Investing In Belgium
Market Entry Strategy
U.S. exporters can penetrate the Belgian market through importers/distributors, wholesalers or specialized retailers, depending on their products and the company size. Interested U.S. exporters will have to focus on innovation and quality in addition to having competitive prices despite the high transportation cost. For specific requests, the firm can contact the Commercial Specialist at the U.S. Embassy Brussels for counseling and market entry strategies tailored to their products and services see: www.buyusa.gov/belgium.
Using an Agent or Distributor
Many U.S. companies are selling in the Belgian market through distributors and agents. New-to-market U.S. companies will find a large number of well-established representatives in virtually every industry sector. Occasionally, their territory is larger than Belgium; it can include the Benelux (Belgium, Netherlands, and Luxembourg), and one or more neighboring European countries. European purchasers sometimes perceive Belgian agents and distributors as neutral sellers, placing them at a distinct advantage vis-à-vis their German or French counterparts. However, it is not a good idea to engage a French, German or Dutch distributor to handle their country as well as Belgium. Foreign distributors tend not to perform as well on the Belgian market. Product lines will tend to be underrepresented in Belgian and the American firm, if they signed an exclusive agreement, may not easily be able to transfer the distribution rights to a more competitive local firm. Many local well-established distributors are reluctant to take on new product lines due to various business constraints, notably the lack of access to quick and affordable financing and high social costs for additional employees. Considering the host of distribution options available, it is important for U.S. exporters to select the option best suited to his or her product. Belgian buyers generally prefer to purchase through an intermediary. Making sales directly to the end-user is rare. Sales, however, of expensive, technically sophisticated goods are an exception to this rule. Intermediaries may take one of three primary forms under Belgian law: Distributor, Agent, or Salaried Representative.
Establishing an Office
In an effort to modernize and streamline the procedure of setting up a company or an office in Belgium, the Belgian Government, established the "Crossroads Bank of Enterprises" (Banque Carrefour des Entreprises). The "Crossroads Databank of Enterprises" is a unique repository that assigns business entities with a unique identification number replacing the social security number, its register of commerce number, its VAT number and the number granted by the national register of legal entities. Data is input a single time and all government entities share this database. The database track relevant identification details, such as the name, address, VAT number and business type. For third parties (including the administration), this number serves as the main identification number of the branch. It must therefore appear on all documents coming from the branch.
Thanks to the unique identification number, companies no longer have to deal with the formalities of registering with various government agencies, since these agencies now share information with the Crossroads Databank. This allows the entrepreneurs to communicate through one channel, and this via email and online forms. As of July 1, 2003 the Belgian government also created "One-Stop-Shops for Enterprises" (Guichets d’Entreprises). These are privately run non-profit offices whose mission is to be the one-stop-shop for all company procedures in Belgium. The business one-stop shops act as an intermediate between entrepreneurs and the government for all official issues. Businesses can fulfill in one location all the operations necessary in order to set up and register in Belgium. See: http://mineco.fgov.be for more information.
Although possible to set-up alone, CS Belgium can provide counseling and also maintains a list of American attorneys that can greatly facilitate set-up. Incorporation usually takes six weeks. Generally, no prior government authorization or business permit is needed to start a business, with the exception of a few very specific industries, such as:
When planning to open an office or set up a company in Belgium, U.S. companies should contact the Foreign Investment Offices of the Belgian region where they will locate. These offices will be able to provide support and advice matters of tax, employment, location and accounting. The national website, http://www.invest.Belgium.be, provides links to the three regions.
Franchising
The Franchise sector in Belgium is growing. There are roughly 170 official franchise systems in Belgium networked into nearly 3,500 franchise units. These businesses provide direct employment for about 30,000 people and represent an annual turnover of 2.4 billion dollars. Franchising started really developing in Belgium in the seventies. Mostly in the sectors of Do-It-Yourself (DIY), food retail, fast food, household appliances and consumer goods. Franchising represents 6% of retail in Belgium compared to the European and American average of 11% and 40% respectively. This makes it, along with Denmark and Finland one of the three smallest European countries in terms of franchise units per capita. Over the past 10 years the franchising of services has grown significantly. Services such as hotel, hairdressing and car maintenance have shown an important increase while sub-sectors such as building maintenance services, security, car-washing, travel and tourism, express delivery, personnel training and accounting services are expanding.
The Belgium Franchise Federation (BFF) forecasts important growth over the coming 3 years in both franchise units and franchise systems. By the end of the year 2007 the BFF estimates 11,000 new jobs will be created. This would include new franchise systems as well as the development of the existing ones. This growth will mainly affect the sectors of services and mostly the sub-sectors of DIY. However, the BFF states that the maintenance and possible development of a favorable economic and political environment is critical to this growth.
Thanks to its cosmopolitan culture, Belgium is an excellent test market for franchise systems. Belgium, a country of 11 million people, has three national languages. However, the market is quite difficult to penetrate and should be approached carefully and with determination. Below are some tips on approaching the Belgium market in a most effective and careful way:
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Any American franchiser interested in the Belgian Market should always contact the U.S. Commercial Service for advice and counseling before penetrating the market.
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It is also recommended for a franchisor to contact the Belgium Franchise Federation (B.F.F., ).www.fbf-bff.be
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American firms should not attempt to do business in Belgium without being fully counseled by a local legal expert.
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Finally, American franchisers should consider participating in the Belgian Franchise Fair held every year in February. For more information on this fair, please contact the Belgium Franchise Federation at info@fbf-bff.be.
For the moment, there is no specific legislation regulating franchising in Belgium. Franchise contracts are considered simple commercial agreements and are subjected to the applicable laws concerning contracts. However, this situation may change in the future, as a new law favorable to franchising may be adopted in 2006. American companies should always hire an attorney before negotiating a franchise agreement. There are numerous well qualified American and Belgian law firms in Belgium. For a list, please contact: stephane.croigny@mail.doc.gov.
Direct Marketing
Direct marketing is a steadily growing technique for selling directly to the consumer. Telephone calls at home, personalized letters and massive door-to-door letter-drops are all on the rise. However, there are signs that consumers are beginning to resist the onslaught. Belgium has several direct marketing organizations and is home to the European Direct Marketing Association. Belgium Direct Marketing Association www.bdma.be.
Joint Ventures & Licensing
In addition to the Commercial Service, there are numerous banks, professional organizations, service companies, and financial organizations that are prepared to advise and assist parties considering joint ventures and licensing. Belgium has a very sophisticated business community with many qualified, potential joint venture and licensing partners. To learn more about Commercial Service assistance in these areas, see: www.buyusa.gov/belgium.
Selling to the Government
Although the objective of EU directives has been to open government procurement to foreign companies, in practice it is still advisable to work with a locally established company that has the appropriate contacts and local market expertise. Purchases by national and regional government entities are subject to procurement by public tender. For the most current information regarding EU directives and statistics, please refer to http://www.europa.eu.int or the Country Commercial Guide for the Commercial Service U.S. Mission to the EU at www.buyusa.gov/europeanunion/ccg_chptr7.html.
Distribution & Sales Channels
Belgium has an excellent network of distributors who are often regarded by other Europeans, especially the French and Germans, as an advantageous source of goods. Belgium adheres to European Union legislation, and Belgian business continues to benefit from membership in the EU single market. However, the openness of the Belgian market should not mislead American companies into thinking that doing business in Belgium is the same as in the United States. The cultural, linguistic and economic differences present among various regions of Belgium strongly influence how business is conducted. A good distributor must be able to operate within all these environments. Belgian distributors tend to be small and specialized. They do not have ready access to inexpensive capital and are somewhat conservative when it comes to risk taking. Consequently, potential Belgian representatives will look to their suppliers for flexible credit terms. The U.S. Commercial Service Belgium can provide assistance locating an appropriate distributor, see: www.buyusa.gov/belgium. Belgium has also established legal protection for distributors against sudden or unjustifiable termination of their distribution agreement. This includes measures ensuring the right to receive reasonable notice of termination and compensation for loss of income as well as damages. In addition, the EU has passed similar legislation protecting agents. It is critical for American companies to seek legal assistance when concluding a representation agreement in Belgium. Please see below for specific requirements.
Selling Factors & Techniques
It is important to remember that Dutch, French, and German language divisions define consumer characteristics in the Belgian market. At the industrial level, where price/technical factors are usually paramount, the language issue is not particularly significant. At the consumer level, issues such as labeling and marketing strategies take on greater importance. In both cases, personal relationships between buyers and sellers can be influenced by the language factor, so it is important to carefully check claims by importers and distributors whether they cover the whole Belgian market.
Electronic Commerce
E-commerce is growing in Belgium. However consumers seem to be reluctant to fully embrace e-commerce. This may be due to Belgian lack of trust in online transactions and a lack of mail-order history in a relatively small country where retail shops and department stores are located within a 10-mile radius of 91% of the consumers. In 2003, over 2.2 million Belgians made an online purchase. E-commerce in Belgium is worth 500 million dollars. The average e-shopper spends $100 per year. Purchasing entertainment ticket (concerts, movies) and transportation passes (plane, train) represent 28% of online traffic. Overall Internet access is fairly high in Belgium approaching 60% penetration. 84% of the Internet connections in Belgium are broadband, either ADSL or Cable. The weak link is the PC sales among senior citizens; less than 50% of the 55-year-olds have access to a computer and the Internet and less than 20% of the 65-year-olds have access to these tools. According to the OECD, 50% of the content of Belgian‘s registered domains is in English, while the rest is equally divided between French and Dutch. However, 24% of Belgian companies use an extranet with customers and 6% allow online transactions. Credit card purchases are becoming more widely accepted but there are still some security concerns. M-commerce remains very weak in Belgium. Twenty percent of Belgians web surfers find it difficult to buy online due to bad service design. There is therefore a market for products that increase user-friendliness of online purchases.
Trade Promotion & Advertising
Commercial Service Belgium's Featured U.S. Exporters (FUSE), offers U.S. companies a standardized online listing for a year on its website. See: http://www.buyusa.gov/Belgium/en/fuse.html. FUSE provides U.S. companies targeted exposure and can help find Belgium business partners in a cost-effective and efficient manner. The American Chamber of Commerce offers advertising in its magazine, which reaches 1,000 members. Rates can be obtained at Tel: 32/2 513.67.70, Fax: 32/2 513.35.90, or Website: http://www.amcham.be.
Pricing
Belgium is a highly competitive market and so the Belgian importer is looking for the best quality at the lowest price. American products and technology are highly regarded, but they do not command higher prices than competitive products. One must consider that, while Belgium is an important market in its own right, it is also the country of entry for many imports from many countries with destinations throughout Europe. This environment gives Belgian buyers access to a wide range of products at competitive prices in their own market. U.S. companies are advised to quote prices on Cost Insurance Freight (CIF) basis, surface or airfreight. This is standard practice for most exporters since it facilitates price comparison between EU suppliers. Import duties are usually quoted on a delivered
warehouse basis.
Sales Service & Customer Support
Distribution centers are established as subsidiaries or branches of foreign companies, and they can aid a company or group of companies using the center in a variety of ways. Their services may include: the purchase of raw materials for members of the company group; storage, management, and packaging of raw materials; the sale, transport and delivery of these raw materials; and the handling of certain goods purchased for resale. In addition to expanding the activities that can be performed at distribution centers, the Belgian government has passed legislation allowing these activities to be taxed at a favorable cost-plus rate.
Service centers are external and independent entities set up by a multinational company with the purpose of carrying out specific activities on behalf of the companies of the group. Just a few examples of the available services include extensive customer support, such as call centers for the follow-up and support of the sale of goods; registration and confirmation of orders; data processing; and customer information. Qualifying service centers must be established as resident Belgian companies. In contrast, coordination centers may be established as branches of a foreign company. They are designed to permit businesses from an international group of affiliated companies to receive exemptions from a number of taxes.
Protecting Your Intellectual Property
Intellectual property rights (IPR) granted in the United States afford no protection in Belgium. An American company interested in protecting a U.S. patent, trademark or copyright must re-file with local, European or other competent authorities. See: http://mineco.fgov.be/homepull_en.htm.
Due Diligence
To assist companies to conduct due diligence prior to entering into a financial or other agreement, the Commercial Service recommends that the U.S. firm contact a company that offers commercial information reports. CS Belgium also offers a service known as the International Company Profile report. For more information contact us at brussels.office.box@mail.doc.gov.
