Cross-Border Barriers Holding Back EU E-commerce

by Ulrika Lomas, Tax-News.com, Brussels

09 March 2009

A new report on 'Barriers to E-commerce', presented by EU Consumer Commissioner Meglena Kuneva shows that online shopping is increasingly popular in the EU, but warns that barriers to cross border trade are holding back its development.

The report published on March 5 presents a detailed analysis of current trends in e-commerce across the EU – including per country, most purchased items and obstacles for consumers and business online. Between 2006 and 2008 the proportion of EU consumers buying at least one item over the Internet increased from 27% to 33%. These average figures mask the huge popularity of online shopping in countries like UK, France and Germany where more than 50% of Internet users have made online purchases in the last year. In the Nordic countries (Denmark, Sweden, Norway, Finland and Iceland) the proportion of Internet users who bought products and services online was 91% in 2008. Countries like Italy and Spain are also fast growing markets. Against this pattern of fast growing national markets, the extent of online purchasing cross border remains small, at only 7% in 2008 (compared to 6% in 2006). The report warns that numerous obstacles - linguistic, practical and regulatory as well as important trust issues – are holding back the development of online shopping in the EU.

Commissioner Kuneva said "Consumers have everything to gain from the Internet. It expands the size of the market they operate in and gives them access to more providers and more choice. It makes it possible to compare products, suppliers and prices on an unprecedented scale. Internet use for retail shopping is destined to become pervasive. Already 150 million consumers shop online, although only 30 million shop online cross border. We must see to it that adoption of the Internet platform will not be unnecessarily slowed down by a failure to remove important regulatory barriers or to address important trust issues for consumers."

The reports finds:

Firstly, that E-commerce is doing well, consumers are generally satisfied with online shopping. For particularly frequently bought groups of products such as IT product as well as entertainment and leisure goods, consumer satisfaction with internet shopping is on average higher than for retailing in general. Consumers are particularly satisfied when it comes to comparing prices, the wider range of offers, the affordability of products and the choice of suppliers. Consumers are less enthusiastic about issues such as clear product information, advertising, the protection of privacy, issues of trust and the possibility of returning goods.

Secondly, it notes that there is a strong potential for cross border trade in online commerce; one third of EU citizens would consider buying a product or a service from another Member State via the Internet because it is cheaper or better. One third of EU consumers say they are willing to purchase goods and services in another language. In a multicultural Europe, there is a demand for more choice and a wider variety of offers than local stores or global brands can supply.

The report however warns that the potential of cross border trade is failing to materialise. From 2006 to 2008, the share of online shoppers in the EU has increased from 27% to 33% of consumers while cross-border e-commerce remained stable. Only 7% of consumers currently buy cross-border online. And the gap is widening not narrowing.

According to the report, the main barriers preventing cross border trades growth are:

• Geographical segmentation: Most traders now have a website that is visible to consumers everywhere. And yet most retailers still seem to operate on the assumption that the internal market is partitioned along national lines. The range of possibilities is enormous, yet in practice, consumers end up being refused sales or redirected back to their country of origin.
• Language barriers: These remain an issue for most traders and consumers, although we should be careful not to overstate their importance. For example, 60% of retailers are already prepared to carry out transactions in more than one language. Problems in terms of the logistics relating to the inter-operability of postal and payment systems, and access issues such as broadband penetration.
• There are regulatory barriers that appear increasingly unjustified to consumers and business; these include for example consumer law, VAT rules, selective distribution law, intellectual property protection, the national transposition of EU legislation on waste disposal for example.
• Barriers undermining consumer confidence – in particular reluctance linked to issues of payments, delivery, complaints, application of guarantees, requests for refunds (after sales support), as well as privacy issues. Difficulties are perceived to be aggravated in cross border transactions.

In the view to improving cross-border E-commerce in September 2009, Commissioner Kuneva will present the results of independent "mystery shopping" to identify how and where consumers are being prevented from shopping online across the EU, which will be presented in a final report to the Commission in Autumn 2009.

Recommended