In December 2016 the European Council agreed to go forward with draft regulations that will ban “geo-blocking”. For those that are unclear, geo-blocking in an internet process where access to content by viewers is restricted based upon their location geographically. Currently, this is one of the biggest barriers of entry to cross-border e-commerce within the EU (European Union).
The process of geo-blocking includes several different processes which the Council believe disfavour would-be customers who are attempting to make online purchases cross-border.
So what sorts of processes does geo-blocking make use of?
Here are just a few:
• Providing discounts to domestic customers only
• Providing special offers to domestic customers only
• Re-routing cross-border shoppers to an equivalent online store that covers their local market
• Totally denying would-be shoppers from other countries the ability to buy online
In 2015 a European Commission was conducted which revealed that just 37% of websites in Europe are enabled to let international customers complete their purchases in the way that they want to.
Promoting an open market
With this in mind, the regulators in Europe have concentrated on the initiative formulated by the EU’s Digital Single Market; this promotes the idea of an open market where residents within the EU have unrestricted and equal access to digital services and goods available across the member states of the EU. The initiative would make it far easier for EU residents to access the best shopping deals that are on offer in other countries within the EU. At the same time, they would be able to make use of preferred digital services at no extra cost, even if they are in different states. Dealing with geo-blocking is a crucial part of this initiative and would do a great deal to promote cross-border shopping online.
A further key element is the need to clamp down on increased costs of parcel deliveries when they are made cross-border. The European Commission carried out research which has shown that many logistics companies can inflate their prices by up to 500% when deliveries go across borders to other countries within the EU. Many online sellers are making use of geo-blocking to get around these higher costs pertaining to cross-border sales. Currently, the EU is promoting total pricing transparency in an attempt to deal with these inflated costs.
Cross-border purchases on the up
However, in 2015 a survey carried out by ANEC (one of the European regulatory bodies) has revealed that in spite of these severe barriers to completing transactions cross-border, online shoppers in Europe have been making more cross-border purchases during the past few years. Surprisingly, 15% of shoppers online within the EU completed cross-border purchases with a seller from a separate EU country. The year before this figure stood at just 12%.
In 2016, the Cross-Border Consumer Research report identified the fact that consumers in some EU countries, such as Portugal and Ireland, were frequently shopping from online stores based in countries other than their own.
Even so, there is still a vast quantity of potential available within the EU for cross-border e-commerce. It remains to be seen whether regulators will be able to eradicate market barriers created by geo-blocking and the hurdles poses by cross-border delivery costs as this would create a major boost for the market.