2024 presents a golden opportunity for direct-selling businesses looking to expand in Europe, with the Baltic states standing out as untapped, high-potential markets. Known for their high-tech infrastructures and adaptive consumer markets, Lithuania, Latvia, and Estonia are great markets to expand your footprint and increase revenue.
Overview of the Baltic Markets
The Baltic region, an often overlooked area for foreign expansion, holds vast potential for direct-selling businesses. Key upsides of the region include:
Booming E-Commerce Sector
The Baltic region has seen significant growth in e-commerce over recent years. The combined e-commerce market in Estonia, Latvia, and Lithuania is estimated to be worth over €2.7 billion. This growth is driven by high internet penetration rates (above 89% in all three countries) and a growing consumer preference for online shopping. The e-commerce market is expected to continue its growth trajectory, offering ample opportunities for direct-selling businesses.
Positive Consumer Spending Trends
Consumer spending in the Baltic states is also on the rise. This is indicated by growing disposable income in all three markets. For instance, in Latvia, the disposable income reached US$35.91bn last year, a 14.40% increase compared to 2022. Similarly, in Lithuania and Estonia, disposable income grew by 13.32% and 6.64% respectively.
Growing disposable income is beneficial for direct-selling companies because it signifies greater purchasing power among consumers. With more disposable income, consumers are more likely to spend on non-essential items, making them receptive to new products and brands.
Logistics and Distribution Efficiency
The Baltic states excel in logistics and distribution, scoring high on the World Bank’s Logistics Performance Index. This efficiency is key for direct selling success, ensuring timely, cost-effective delivery, which is essential for customer satisfaction and repeat business. Efficient logistics also mean lower operational costs, crucial for sustained growth and market presence.
Doing Business in Lithuania
Ease of Doing Business: Easy (score of 93.3/100)
The biggest of the three, Lithuania with a population of 2.7 million people, is a great country to expand your direct-selling business thanks to its stable GDP growth (2.7%), efficient regulatory environment, and digital innovations in public services.
Rising Entrepreneurial Spirit
The Lithuanian market is buzzing with entrepreneurial appetite. As per data collected by the Lithuanian government, there were 222,483 individuals in self-employment in 2022, an increase of 12% compared to 2021, indicating a strong drive towards independent business ventures.
This trend is particularly relevant for direct selling models, where individuals are motivated to become independent distributors.
Legislation and Taxes
Lithuania’s business-friendly tax policies include one of the EU’s lowest corporate tax rates at 15%. The country also offers specific incentives for small and medium-sized enterprises (SMEs), which are often the backbone of direct selling networks. This fiscal environment, coupled with transparent compliance processes, reduces operational complexities for direct-selling businesses.
Impressive Direct Selling Growth
According to a 2022 report from the country’s Direct Selling Association, the direct selling sector saw a substantial 12.8% increase in revenue, hitting €47.7 million. This uptick is more than just numbers; it’s a sign that Lithuanian consumers are quite open to new products and sales methods. For businesses looking to enter this market, this could mean a smoother path forward with potentially lower customer acquisition costs.
Doing Business in Latvia
Ease of Doing Business: Easy (score of 94.1/100)
Latvia, the second biggest Baltic state, offers unique advantages that make it appealing to international companies. Here’s what they are:
Strategic Geographic Location
What makes Latvia stand out is its geographic location. Nestled between Estonia and Lithuania, Latvia is a place you’d want to invest as a direct sales business.
Photo: Ilze Buldere, General Manager Filuet Baltics
According to Ilze Buldere, the General Manager for Filuet Baltics, all three Baltic states – Estonia, Latvia, and Lithuania – are ready to host more direct selling companies. All three countries have high digital literacy and an inquisitive consumer base that is increasingly interested in international brands and products, providing ample opportunities for direct-selling businesses. Besides, these countries are in a handy spot for shipping products quickly, which is a big plus for companies looking to grow there.
So, if you want to be in all three markets, Latvia is the country you want to start with.
Latvia, with the world’s second most attractive taxation system, offers significant advantages for expanding direct-selling companies. Its corporate income tax rate is a competitive 20%, applied only to distributed profits.
Additionally, the tax system is favorable for self-employed individuals, featuring a progressive structure: 20% for income under €20,004, scaling up to 31% for income above €78,100. This is particularly beneficial for entrepreneurs who often start as self-employed or with small teams, allowing them to take advantage of lower tax brackets.
Direct Selling is on the Rise
Latvia is one of the easiest countries to start a direct selling business in the region. That’s reflected in the direct selling growth.
The direct selling sector is thriving due to its appeal as a flexible and empowering form of entrepreneurship. It attracts a largely female workforce, with 89% of direct sellers being women, who appreciate the ability to integrate work with family responsibilities. The sector’s growth, with €78 million in sales and over 59,000 participants, is driven by its personalised approach and the opportunity for sellers to be their own bosses.
Having a strong network of entrepreneurial individuals and a customer base receptive to personalised, direct sales approaches paves the way for healthy profits. Latvia offers both.
Doing Business in Estonia
Ease of Doing Business: Easy (score of 95.4/100)
Make no mistake, while Estonia is the smallest country of the three, it offers some solid perks for direct-selling companies.
The Best Taxation in the World
Latvia was second… Estonia is first! Here’s what makes Estonia’s taxation the best in the world: a flat corporate tax rate of 20%, only on distributed profits, and the same flat rate for personal income tax for self-employed individuals.
The benefit? Self-employed employees of your direct-selling business will face a very straightforward tax scenario. This, in turn, simplifies financial planning and tax compliance, making it easier for businesses, especially those in the early stages of expansion, to manage their finances and understand their tax obligations.
Stable Economy and Institutions
Estonia’s stable economy, marked by solid institutions, political stability, and robust fiscal policy, offers an ideal environment for expanding in the country. This stability ensures a predictable business climate, reducing economic and political risks, essential for long-term planning. A steady economy translates to consistent consumer spending, key to direct-selling business success.
Perfect Market for Cosmetics, Wellness, and Household Products
If you’re a direct-selling company selling cosmetics, wellness, household products, and clothing, Estonia is a great country to expand into. These products are in demand in Estonia. Most importantly, Estonia is spearheading the logistics and transportation game which means efficient delivery of these products within the country and the rest of the Baltics.
Take Your Pick
Venturing across borders within the Baltics might seem straightforward, but this is a common misconception. Each of the three countries, while part of the EU, has its own unique identity and legislation. This is where Filuet’s expertise becomes invaluable.
With a strong presence in these markets, we understand the distinct nuances of each Baltic country. Our infrastructure, centered in Latvia, offers a strategic advantage. Riga, being at the heart of the Baltics, serves as an ideal hub for managing operations across the region. By partnering with us, businesses can navigate these complexities effortlessly, making expansion across the Baltics less of a challenge and more of a seamless journey.
At Filuet, we excel in facilitating smooth business expansions in this diverse area and beyond. Our approach is a comprehensive, 360-degree solution, refined over 30 years in the industry, enabling businesses to enter new markets with minimal risk. This method has been proven effective with well-known clients like Herbalife, Tupperware, and AMC, highlighting our capacity to streamline the expansion process and make it a manageable and successful endeavor.
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