Wednesday

19th Sep 2018

Opinion

Is EU retail sector equipped for 21st century?

  • 90 percent of sales still happen in physical shops (Photo: George Hodan)

We all shop.

Filling our trolleys or clicking on the screen of our laptops and smartphones.

Read and decide

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  • Jyrki Katainen (l) is EU Commission vice-president, responsible for jobs, growth, investment and competitiveness and Elzbieta Bienkowska is EU Commissioner for internal market and industry (Photo: European Commission)

We all like the choice of channels and shopping places offered by today's retail. This is how we, as consumers, drive the changes in the retail sector.

In response retail has become increasingly multi-channel.

The value of online sales in the EU practically doubled between 2012 and 2017 reaching over €220bn, and e-commerce is still growing on average by 12 percent a year.

Today over 3.6m retail companies in the EU provide almost 10 percent of EU jobs, and therefore stand for one of the most important sectors in the EU economy.

But it is not easy for all businesses to seize the opportunities. Only one fifth of retail companies sell online.

In order to unlock its innovation and growth potential, retailers from large to small need a supportive regulatory environment that allows both online and offline market players develop business models called for by consumers and thrive.

The retail rulebook needs a breath of fresh air

We have taken down most of the barriers that stopped consumers from looking for the best offer online.

Our new rules on geo-blocking will make it easier for people to shop online across the EU and the new parcel delivery regulation will allow people and companies to buy and sell products and services online more easily and confidently across the EU.

But the trend is multichannel retailing – online and offline retail complement each other. Still 90 percent of sales happen in physical shops.

It is high time now to look at the potential of brick-and-mortar. We want offline retailers to also be able to develop.

Shops shall continue to have their important place in the retail landscape. Consumers like to enjoy their shopping experience, being able to rely on advice and expertise from skilled shop assistants.

Nevertheless, vacant shops are increasing and maintaining our city-centres vibrant is a concern. We want to promote smart strategies to attract people as well as small and large retailers to city centres.

After a thorough analysis in cooperation with EU countries we have identified many regulatory restrictions that hamper innovation and investment in the retail sector.

We clearly see that reforms are necessary, otherwise retailers will not be able to adapt.

Often, it is the rules for retail establishment and operations that do not allow offline retailers to change and evolve to compete.

We need to create a regulatory framework in which retailers can open a shop and do business without facing undue limitations, restrictions and delay.

The EU needs a market, where competitiveness and innovation are a measure of success, where retailers can expand and create new jobs, consumers get the best value for their money and this value corresponds to their needs.

Do we need new EU legislation?

Not necessarily.

A lot can be done just by applying EU rules better. A more ambitious implementation of existing EU rules would significantly benefit the retail sector.

Many rules affecting the sector pursue important public interest goals: protecting workers, keeping town and city planning under control, saving our environment.

But we need to check: are all the rules imposed some years ago still working for the retail environment of today? Are they serving their purpose? Do these regulations really fulfil their objectives and preserve fair competition? Are they fit for the digital world we live in and which retailers have to endorse?

Only smart and flexible regulatory solutions will ensure that retailers can adapt and innovate.

In some countries, it is extremely difficult to open a new shop. In others, the process is fast and smooth.

There are examples of business models very successful in some countries, which do not manage to develop in other countries.

Has it to do with consumers' demand? No. They are prevented from expanding by rules which cannot accommodate such innovative shop concepts and cement outdated business models which do not reflect modern consumer expectations any longer.

Also, already established shops may not be able to work efficiently or expand their operations and become champions of multi-channel retailing.

For example, various rules in EU countries affect the way shops organise their sales or source products. And these rules have often been put in place when e-commerce was not even emerging on the horizon.

At the same time, there are many good practices already on the ground, which could inspire others.

There are national authorities who succeed in delivering public policy objectives in a smart and the least restrictive way possible.

Where rules on shop location are flexible and forward-looking. Where simple, transparent and efficient procedures allow for quick creation of innovative shops and related jobs, and where efficient ways to maintain vibrant city centres are deployed.

This gives the retailers the flexibility they need to adapt and flourish. Such practices should spread.

The communication on best practices for facilitating retail establishment and reducing operational restrictions, published by the European Commission in April 2018, gathers this wealth of practices and rules together.

Underpinned with a sound economic analysis, it points to smart and flexible solutions that already work in practice in certain member states.

Finally, it responds to recurring questions concerning the applicability of EU rules to the retail sector and explains them in more detail.

Reforming retail rules pays off: where retailers are given the air to breath, more companies are set up and the market concentration is lower. There is more competition in the market and the retail landscape is more varied.

There are different store formats, which generate efficiencies and attract investment. Less strict regulation encourages innovation and improves productivity.

There are also indirect benefits. A better performing retail has positive effects on other sectors of the economy including manufacturing. It can also bring indirect benefits for consumers in particular on consumer prices.

Lower consumer prices in turn spur demand, and this stimulates production and investment in innovative products.

Private operators should also play by the rules of the single market. In some countries, consumers do not have access to a wide choice of products, including different versions of the same product at potentially lower prices because retailers are prevented by suppliers from buying from whom and from where they want.

Such practices are against the spirit of a true single market in the EU.

We will look into these practices closely and will carry out further fact-finding. Further action may be necessary.

Through the ministerial discussions in the framework of the competitiveness council and the European Semester exercise, we have stimulated EU-level discussion on the retail sector, its potential and challenges.

The economic importance of retail and the regulatory approaches call for a closer look and a debate between all concerned. As a part of this process, we will meet on Tuesday (19 June) at the conference A European retail sector fit for the 21st century in Brussels.

The discussions that we are having with policy makers, retailers and other businesses, civil society and academia, confirms that reforms are needed to make a difference for retail in Europe.

A boost to retail would not only benefit all who shop, but be a boost to the entire EU economy.

Jyrki Katainen is EU Commission vice-president, responsible for jobs, growth, investment and competitiveness and Elzbieta Bienkowska is EU Commissioner for internal market and industry

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