Direct selling: Italian peculiarities

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 years. Italy is one of the top direct selling markets in the world, both by sheer size and growth figures.

There is a clear and stable regulatory environment: with the 2005 law regulating direct selling (Legge 173 dated August 17, 2005) with a special contract for intermediaries, income taxes are levied at source. There is also an income threshold clearly stating the difference between occasional and professional intermediaries and there are severe provisions against pyramid schemes, as well as against ungrounded Health Claims. Understanding different regulations is important, but understanding the style of communication in each country is important too.

The most successful companies are the ones who actually adapt to the local environment and culture and do their homework before they set up their local operations. The purpose of this memorandum is to provide a short summary to the most relevant provisions which characterize the Italian Direct Selling Market, in particular with regard to the key role played by the Italian “incaricato alla vendita diretta a domicilio”.

As a matter of fact, due to the Italian legislation and the benefited schemes it provides, distributors in Italy are not “direct sellers” but are called “demonstrators”, a peculiar kind of intermediary. The Italian term for this is “incaricato”, according to Italian direct selling law. In particular, an Italian incaricato is an intermediary, who is not purchasing a product for re-selling but, on the contrary, he introduces the selling company to a consumer and gains an intermediation commission for the introduction.

This system, based on a single sale rather than two sales, makes Italy different from many other countries.

Background

Note that a pure distributive scheme, like the traditional one above, can be legally put in place in Italy. Given no special regimes are set forth for distribution, though, that scheme would significantly affect the net income of the distributor, as ordinary taxes (much higher) and personal (expensive) formalities would apply. For this reason, the direct selling industry in Italy is almost entirely working with the Italian benefited scheme for salesmen.

Sales scheme

Traditional direct selling

Income for the affiliate is a distribution margin (e.g. wholesale price is 80$, Retail price is 100$: distribution margin is 100$ - 80$ = 20$).

Italian direct selling

Income for the affiliate is an intermediation fee (e.g. he charges a commission fee of 20$ for intermediating the sale of a product sold at retail price of 100$).