Online commerce is established and here to stay. In more and more countries consumers want to search for and purchase products on the Internet. Everyone involved is happy about this new distribution channel. Only manufacturers and brands are not so happy. For many manufacturers, it seems to be an annoying version of commerce – and remains so. Deuter, Asics, Scout and, until a year ago, sports giant Adidas too, tried to restrict online commerce in an illegal manner. For orders by unwanted merchants, containers filled with the desired goods fell off the ship in Rotterdam. The goods that honest partners were able to get within a short time. The industry claims that the goods were not presented appropriately, the advice given was not sufficient, and many online retailers even sold fakes. That is not the case, as now is also known to the courts. Various tribunals, higher regional courts and district courts across Germany have decided in favour of e-commerce.
Moreover, cartel investigators from the German and French cartel authorities have stood up for online commerce. Strenuous investigations against Adidas and Asics have led to partial success and Adidas, at least, is now managing quite well without merchant restrictions. But since the problem is still virulent in many areas and sectors, it is an issue that we at the Federal Association for Online Trade (BVOH, www.bvoh.de) are greatly focused on. The consequences of restrictions, especially for small and medium-sized distributors, are often devastating. Our recent study by Initiative Choice in eCommerce (www.choice-in-ecommerce.org) shows that 51% of traders across Europe are threatened by sometimes massive sales losses, and that even 3% are at risk of bankruptcy. All the findings of the study can be found here: www.ecommerce-in-danger.eu
But that will not prevent the triumphant march of e-commerce. A good 20 years after the launch of the Internet, the Sleeping Beauty of online retail has awakened. This can be seen most recently in the fact that politicians are now actively engaged in the framework for online trading. To date it has seemed as though online commerce, the little brother of bricks-and-mortar commerce, was rather ridiculed or not taken seriously.
Now would be the right time to think about the status quo in online trading. Where are we, anyway? I see commerce undergoing multi-phase development:
It all started with the fact that commerce, a system that has existed for centuries, had to welcome a newcomer: e-commerce. This starts us off sociologically in the first phase, the phase of PERCEPTION. After 20 years, one can assume that this phase is almost complete. In this phase, online trading was still observed and ridiculed – and not taken seriously. We know the saying that the Internet will pass by someday – it was not just Bill Gates who was totally wrong. In terms of accepting the Internet, customers seem to have responded more quickly than many traders – how else would the triumph of Amazon and eBay be explained, or the more than 300 different successful online marketplaces in Europe. (www.marketplaces.digital)
The second phase is characterised by the COMPETITION between traditional and online trading. Although for me online trading has always been a part of commerce, many bricks-and-mortar traders view it only as an enemy, to be feared and fought. This is also a place to look for the cause of the restrictions imposed by the industry. Of course there is no price fixing in Europe – apart from exceptions (booksellers in Germany). Each ordinary entrepreneur can calculate his or her prices with his or her own profit margin. Individual mixed costings can then lead to results that sometimes differ considerably from the “suggested retail price” of the manufacturer. To the entrepreneurial freedom of the businessman and the luck of the consumer, because exactly this competition is what makes commerce diverse. However, at this stage some bricks-and-mortar traders have already begun to build a second pillar in terms of their own online shops. Looking for new distribution channels and opening up new markets has been the duty of a good businessman for centuries. And if my store transactions do not bring in the revenue I was able to achieve a few years ago, then, as a resourceful entrepreneur, I will just find another way to bring the goods to the woman or the man. Now that the customer has run after, and threatened, the merchant for many years, as far as the trade temple just outside the city, the trader must now see where the client is running to. And as many roads lead directly to the Internet, the dealer must or should respond appropriately. Whether with its own online store or using online marketplaces such as Allegro, Amazon, eBay or PriceMinister is irrelevant.
In any case, the business success of online merchants results very quickly in the third phase, CONFLICT. The fact that commerce saw the upstart of online trading not as a competitor but rather as an opponent meant that there was no phase of mutual reinforcement but only that of conflict. We are currently in this phase. And at least now the established system of values is calling for regulatory support. At every turn we at the BVOH feel how attempts are being made to box online trade in. The opponents are clear: manufacturers and bricks-and-mortar trade, both in the media and politically, represent online trading as something special and that they want to see regulated separately. Whether sales restrictions or the “Law for the Reorganisation of the Law relating to the Sale, Return and Environmentally Sound Disposal of Electrical and Electronic Equipment” (WEEE), all too often attempts are made to put obstacles in the way of online trade. It even goes so far that, for example, a “retail trade dialogue platform” has been constructed at the highest political level in Germany to protect the original target, retail stores, from online trading. Protect? From whom or what? Rather, it is often the case that the alleged counterparties mutually reinforce each other.
Therefore, the fourth phase will come sooner or later: ADAPTATION. Of course we already see many examples of successful adaptation. More and more often, precisely the parties that partially actively drive forth the active conflict phase are those that head towards digitisation internally, and with it, e-commerce. It can be seen especially clearly in terms of the manufacturers who, on the conflict level, conclude contracts to exclude their distributors from online trade, but then themselves enter e-commerce intensively. The manufacturer Nike has no website, just an online store. Also, trade flows will change. Previous multi-stage trade flows from producer through wholesaler to retailer will disappear. The producer sells itself and retailers manufacture products themselves. The call for the supposed saviour, the own brand, gets louder and louder.
It will not be long before we have reached the final phase, ALIGNMENT. In a few years we will have got through the transformation and the trade will have aligned itself. Developments of this kind are also accelerated by initiatives from Brussels. Freedom of trade was indeed once the basic idea of the modern European integration of the EEC via the EC to the EU. The latest initiative from Brussels, conducting a sector enquiry, has also not been surprised by this. “In the cross-border online sale of goods and services, European consumers encounter too many barriers, and some of these obstacles are created by the companies themselves,” EU Competition Commissioner Margrethe Vestager said.
As with any transition, there are winners and losers. Consumers will win, because they can find the goods that they want faster, easier and cheaper. But only as long as there is free and restriction-free trade. The great danger is that specialist retailers end the race as losers, because if manufacturers themselves enter trade with their capital and marketing power, the medium-sized retailers will have no chance of survival. And even we in Europe benefit from the heterogeneous commerce landscape, with a variety of specialist retailers. To successfully complete the current commerce transformation, I see associations and purchasing groups in particular as having a duty to head towards digital reorganisation along the path set up by industry. Manufacturers will exploit the innovation wasteland in the network landscape mercilessly and takeover the digital trading business alone and left to the retail stores to themselves. The industry believes that specialist retailers are no longer needed. The Moor has done his duty, the Moor can go. But this is a misconception! This is what we at BVOH are fighting against.