A European Commission report says online trade provides more transparency, price competition and means for manufacturers to sell directly to consumers. On the other hand it also creates more trade obstructions and the disadvantages of free-riding.
50 % tracks competition’s pricing
Over the past few months, the Commission surveyed nearly 1,800 people from a whole range of markets (clothing, shoes, consumer electronics, toys, books, cosmetics, DIY material and sporting equipment) about the consequences of online trade. The Commission wanted to see whether its goal of a unified digital market, designed to create easier access to goods and services, is coming to fruition.
The preliminary report’s first conclusion is that eCommerce, unsurprisingly, leads to increased transparency and competition: 53 % says they often check competitors’ pricing and out of that group, 70 % uses software to automatically scan the competitor’s information.
Online trade also allows manufacturers to sell directly to the consumer: 64 % of them opened their own web shop in the past 10 years, but this also provides additional competition for retailers as they now have to face manufacturers as well. A lot of manufacturers active in the cosmetics and health care industry have their own web shop.
Manufacturers create restrictions
eCommerce has also prompted companies to become defensive: some manufacturers have excluded online companies through selective distribution. 20 % of all manufacturers in the survey said they started using the method in the past 10 years, in an attempt to get a a higher quality distribution and a consistent brand image. Selective distribution is most commonplace in Germany, where 32 % retailers place such restrictions, compared to 17 % in the Netherlands and 10 % in Belgium.
Other restrictions are that retailers are contractually forbidden to sell certain items abroad, with 11 % of retailers surveyed facing such contracts. The exact same amount of retailers say they also face limitations about what they can offer on their own website.
Price restrictions are also a popular measure: 42 % of European retailers needs to deal with these, while 80 % of manufacturers say they advise distributors to use particular sell-through prices. Price comparison websites are also under increased pressure, because more than 10 % of retailers are not allowed to communicate prices with these websites. Germany (14 %) is the strictest in this sense, followed by Austria and the Netherlands (both (13 %).
An increasing problem is free-riding, where consumers hop from one channel to another, getting information at one location and buying the item at another. Some sellers therefore has to spend to inform the customer, while others reap the benefits.
