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Sep 30, 2009 15:16 EEST
BELGRADE (Serbia)/SKOPJE (Macedonia), September 30 (SeeNews) – The personal services business is slowly emerging in Serbia as the the economy and the franchising sector grow, while in neighbouring Macedonia its development lags behind due to the low standard of living and insufficient disposable income of the population.
“I would agree that as Serbia continues to develop economically, there will be more demand for such services,” Cameron Werker, senior commercial officer at the U.S. Embassy in Belgrade, told SeeNews.
In Macedonia, the impediments to the growth of the sector include the lack of a personal services culture and the adverse impact of the global crisis on the country's emerging economy.
“There is a potential for this sector to develop, but people should realize they are in need of such services. When we launched the business, we were ready to organize all types of events, but as time went on, we realized there is a bigger demand for organization of corporate rather than personal events,” said Suzana Stevanovic, co-owner of Skopje-based agency for event organizing and planning Momenti.
According to Momenti's co-owner Slavica Ilievska it needs time and bigger awareness among people for this business to develop. People should accept the fact that someone else will take care of their duties, thus allowing them more free time, Ilievska said.
The personal services sector covers all of the services which contribute to improved living conditions of people, either in their own home or at their workplace.
The sophistication and development of the services industry is generally directly proportional to per-capita income, Werker said.
Serbia and Macedonia, both of which once belonged to the now defunct Socialist Yugoslav Federation, are now independent countries where the population displays comparable personal incomes and similar attitudes to personal services.
“That is, as per capita income increases, citizens have more disposable income that they spend on services that improve their quality of life,” Werker explained, adding that a big exception to this general rule is the cost of labour.
“In countries with very low labour costs, a wider array of personal services are inherently available. I would not include Serbia in the category of countries with very low labor costs. As a result, it is fair to say that the personal services sector in Serbia is not as developed as in the United States or Western countries,” Werker elaborated.
Serbs spend about 58% of their monthly income on basic items such as food, while a further 15% they spend on paying their utility bills, a recent study by Belgrade-based marketing research institute IZIT indicated.
Serbia’s per capita gross domestic product (GDP) rose to $6,685 in 2007 from $2,112 (3,087 euro) in 2002, according to International Monetary Fund (IMF) data.
Serbia posted strong economic growth before global crisis struck it last year. Serbia’s economy slowed its growth to a real 5.4% in 2008 from 6.9% in 2007 before contracting by a real 3.5% on the year in the first quarter of 2009. The country's economy will shrink by 4.0% this year before growing by 1.5% next year, the IMF said earlier this month.
The average monthly salary in Serbia is about 32,000 dinars, equivalent to some 350 euro, while the country’s unemployment rate of 15% is likely to remain unchanged throughout 2009, the country's Economy Minister Mladjan Dinkic has said.
“In Macedonia, the sector of household services is not very developed, that is why we closed down our agency, specialized for such services three years ago,” said Sladjana Spirova, now the owner of Skopje-based agency for part-time employment Partner.
There had been no huge interest in housekeeping or in-house older people's care, she said without elaborating.
The director of Skopje-based Kontext au pair agency Aleksandra Bozinovska said that this kind of service is not advanced in Macedonia, so they are sending most babysitters abroad, to Germany and the U.S. for example.
There is no professionalism in this business, she said.
Asked whether cheap labour in Macedonia is a chance for future growth of household services, she replied: “I don’t see it like that."
“Why a family earning some 50,000-60,000 denars per month can not spend 10,000 denars for babysitting but offers 5,000-6,000 denars instead?,” Bozinovska said.
In Macedonia, where per capita income figures are comparable with those in Serbia, low disposable income stalls the development of the personal services sector. The average net salary in Macedonia was 19,763 denars ($467/321 euro) in July while the official unemployment rate in the country was 32.7% in the first quarter of 2009, of double that of Serbia. The value of the basket of food and beverages for a household of four in Macedonia was 11,825 denars in August, calculated on the basis of retail prices.
Macedonia, just like its northern neighbour, posted strong economic growth in the years before the crisis hit and ended 2008 with a 5.0% rise in GDP. The country's economy contracted by nominal 1.4% year-on-year in the second quarter of 2009, compared to a 6.7% growth a year earlier, according to preliminary data of the country's Statistics Office.
Several friends in their mid-twenties were watching a soccer game in a Belgrade apartment when they decided to order some food.
“We wanted to order burgers and juices and realized there was no one offering this type of service,” co-founder and owner of Errand Boy, a service agency that buys and brings items to your door, Dragan Stancic, told SeeNews.
“No one was willing to sell you food below a certain price and/or go to the store for you. There was no takeout place that was willing to bring you products from various vendors and there was an endless fight going on between us, what we were going to order, burgers or pizza…
“That was how we got the idea to do this,” said Stancic.
Despite the crisis, owners say, Errand Boy has doubled its monthly turnover since January, when it started operations, and has encouraged the launching of similar companies across Belgrade, suggesting that a market for personal services, albeit a small one, does exist in the capital of Serbia.
No such service exists yet in Macedonia, while in Serbia Errand Boy and its spin-offs are limited to Belgrade.
Errand Boy, which started operation on January 1, charges 200 dinars for a service per one fiscal bill, that is per one store order. About half of its customers belong to the higher income bracket, while 30% are middle class. The remaining 20% of customers come from the lower class.
Errand Boy had an idea to open franchises in Valjevo (western Serbia), Kragujevac (central Serbia) and Novi Sad (the administrative centre of the Vojvodina province in the north), but there was absolutely no market for this type of service there, co-founder and owner Uros Stancic said.
“A lot of people in these towns work for 5,000 or 6,000 dinars a month. Major industries have halted production across Serbia and many towns are depressed so people can’t afford our service. We had a pilot project in Valjevo, testing the market there earlier this year. We printed flyers but people we recruited there gave up. We even considered cutting our fee. There was simply no interest,” Uros Stancic said.
An excellent way to meet increasing demand for personal services is to use the franchising concept, Werker said.
“Franchising encourages entrepreneurship, which is typically at the root of personal services operations,” Werker said, adding that personal service professionals, such as hair stylists and delivery services, are less likely to be of interest to foreign investors and more apt to develop through local entrepreneurship and franchising.
But expansion of franchising in Serbia faces setbacks due to lack of know-how and widespread misconceptions about start-up and operating costs. Even though franchising is on the rise in Serbia, the Balkan country is home to only about 25 foreign franchise operations at present, including fast-food restaurants McDonald’s, KFC and Pizza Hut, realtors Century 21 and RE/Max, the Fornetti bakeries and office supply chain Office 1 Superstore.
In Macedonia, the promising franchising industry faces even bigger stumbling blocks mainly due to the country’s underdeveloped infrastructure and the lack of big retail centres. The exact number of franchisers in Macedonia is unknown.
LOCAL VENDORS AND THE CRISIS
Several hairstylists and taxi drivers polled by SeeNews in downtown Belgrade saw their revenue drop by between 20% and 50% since global crisis knocked at their doors about a year ago. Sales of local take-out restaurant Signora, which offers traditional Serbian food, reported a drop in sales of about 15%.
“Local minds needs to change towards relying on the kind of services we provide,” Signora founder and owner Aleksandar Tanaskovic told SeeNews, but added that the mushrooming of similar take-out places in Belgrade over the past few years is a strong indicator that the services sector has potential for growth.
In Macedonia, in contrast, the biggest problem affecting personal service professionals does not appear to be related to the global crisis but to the shallowness of the local market.
For Skopje area taxi drivers, the biggest problem are their non-licensed competitors, who are wreaking havoc in street traffic. Only 2,700 licensed taxi drivers compete with 12,000-13,000 who work without a licence, a Skopje taxi driver said. Besides, the number of passengers has dropped due to the crisis, he added.
Skopje hairstylist Ruse Kralev said that the global financial turmoil has not affected his business much but complained of competitors offering cheaper services.
“This makes it harder to find good stuff,” Kralev, owner of beauty parlour Still, told SeeNews.
Despite the crisis he has kept his clients, who he says belong to the middle class. Kralev, a winner of the first prize in the international contest for women's hair fashion in Sofia, Bulgaria in 2007, works under the Intercoiffure franchise which he hopes will bring him more high-class clients. Operating under a franchise umbrella makes him a rare bird locally. France-based Intercoiffure is an international organization of high-quality hairdressing, with some 3,000 salons in 50 countries worldwide.
Kralev says his services are pricier than those of other local hairstylists, given his training in Amsterdam and Paris, but they are still lower than elsewhere in Southeastern Europe.
“My prices are still low compared, for example, to those in Bulgaria where a good haircut costs a minimum 20-25 euro,” he said.
(1 euro = 93.0114 Serbian dinars or 61.5026 Macedonian denars)
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