Annals of the University of Petroani, Economics, 11(4), 2011, 151-158

151

ABOUT DIRECT SALES IN THE WORLD, EUROPE AND

ROMANIA
CLAUDIA ISAC, ALIN ISAC

ABSTRACT: Direct sale represents a modern product distribution system directly to

consumers, generally, directly to their homes, to their workplace or other places, beside retail
shops. The best known type of direct sale, the Network Marketing or Multilevel Marketing
implies the existence of a network of distributors which earn income from selling on
commission, to which they add the trade markup. This paper is based upon the analysis of these
types of sales starting with the study of specialized literature especially by foreign authors,
mainly Americans, with the analysis of statistical data presented by several organizations such
as SELDIA (The European Direct Selling Association), MLM International Romania, ACVD
(Association of Direct Selling Companies in Romania), as well as the legal regulations within
this field. In conclusion, the paper presents an interesting comparison of the sales and structure
volume between the Europe and Romania.
KEY WORDS: direct sales; network marketing; sellers; franchise.
JEL CLASSIFICATION: M16; C15.

1. INTRODUCTION
In the long run, the term franchise has been associated with different
definitions according to the point of viewing and to the field of activity in which it was
used. In a simple sense, franchise means a license allowing the designee to sell and
market a companys products or services in a particular place, using the name or the
trade mark of the company; it allows him to do business for himself but not through
himself. From the marketing point of view, franchise represents a distribution system
based on the partnership between two parties which are legally independent, between
the franchisor (the proprietary owner, the owner of the trade mark of products and
services) and the franchisee (Dura & Isac, 2006).
*

Assoc. Prof., Ph.D., University of Petrosani, Romania, [email protected]

Lecturer, Ph.D., University of Petrosani, Romania, [email protected]

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Developing a franchise using a well-known trade mark, as well as the name of

a company has enabled the development of a more complex distribution system, which
is different from the classic marketing systems.
Thus, seen from the marketing point of view, there arose a new form of selling
which presents the products directly to consumers without using the characteristics of
the classic sales, meaning the existence of shops, of product stocks, of storehouses etc.
Invented by the Yankee vendors who traveled across America to market their goods,
direct sales have become reality, as proven by the development of companies which
successfully implement this distribution method at the beginning of the third
millennium (Dumitra, 2003).
The European Direct Selling Association defines direct selling as a method of
marketing and retailing goods and services directly to the consumers, in their homes or
in any other location away from permanent retail premises.
It is usually conducted in a face-to-face manner either where products are
demonstrated to an individual , or to a group or where a catalogue is left with the
consumer and where the direct seller call as later to collect orders.
Unlike direct marketing or mail order, direct selling is based principally on
personal contact with the customer (http://www.seldia.eu/direct-selling/about).
The economic importance of direct sales has made a series of famous
specialists, among which John Naisbitt, study this phenomenon and reveals four
important stages in its evolution:
pioneer stage (1945-1977) characterized by the successful development of US
companies such as Amway or Nutrilite as well as by the beginning of direct
sales within Europe and Asia;
professional stage (1977-1990) did not refer only to an accelerated increase of
the sales volume, but also to the implementation of some modern strategies for
setting up a network of distributors;
information stage (1990-2000) enabled the use of information technologies to
control the network of distributors on the one hand, while on the other hand it
made use of modern methods of promoting and delivering the products to the
customers doors;
globalization stage (2000-present) is still in progress and it is characterized by
an explosive increase of the volume of direct sales due to the fact that the
range of products and services marketed through direct sales has been enlarged
by the growing number of distributors that are highly motivated by the
financial advantages offered by this type of sales; moreover, it is easier to
penetrate the international market using the Internet.
2. DIRECT SELLING IN THE WORLD
In 2010, within 100 list direct selling company, the top 10 companies
contributed 39$ billion to the world economy.
As we can see in the next picture, the 2001-2010 retail sales show a stagnation,
even the maximum has reached in 2006 (32.18 billion dollars) the 10 years average is
around 28 billion dollars.

About Direct Sales in the World, Europe and Romania

153

The structure of products category is quite the same in Europe like

international one, which it means the first two places are token by Cosmetics &
Personal Care and Wellness, which claim more than 50% of sold products through
direct sales.
The next places are token by Clothing & Accessories with 16% and Household
Good & Durables with 9% or Financial Services with 5% (http://www.wfdsa.org/
about_wfdsa/?fa=globalStats).

Figure 1. Retail sales in 2001-2010

3. DIRECT SELLING IN EUROPE

In Europe, the direct sales volume is near 20 billion dollars and the biggest
sales are in Germany with 3761.9 million dollars, Italy 3361.2 million dollars, Russia
3062 million dollars and France 2413 million dollars.
The top countries after the number of selling people are Russia with almost 5
million sellers, followed by Ukraine,with more than 1436000, Italy, Germany and
France. Sales volume are proportional with number of selling people in the most
countries, which it means one seller has near 1600 dollars sales volume.
Another interesting conclusion is in Europe 82% of seller are women, in some
countries this percentage are very high, by example in Czech Republic, Estonia and
Lithuania with 95%. In every countries the women seller percentage is more than 50%,
just very few of them like Switzerland has only 53% or Austria with 55%.
Direct selling is a large and growing sector within the non-store retail trade in
Europe. Direct sales volume shows a constant growth over the last five years and over
6 million people are engaged in direct selling in European Union. Direct selling

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companies offer in Europe permanent employment to over 26,000 people and 76% of
the products they sell are manufactured in Europe.
Table 1. Indicators concerning direct sales worldwide
Country

Estimated
Number of
Salesforce
Part time
Retail Sales
Sellers
Women
%
(bill. $)
%
Austria
266.7
14000
55
75
Belgium
234.5
18122
67
65
Bulgaria
68.9
86446
87
54
Croatia
33.8
34820
63
96
Czech Republic
223.5
223673
95
85
Denmark
125.9
99500
70
95
Estonia
17.2
20960
95
Finland
202.8
80000
80
92
France
2413
265000
80
80
Germany
3761
460000
88
90
Greece
120.4
102016
Hungary
250.2
316448
76
90
Ireland
74.3
17758
71
82
Italy
3361.2
390995
79
99
Lithuania
41.1
31235
95
Luxemburg
13.9
600
Netherlands
131
36135
81
86
Norway
280.6
188800
85
90
Poland
698.7
869328
88
85
Portugal
95
12708
Romania
204.4
345560
84
31
Russia
3062
4995508
80
44
Slovakia
98.6
98000
Slovenia
36.1
35000
65
80
Spain
611.2
185000
88
96
Sweden
387.8
100000
75
95
Switzerland
383.8
10000
53
60
Turkey
441.7
612814
90
65
Ukraine
540.2
1436100
United Kingdom
1397.2
278000
85
87
Total
20217.4
12363486
82
70
Source: Special Supllement to the Wall Street Journal by Direct Selling News The Ultimate
Social Business Model

From the point of view of the categories of products, it is noted that over the
past few years in cosmetics and personal care sales rankings are maintained, and in
2010 as their share of almost 38%.The total of household goods and wellness represent
more than 36% followed by clothing and accessories with 7%, home improvement 6%
and same shares of 4% foodstuff and books & educational products.

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155

Source: http://www.seldia.eu/direct-selling/companies-products
Figure 2. Structure of product categories

4. DIRECT SALES IN ROMANIA

The beginning of MLM activities in Romania is related to the admission of
some private Austrian life insurance agents on the market. Only after 1994 can we
mention some MLM companies which were registered as legal entities and which obey
the Romanian legislation. At present, according to the statistics made by the
Association of Direct Selling Companies in Romania, there are at least 70 companies
that promote direct sales and they comprise over 270.000 distributors.
An important factor for increasing the turnover generated by direct sale
companies and multilevel marketing networks represents the wide range of products
and services with a structure that is continuously changing. Thus, if between the years
1996 2002 prevailed the sales of cosmetics, body-care and nutritional products lately,
this selling system has incorporated insurances, especially life insurances (11.5% in
2005), private pensions as well as real estate sales. As far as the insurance system is
concerned, into the picture came insurance brokers who are authorized by the
Insurance Surveillance Committee which distributes its products through direct sales
and Multi Level Marketing (Safe Invest Romania, Salve-Club, Fin-Cop Broker, EPM
Romania etc.) and which extended its services in this field due to the context of
implementing the compulsory and optional private pension system in Romania starting
with the year 2007 in the case of optional pensions and with the year 2008 in the case
of compulsory pensions by signing adhesion contracts to a private pension system.
As far as the real estate sales are concerned, an important step is represented by
the setting up of specialized banks such as the banks for houses which have interesting

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Isac, C.; Isac, A.

offers for individuals who want to invest in real estates by signing Bauspar contracts
according to the collective credit system and which function based on direct sale
contracts. At present, in Romania there are two banks which offer loans for houses and
they are Raiffeisen Bank for Houses SA and HVB Bank for Houses, founded in 2004
and 2005 respectively, with an increasing number of contracts. Therefore, the career
system for the direct sales promoted by Raiffeisen Bank for Houses SA made it
possible for the 3500 distributors to have signed contracts over EUR 700 mil for over
100.000 clients by January 1st, 2007.
Another important aspect of direct sales and multi level marketing is
represented by human resources because marketing systems rely on the principle of
multiplying the efforts of distributors within a structure and creating education and
training programs. At present, in Romania, beside the 750 employees of direct sale and
multi level marketing companies there are over 250.000 who earn extra incomes from
the commissions resulted from this type of sales.

Source: http://www.money.ro
Figure 3. Direct Selling Company in Romania

In the present, the direct sales volume knows an easy growth to 282 million
euro in 2011, after what in the 2010 was near 278 million euro and in 2009 around
280.4 million euro, conform to Euromonitor statistics. Personal care and beauty
products represent 88% of the total Romanian direct sales volume which it means the
most important category. This important ponder of cosmetics and personal care is
demonstrated by the position of the companies in the Romanian market.
So, the Romanian direct sales leader is Avon with 35% followed by Amway
with 12.9%, Oriflame Cosmetics with 10.3 and Forever Living Products International
with 8.5%. All the other market players have 33.3% .

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5. TRENDS IN DIRECT SELLING BUSINESS

Some of the trends have already been mentioned above:
- strong growth in international markets. Direct selling continues to perform strong
during the global economic crisis;
- high participation of women. Women are beginning to realize that the Internet makes
it possible for them to reinvent themselves and begin a business that requires little
risk and low start-up cost;
- there are no age limit to develop the business;
- important market shares for cosmetics and household goods;
Besides these trends, the Internet has a positive influence on direct sales
industry. Internet has had an impact in relations between direct seller and the company
and between the direct seller and the consumer. The main levers through which the
Internet helps the development of this industry are:
The internet has allowed direct sellers and customers to maintain contact outside
the face-to-face meetings;
Direct sellers have started blogs and social media page;
Direct sellers use electronic mailings and have online access to product and
services brochures;
Paying through Internet banking;
Using Internet banking for paying;
More and more people were extended his professional activities of direct selling
through the use of the Internet and social networks.
A direct selling activity can be run from home and does not require a high
investment.;
Some may even give follow-up orders by electronic means. However, despite this
convergence of physical.
From the seller's point of view, the major attraction of direct selling is that it
offers an equal and flexible income opportunity to men and women, across all ages,
level of experience and social origins. In this context, the direct selling industry
development trends will be direct influenced by maintaining these advantages for the
distributors and by using and developing the communicating modern technologies.
6. CONCLUSIONS
The economic results and the dynamics of the goods and services distribution
through direct sales and multi level marketing are determined by a set of economic,
technologic and even social factors. The economic financial analysis is sometimes
considered by the specialized literature as being limited, and because of that we think it
is necessary that the diagnostic analysis should be completed with the evaluation of the
stability of the management system of companies specialized in this kind of sales.
In conclusion, sales through direct marketing and multilevel marketing are one
of the most dynamic and fast distribution methods in the world; for Romanian
salesmen it represents an opportunity for future development of businesses and for
increasing living standards.

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REFERENCES:
[1]. Dumitra, H.D. (2003) Introducere n managementul sistemelor MLM, Editura Digital
Data, Cluj
[2]. Dura, C.; Isac, C. (2006) Economia ntreprinderii, Editura Universitas, Petroani
[3]. Special Supllement to The Wall Street Journal by Direct Selling News, The Ultimate Social
Business Model
[4]. www.wfdsa.org/files/pdf/global-stats/Product_Categories_Report_Final_6-20-2012.pdf
[Accessed may 2012]
[5]. http://www.seldia.eu/direct-selling/about [Accessed may 2012]
[6]. http://www.wfdsa.org/about_wfdsa/?fa=globalStats [Accessed may 2012]
[7]. http://www.seldia.eu/direct-selling/companies-products [Accessed may 2012]
[8]. http://www.money.ro [Accessed may 2012]