cyprus
Fact File
|
The Mediterranean island of Cyprus is an example of how direct selling organisations can increase their geographic spread through local partnerships. Judith Wojtowicz examines the difference between these licensees and a direct market entry.
With a population of just over 800,000, many companies would consider Cyprus not to be a viable proposition, bearing in mind the time and money required to prepare a direct entry plan.
Creating a partnership with a local company or like-minded entrepreneur is an alternative method of increasing market penetration – a method that several direct selling organisations have set up here since the mid-80s, among them Tupperware, Nutrimetics, Avon and Vorwerk.
Direct selling was unknown at that time and the first multinationals worked hard to promote the concept and benefits of this self-employed opportunity. Many of the brands were new, which needed additional effort, and today there is a thriving industry.
Appointing a distributor partner, working under licence to strict guidelines, can generate rapid payback and high levels of operating profit for the parent company. Even in countries with a big population, a joint venture or licensed operation is sometimes the only option in order to meet local legislation.
Choosing the right partner is essential. And while some companies operate here very successfully, in a close environment where retention is especially critical, some have given up after realising it is not as easy as it may appear. The same applies to retailers who occasionally test the water with a parallel direct selling arm but fail to grasp the basic elements. “They start high but don’t have the discipline that this industry requires,” said one seasoned executive. “They come and go, falling by the wayside like a burst bubble.”
Luis Barrera, Head of Distributorships for beauty company Avon, thinks it is an ideal option for direct selling organisations (DSOs) who might otherwise miss out on the potential of a market that initially may appear problematic. “Sometimes it can seem complicated due to local custom, culture and legal requirements,” he said. “As long as all the other conditions are satisfactory, payback can be quicker because of the smaller structure and the commitment of the partner to make it work.”
Avon prefers to work with an exclusive distributor partner, investing considerable resources to help them adopt and maintain the same standards of ethics and compliance, as well as a commitment to women’s empowerment in line with global direction. In contrast, some DSOs appoint an established company which already represents several (non-competing) brands, believing them to be more familiar with the direct selling concept. In both cases, mutual success comes from adequate support and training to ensure the appropriate business model is followed.
Markets are chosen using many factors, including population, consumption, competition and whether direct selling is officially approved. In Cyprus, where there is no Direct Selling Association, regulations were ‘a bit loose’ until the island joined the European Union in 2004. Since then, all companies involved in direct selling are subject to the same EU directives and codes of conduct that govern all European markets.
Adopting the common currency (2008) also proved an advantage, although it was not widely welcomed at the time. As the economy starts to feel the effects of the global recession, a little later than most, some commentators believe the Cyprus pound would have been devalued, with devastating effect on the costs and overheads of DSO partners. The economy is now facing similar problems to those of its close friend and neighbour Greece. The government is trying to deal with a growing public deficit and a privileged, bloated civil service resistant to change. Unemployment is running at record levels and banks are suffering due to their exposure to the Greek crisis. Many people believe being inside the euro zone has helped businesses avoid the worst.
The absence of a professional organisation means there is no reliable industry data, but observers estimate the direct selling market here is worth around €15 million, and growing. With Avon already a strong and high-profile presence, direct selling continues to grow, gaining share from the retail sector partly due to the noticeable impact of two companies who have started up in recent years. Swedish beauty company Oriflame switched from distributor to direct entry, and fragrance specialist LR, one of the largest DSOs in Germany, was encouraged to open when Cyprus joined the EU. Rumour has it that at least one other multinational is planning to return as a direct entry.
While this is further raising the profile of the industry it has changed the dynamics, creating new challenges for licensees who feel they are no longer competing on equal terms. Pricing is one sensitive area especially, now that the economy is being squeezed, and the effects of multilevel marketing introduced by newcomers are starting to be felt.
Against this background of change and economic uncertainty, there seems to be agreement that Cyprus remains a very good place for direct selling, with lots of potential. The social structure lends itself to strong networking, the warm climate means there is no interruption to service and a strong middle class aspires to improve its lifestyle.
Editor’s Note: All the points and issues included in this article refer to the internationally recognised island of Cyprus, administered by a Greek Cypriot government. The Turkish-administered area is not included.
Related Entries
