Having a sales force that speaks Czech is essential to success in the market. Product literature should ideally be in Czech. Depending on the market, a dual Czech/English brochure can help to effectively reach both Czech firms as well as the many international firms located in Prague with non-Czech speaking decision makers. Metric measurements should be used in the materials. In addition, product labels on consumer items must be in Czech. A local partner/distributor can assist with this process.
Companies doing business in the Czech Republic should have a website in Czech and English. Depending on the consumer, use of a third language may help reach a broader market. Having a website gives legitimacy to a company’s presence in the market and is essential in attracting potential customers.
Trade Promotion & Advertising
Although choosing and supporting a suitable agent is the most important factor in achieving success in the market, companies can further stimulate sales by working with Czech partners on effective marketing campaigns. Foreign firms most often pay for in-country advertising, while their local distributors provide facilities, warehousing, and equipment. A good agent or distributor should be able to help craft an appropriate strategy. The Czech market is small, and market entry is relatively low-cost; consequently, expensive marketing campaigns are probably not necessary, unless promoting a consumer product.
With a history dating back to the Middle Ages, trade shows are a European way of life. Both Prague and Brno host several regional shows. A small booth is a good and relatively low-cost way to meet customers in the Czech Republic and neighboring countries. We recommend working with a distributor to identify which shows are best for the product and then agreeing how costs can be shared with the partner, who may be representing several other products. It is also beneficial to have a member of the U.S. company’s sales staff at the stand with the distributor to ensure that the product is being properly represented at the exhibition.
The Czech Republic is a small market and each sector has a few key decision makers and opinion leaders. One way to quickly reach these leaders is to hold an innovative in-country promotion, including a technical seminar or small reception at an industry trade show. Media promotions and press conferences related to events such as launching new lines or opening new offices are effective. In-store promotions are utilized extensively in the retail sector. The U.S. Commercial Service in Prague can help organize such events to target key decision makers.
Czech consumers and firms are very price-sensitive and the market is dominated by cost-conscious consumers. Although in 2019, Prague was ranked as the EU’s sixth wealthiest region with a regional GDP per capita in Purchase Power Standard (PPS) accounting for 192 percent of the EU average (+5 percentage points higher year-on-year). The Czech Republic overall, however, has a GDP per capita of 27,500 in PPS and slightly below (91%) the EU average of 30,200. Retailers often comment they are unable to move goods that are not on sale. There has been a subtle shift in the consumer market towards prestigious name brands over low-cost options for certain goods.
From a pricing perspective, U.S. firms face stiff competition from local and other European firms which have lower transport costs and no import duties. Low cost imports from Asia are also preveland in the market. Many larger U.S. firms have improved sales by doing some low-cost assembly or value-added production in the Czech Republic or other European markets.
Czech VAT law is harmonized with EU VAT law and is levied on goods and services from other EU countries and from third countries. The VAT rate is currently 21 percent on most manufactured goods and services, and 15 percent on selected goods, such as food products, hotel accommodation, public transportation, newspapers and periodicals, and medical and dental care, among other items. A reduced VAT rate of 10 percent applies to foodstuffs classified as essential for child nutrition, pharmaceuticals, and books. VAT is based on the imported price plus applicable duties and is normally paid by the distributor or the importing company. A firm is obligated to register for Czech VAT once it starts to provide taxable good and services in the Czech Republic or establishes a permanent operation.
Sales Service/Customer Support
Although not yet at the level of Western European standards, customer service has come a long way since the market opened up almost 30 years ago. Attitudes are changing, especially in government services and state-owned businesses. Foreign investment and foreign franchises have had a positive impact on improving customer service.
The industrial sector has become more developed as the Czechs have made great strides in becoming part of the international marketplace. U.S. companies should demonstrate their after-sales service capabilities to potential end users. Some industrial users have the impression that European suppliers offer superior after-sales support, and the presence of a well-trained, well-supported local agent who can service equipment is important in both closing a sale and maintaining a client base.
EU institutions have launched a number of initiatives aimed at harmonizing national legislation due to discrepancies among member states in product labeling, language use, legal guarantees, and liabilities, the redress of which inevitably frustrates cross-border shoppers. Suppliers within and outside the EU should be aware of existing and upcoming legislation affecting sales, service, and customer support.