Spain - Commercial Guide
Distribution & Sales Channels

Discusses the distribution network within the country from how products enter to final destination, including reliability and condition of distribution mechanisms, major distribution centers, ports, etc.

Last published date: 2020-08-07

Overview

Sales channels to consumers have developed significantly in the last few years. While the traditional method of wholesalers selling directly to small shops continues, online sales and shopping malls are growing rapidly throughout the country.

Madrid and Barcelona are the two major hubs for the regional market. The majority of agents, distributors, foreign subsidiaries, and foreign trade related entities are present in both cities. The section “Regions” in the website “Invest in Spain” includes details on each Spanish region, including main sectors of opportunity and investment incentives.  Nonetheless, given the ongoing importance of the 17 autonomous communities, greater importance is being attached to distributors being located in the respective region.  In the case of Catalonia, products for distribution in the region need to be labeled in the language of the region, i.e. Catalan.

Price is a very important factor in the Spanish, as in the Western European market. Although EU member states’ exports to Spain have lower tariffs than those imposed on U.S. goods because of the EU’s common External Tariff, the dollar-euro exchange rate and possible lower production costs keep U.S. companies competitive with EU exports.

ExIm Bank can now play a more active role in financing exports of U.S. products and services by financing Spanish buyers through loan guarantees.

Using an Agent to Sell US Products and Services

The legislation governing business activities in Spain is similar to that of other OECD (Organization of Economic Co-Operation and Development) countries.

The most common forms of representation agreements in Spain are:

Distribution Agreements:

Commercial Concessions or Exclusive Distribution Agreements: The supplier agrees to provide its products to a number of distributors within a specific territory and agrees not to sell those products itself within the territory of the exclusive distributor(s).

Sole Distribution Agreement: Includes the provisions in the above-mentioned Exclusive Distributor Agreement and reserves the right of the distributor to supply certain products to users in the territory of concession.

Authorized distribution agreements under the selective distribution system: Distributors are selected according to their ability to handle technically complex products and to retain a certain image or brand name.

Agency Agreements:

The agent promotes and sells the products as if he or she is the principal supplier; informs the principal supplier of all matters relating to the agency.

Commission Agency Agreements:

Involve occasional engagements; agent facilitates the conclusion of an agreement but does not ultimately represent either party.

Models of distribution contracts and clauses are available on-line from

the bookstore of the International Chamber of Commerce

It is recommended that contracts be reviewed by legal counsel prior to signature.

EU standards provide protection for self-employed commercial agents, changes in clauses, competition in the internal market, and payment delays. Companies with grievances regarding inefficient management can contact the European Ombudsman, which will investigate cases.

Establishing an Office

There are two options for businesses interested in establishing an office in Spain: incorporating a subsidiary or establishing a branch. Both options have full legal status and their profits are taxable in Spain. It is recommended that companies obtain legal advice to aid in the process.

A subsidiary can be one of the following: a corporation, a public limited-liability company (Sociedad Anónima, SA) or a private limited company (Sociedad de Responsabilidad Limitada, SL or SRL).

The structure of the SA is better suited for larger operations and the SL for smaller.

Corporations (S.A.) and limited liability companies (S.L.) are similar in that the shareholders are not liable for the company's debts and are limited to their contribution. The main differences between these entities are:

  • Capital (Euros 60,000/USD 67,200 minimum versus Euros 3,000/USD 3,360);
  • The number of founding members (three versus two);
  • Flexibility permitted at general meetings, transfer of shares and management of an S.L.

The steps to legally establish a branch are:

  • Register company name:  Applications are made at the Central Mercantile Registry. The certification is valid for two months.
  • Declare the investment to the Spanish Ministry of Economy and Competitiveness.
  • Notarize public deed of incorporation.
  • Pay asset transfer tax and legal proceedings document tax: These taxes are for new incorporations (roughly one percent of capital stock).
  • Request a tax identification number (locally called NIF – Número de Identificación Fiscal): This must be done within 30 working days from the signing of the public deed. The NIF must be used within six months of application.
  • Register the company in the Mercantile Registry: This is done at the corporate registry corresponding to the company’s official address. On average, it takes two months to complete registration. The Spanish Government and local chambers of commerce have created the “Ventanilla Unica” (One Stop Shop) to simplify the process of setting up a business in Spain.
  • The Spanish Ministry of Economy and Competitiveness website, Invest in Spain, has specific chapters   addressing “Establishing a business in Spain” and “Company and Commercial Law”.  Information in English on how to open a business, or establish an office is available at:  Invest in Spain, Setting up a Business.

Franchising

The franchise sector is an important segment of the Spanish economy.  With 1,381 networks and an annual turnover of nearly USD 3 billion in 2019, the sector continues to offer good potential for U.S. companies.   

When drawing up contracts, franchise companies - whether Spanish, foreign, or the master franchisee – must register with a special administrative Franchisors Registry and need to meet the requirements of the Disclosure of Pre-Contractual Information. The intended franchisee must receive all the required information in writing at least 30 days prior to signing a franchising contract or a pre-contract, or prior to any payment to the franchisor. All new contracts should comply with Spanish and EU legislation.  Current contracts should also be reviewed whenever possible. 

Franchise Disclosure Rules in Spain 

According to current law, the most important considerations are: 

Each franchisor must disclose how long he/she has been managing the franchised business in question prior to disclosure. 

Master franchisees are obliged to annex to their disclosure document a copy of his/her Master Franchise Agreement. 

Foreign companies must translate all legal documents into Spanish and register them together with the original language versions. 

Additionally, each franchisor may voluntarily register the following information: 

The company's quality certifications. 

Any mediation or ADR (Alternative Dispute Resolution) systems in use in the franchise network. 

Whether the franchisor observes a Code of Conduct. 

Whether the franchisor participates in the consumers' arbitration system or any other system to settle consumer complaints. Both sides must decide in which country (ies) the arbitration method will apply, if needed. 

Given the size of the franchise market in Spain and the important presence of Spanish franchise concepts worldwide, the Spanish Franchise Association (Asociación Española  de  Franquiciadores – AEF) has an agreement with the World Intellectual Property Organization (WIPO) to promote arbitration in master franchise agreements.  AEF collaborates in the verification that potential arbitrators have the appropriate ADR WIPO training and experience to be nominated as WIPO arbitrators. 

Legislation regulating franchise matters in Spain includes: 

  • Article 62, of Law 7/1996, of 15th January, of Retail Sector Management. 
  • Royal Decree-Law 201/2010, of 26th February, regulating the exercise of commercial activity under a franchise regime and the communication of data to the Registry of Franchisors. 
  • Law14/2013 of 27th September, Support for Entrepreneurs. 
  • Law 20/2013 of 9th December, Warranty of Market Unity. 
  • When operating In Spain, franchisors need to comply with the European Union General Data Protection Regulation (GDPR) which became effective on May 25, 2018. The main points to consider are: 
  • Requires companies including Franchisors & Franchisees to protect personal data of EU residents. 
  • Applies to all companies that process personal data of EU residents (“Covered Entities”), including personal data of EU residents collected during their visits to other countries. 
  • “Data protection officers” must be hired by each Covered Entity. 

Individuals must give written consent to use their personal data, and they may withdraw their consent, easily, at any time. Personal data must be readily provided to customers if requested by them at no cost, within 30 days. 

Companies must notify their “Data Controllers” of changes in customers’ consent.  

Notices of data breaches must be sent by Data Controllers no later than 72 hours after breach occurs. 

EU Data Directive restricts sharing personal data outside of EU unless company adheres to certain international agreements, e.g., the EU-US Privacy Shield. 

Fines and penalties of up to the greater of €20 million or 4% of a company’s global annual sales are permitted for violations. 

Class action lawsuits and other judicial relief are also available. 

The most recent change in Spain, that benefits U.S. franchisors, is that effective December 7, 2018 the Franchise Registration Requirements have been cancelled by Royal Decree 20/ Act 20/2018. It deletes certain obligations for franchisors (local or foreign) where they are no longer required to register their franchise concepts with the Registry of Franchisors. In additions, franchisors do not have to provide annual reports updating its information with the Registry. The sanctions for such breaches were also deleted from the law. 

Companies are advised to have all new contracts drawn up in compliance with Spanish and EU legislation, and to have current contracts reviewed whenever possible.   

The CS Spain advises all U.S. companies to consult with a local legal office to ensure this compliance. 

Snapshot 

The Spanish franchising system is made up of a total of 1,381 brands as of December 2019, five more than in 2018, of which 1,132 are of Spanish origin (81.9%) and the remaining 249 (18.1%) come from a total of 26 countries, most notably France (56 brands), the United States (46), Italy (44), the United Kingdom (16) and Germany and Portugal (14).  

The market share of brands coming from the United States has increased from 43 to 46 between 2018 and 2019, surpassing Italy for the first time since CS Spain started to focus in franchising. This is a direct result of the work done in recent years to increase the U.S. presence via targeted and customized programs.   

Of these 1,381 franchises, the sub-sector with the most stores is “Fashion”, with a total of 242, followed by “Hospitality/Food/Beverage”, with 207 chains and “Beauty/Wellbeing”, with 113 networks.  The major trade shows in Madrid and New York are promoted to U.S. and Spanish audiences.  

Detailed information on the sector is available via the Spanish Franchisors Association annual report. 

Direct Marketing

Direct marketing in general continues to be an important promotional activity in Spain despite the steady progress of e-commerce. Spain is now the fourth largest B2C market in the EU, behind UK, Germany and France. According to INFOADEX (leading source of advertising sector intelligence), digital marketing now accounts for 38 percent of traditional marketing, increasing by 8.8 percent to USD 2.6 billion in 2019, and having surpassed television which dropped by 5.8 percent to USD 2.2 billion in the same year. Investment in non-traditional marketing in 2019 reflected a slowdown for the first time in several years, reaching USD 7.8 billion, a decrease of 1 percent over the previous year. Personalized marketing, decreased by 9.7 percent to USD 2.4 billion; while other segments remained positive but with less growth than in previous years, i.e. on-site advertising, up by 1.4 percent to USD 1.84 billion and   telemarketing increased by 1 percent to USD 1.44 billion.  

The wide range of EU legislation covering the direct marketing sector is applicable in Spain.  Companies are required to provide full and transparent information to consumers prior to the purchase, as well as detailed information on the procedures followed to collect and use customer data.  Compliance requirements are stiffest for marketing and sales to private consumers.

The EU has a single rulebook, titled “the Consumer Rights Directive”.  It covers important areas of Distance Selling to Consumers, Doorstep Selling, Financial Services, and E-Commerce. Consumers have the right to turn to quality alternative dispute resolution entities for all types of contractual disputes including purchases made online or offline, domestically or across borders.  The platform to handle online dispute resolutions became operational at the end of 2015.

Trust is an important competitive factor in this market. The Spanish E-Commerce and Direct Marketing Association (Asociación Española de la Economía Digital) places importance on generating greater consumer confidence and requires members to follow a number of ethical codes, including a code of self-regulatory rules for electronic advertising.

As indicated in Chapter 1, new EU legislation, the General Data Protection Regulation (GDPR) covering data privacy came into effect in May 2018, replacing the previous data protection Directive 1995/46.  The GDPR applies in all member-states of the EU, including Spain.  This horizontal privacy legislation applies across sectors and to companies of all sizes and will continue to gain importance in all areas of marketing.

Distance Selling of Financial Services

Financial services are covered by a separate directive (2002/65/EC), designed to ensure that consumers are appropriately protected in transactions where consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the Directive establishes criteria for the presentation of contract information.

Joint Ventures and Licensing of Professional Services

License contracts in Spain may include industrial property rights (patents, utility models, and trademarks), intellectual property rights (rights of use for literary, scientific, artistic works, or software), know-how, or other uses of technology. The Spanish system allows for flexibility when negotiating the terms and conditions of the agreement. Common clauses include:

  • Exclusivity clauses, including exclusive purchase obligations.
  • Measures to limit a licensor's commercial activity.
  • Confidentiality and non-compete obligations.
  • Obligations relating to improvements and innovations (this includes updating the rights granted to the licensee and communicating to the licensor innovations developed by the licensee.
  • Restitutions, in case of breach of contract.
  • U.S. companies can also enter the Spanish market through joint ventures

Express Delivery

Major global organizations such as DHL, FedEx, UPS, ARAMEX and others operate in Spain and offer express delivery services. Transit times vary but for packages shipped from the U.S. to Spain, the average time is 2-3 days, not including the customs clearance process. Express service points are serviced at several locations around the country.

Customs procedures and requirements are standard and can be found on the Spanish Customs website.

Due Diligence

Product safety testing and certification is mandatory for the EU market. U.S. manufacturers and sellers of goods have to perform due diligence (act with a certain standard of care) in accordance with mandatory EU legislation prior to exporting.

CS Spain provides International Company Profiles and input from a qualified local credit-reporting agency. Commercial information and financial reporting are also available from the private sector or local chambers of commerce.

A complete list of credit reporting agencies may be obtained from CS Spain.  Two of the main entities include:

Informa 

Axesor