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EU VAT madness ramblings, part II.

(To go to part one, click here.)

There’s still more things in that EU memo that make me scared, or sound weird, or plain unfeasible, so I’m not done rambling. Here’s the next bit:

Why does the Strategy include measures on parcel delivery?

Today only 15% of consumers shop online from another EU country – which is not surprising, if the delivery charge ends up being higher than the actual price of the product. The measures to be taken will address frequent complaints by e-retailers and consumers concerning a lack of transparency (what are the available delivery options and conditions?); the excessive costs of shipments (especially of small parcels sent by SMEs); the lack of interoperability between the different operators typically involved in a cross-border shipment (resulting in the absence of affordable track-and-trace solutions); the lack of convenience for the final consumer (not being offered last-mile delivery or convenient return options). These issues have already been identified in a Green Paper in 2012, followed up by a Roadmap in December 2013. The postal operators have committed themselves to introduce a number of improvements in the area of quality of services (e.g. track-and-trace services for small parcels sent across borders, easy return procedures, etc). The focus of the future EU measures on parcels is, however, on problems not addressed by the postal industry’s own commitments initiative. This includes excessive prices and insufficient regulatory oversight. The Commission is today launching a public consultation to collect views from all the interested parties on the main issues and possible areas for improvement.

I have two bits to say about this. First of all, how are “customers” defined? Anybody who is already buying things? That would include the five-year-old who is going to the bakery to get a piece of cake. Small wonder, then, that the figure seems so low. But is it? And is it that bad, being so low?
There will always be people who do not shop across borders, due to language barriers, not enough internet access, or, yes, because they think shipping costs are too high. I have often not bought something small somewhere online because of high shipping costs – but that applies to German shops as much as to non-German ones.
However, let us not forget that many of these 85% of customers might not shop internationally due to the plain fact that they do not have the need to shop in another country. Because they can get everything they want or need inside their own. And that is perfectly, perfectly fine! Or what happened to “think global, buy local”?

Now for the second bit. Shipping, for a small supplier, is a pain on several accounts. Especially if you have a range of goods with very different shapes, and sizes, and do not ship a load of stuff every week, but do ship to a number of countries plus domestically.

You have to check weights and sizes for pricing, and have to get suitable boxes to ship with. Being in Germany, you also have to register and pay for any new packaging you are going to send out, because it might end up in the Dual System (a recycling system) and you have to pay processing costs for your things. That’s all nice and fine theoretically – but for a very small supplier it means registering for a minimum amount of packages, and paying for them, that you will never ever reach. If I ship out paper and carton, inside of Germany (because that only counts for domestic shipping), of about 7 kg per year, but I have to register and pay for shipping up to 200 kg of paper – well, go do the maths yourselves. It’s weird.

Then figuring out shipping costs. Yes, it is true that generally, shipping outside your own country will cost significantly more than shipping domestically. Yes, large companies have such a high shipping volume that they can cut special deals with the shipping companies and thus can offer lower prices for shipping, or free shipping. So for your shipping pricing, you have to calculate the cost of the packaging including cost of labels, cost of the shipping itself, plus the time required to do the related logistics (such as filling out customs forms), and the logistics of getting it to the post office. (If that sounds nitpicky and mean, let me tell you that it does add up, and all of these things get easier, faster and cheaper again if you do it often and in bulk.) There are instances where your set shipping price will be a bit above your actual costs, but there are also instances where you pay more for shipping than expected, and the fee you charged does just cover the shipping cost itself, or not even that, and unless you wish to calculate a gazillion shipping cost options and present your customers with a huge list of possible prices… you’re stuck with that.

Why is action needed specifically on pricing? Will you regulate prices?

Recent studies confirm that the cost of delivery is still an obstacle to shopping cross-border. Shipping costs is the most common reason (57%) in Europe for not completing an online purchase. 62% of companies that are willing to sell online say that too high delivery costs are a problem (see the newly released Eurobarometer on e-commerce).Tariffs for cross-border small parcel delivery charged by postal operators are often two to five times higher than domestic prices. An example? It costs €32.40 to send a 2kg parcel from Belgium to Austria – over five times the price of €6.40 within Belgium. From Austria to Belgium it costs €14.40 – over three times the price of €4.50 within Austria. Competition appears to be the most appropriate and effective way of addressing today’s concerns in terms of affordability. However, for such competition to unfold in a fair and efficient manner, all market participants – retailers, delivery operators as well as consumers – need to enjoy a certain degree of price transparency. Price regulation is only a means of last resort, where competition does not bring satisfactory results, and is not considered at this stage. Close monitoring is essential in order to identify and address any market failures. The situation will be reviewed after two years.

Yes, it can cost an arm and a leg to ship stuff outside Germany. Weirdly, however, I have also had circumstances where shipping the exact same order to Australia, or to England, or to Sweden did cost me less money for the postage than shipping it domestically. What about that? Will you force the German Post to stop offering these cheap international shipping possibilities, to level the playing field? Please don’t. As with so many other things, yes, it’s not a good thing that we have so many different fees and different structures and different rules – but by imposing even more rules in the hope of making things better, I’m afraid that we will end up being worse off.

Shipping cost calculation, for small companies, will remain a pain. It’s just due to the nature of the thing, because there will always be different prices and sizes and weights for the shipment ranges – and they are necessary. How are you going to get “price transparency” across borders when shipping prices inside a country are already so diverse that there are calculating tools to help you get the best possible deal for your shipping? That sounds like a pipe dream to me.

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