Flash Eurobarometer European Commission Business attitudes towards cross-border sales and consumer protection Summary Fieldwork: October 2006 Report: December 2006 Flash Eurobarometer 186 The Gallup Organization This survey was requested by Directorate General Health and Consumer Protection and coordinated by Directorate General Communication This document does not represent the point of view of the European Commission. The interpretations and opinions contained in it are solely those of the authors. Summary, page 1
Flash EB N o 186 Cross-border sales and consumer protection The Gallup Organization Flash EB Series #186 Business attitudes towards cross-border sales & consumer protection Conducted by The Gallup Organization Hungary & Gallup Europe upon the request of DG Health and Consumer Protection Survey organised and managed by the Eurobarometer Team of Directorate-General Communication This document does not reflect the views of the European Commission. The interpretations and opinions contained in it are solely those of the authors. THE GALLUP ORGANIZATION page 2
Main findings A significant percentage of EU retailers are currently carrying out cross-border transactions (29%). E-Commerce also seems to be the key driver for opening up the retail Internal Market. But on average, the retail Internal Market is far from being like a national retail market: for those retailers who do trade cross-border, most do only to a very few other Member States (MS), only five percent of retailers with ten MS or more. 48% of retailers are prepared to trade cross-border, but 29% do at all. Finally, 46% of retailers are not prepared to trade cross-border. Although most EU retailers (SMEs employing at least 10 persons represented 97% of the sample) sell to customers through shops, a very significant proportion is also engaged in Internet-based sales (57%). Two-thirds (66%) of EU retailers only sell in their domestic market. Overall, three-in-ten retailers in the EU (29%) sell cross-border, using distance sales methods, to at least one other EU country, but only one-in-five (19%) advertise cross-border. The businesses most likely to be involved in cross-border retailing are the medium or medium-large retail enterprises, with a limited number of outlets in other Member States and with significant existing language capabilities. Compared to actual sales activities, a surprisingly high number of retail enterprises are prepared to sell on a cross-border basis. Almost half of the EU retailers (48%) consider they are prepared to sell to consumers in different Member States. Eighteen percent of all EU retailers also consider they are prepared to make cross-border sales to 10 or more Member States, while only 5 percent report that they actually do so. The most important obstacle to cross-border trade identified by the retailers is the perceived insecurity of transactions (61% of respondents that answered the question consider it is a fairly important or very important obstacle). Other obstacles are almost equally important: retailers are concerned about different national fiscal regulations (58%), the difficulty to resolve complaints and conflicts cross-border (57%), the differences in national laws regulating consumer transactions (55%), the difficulties in ensuring an efficient after-sales service (55%) and, finally, the extra costs arising from cross-border delivery (51%). Only the costs arising from language differences clearly stand out as being less important (43%). Retailers who have no direct experience with cross-border trade are much more concerned with possible obstacles to the development of such sales, than those familiar with crossborder activities. Retailers agree that if the provisions of the laws regulating transactions with consumers were the same throughout the EU, their cross-border sales would increase: 43% of retailers say that their cross-border sales would increase (28 % that they would increase a little, and 15% that they would increase significantly). Retailers that use e-commerce, but are not currently involved in cross-border sales, are optimistic about the possible effects of such harmonisation (47%), but those who have an experience of cross-border e-commerce are even more optimistic (59%). Regarding the costs of compliance with national consumer regulations, retailers who are prepared to trade cross-border (but not trading) tend to give more importance to these costs: 44% of them evaluate these costs as high (rather high or very high costs), and 33% as low or negligible. The majority of EU retailers are not sure where to obtain information about consumer regulations in the different Member States (62%). Summary, page 3
Flash EB N o 186 Cross-border sales and consumer protection The Gallup Organization Introduction EU policies have a gone a long way towards establishing an Internal Market. However, while this has created a flourishing business-to-business (B2B) Internal Market, the same cannot be said for the business to consumer (B2C, or retail) transactions, which remain largely fragmented along national lines. So an area of economic activity which represents 58% of EU GDP is not yet truly integrated and not fully subject to the competitive forces of the largest market in the world. A lack of consumer confidence, but also companies reluctance to make cross border offers to consumers, restricts the extent to which consumers could benefit from the Internal Market. In order to assess cross-border trade or cross-border sales (CBS) activity from a retail perspective, the Directorate General Health and Consumer Protection sought to poll managers of retail enterprises, with at least 10 employees, on their experiences in cross-border transactions, as well as their views on certain consumer protection measures. A total of 6,606 managers in the 25 countries of the European Union (EU) and Norway were interviewed by telephone between the 6 th and the 27 th October 2006 in a Flash Eurobarometer survey. (Eurobarometer 252 analyses consumer attitudes towards cross-border shopping and consumer protection in the Internal Market.) The sample was randomly selected according to two criteria - country and company size - within certain activity sectors that are considered to be prone to have significant retail activity (see the Annex of the full report for the list of sectors included) and are also likely to be able to sell via distant methods. Further technical notes explaining the manner in which Gallup and its partner institutes conducted the survey is also attached in the full report. 85% of the companies interviewed were small enterprises (10 49 employees), 12% were medium enterprises (50 249 employees). 90 % of them were independent companies, while 3% were the mother of a multinational group and a further 7% were members of a multinational group. page 4
Cross-border trade among EU retailers Most retailers use the traditional method of selling goods to consumers in shops (79%), but a very significant number of EU retail enterprises are also engaged in Internet-based sales (57%). This percentage gives an indication of the potential for growth in cross-border trade. On average, retailers use at least two channels (2,05) to target their customers, and one third (33%) of EU retailers offer their products and services via three or more channels. Sales channels used for retail direct retail sale (i.e. shops) 79 e-commerce / Internet 57 mail order 27 telesales / call-center 22 sales though representatives visiting consumers in their homes 21 0% 25% 50% 75% 100% Source: FLASH EB 186 October 2006 GALLUP Q1. Do you use any of the following sales channels for retail? % by EU25 When analysing the average number of distant sales channels (that is: e-commerce, mail order, telesales, or home visits) used for retail purposes, it appears that an average retailer in the EU offers at least one distant sales method to consumers (1,26). Slovenian (1,84), Czech (1,82) and Austrian (1,72) retailers put the most emphasis on utilising multiple distant sales channels, while those in Belgium (0,77), Finland (0,77) and France (0,82) seem to be the least interested. Retailers who are actually involved in distant cross-border sales are enthusiastic about the very positive effects of, and the opportunities provided by, e-commerce on their businesses; 50% say Internet make it much more interesting for them. Two-thirds (66%) of EU retailers only sell in their domestic market. One-in-ten retailers (9%) within the EU-25 claim to be selling goods to final consumers in at least three other EU Member States. This proportion rises to 20% of Maltese and 15% of Luxembourgish retailers, and drops to only 3% in Finland. Summary, page 5
Flash EB N o 186 Cross-border sales and consumer protection The Gallup Organization Current cross-border sales to final consumers Sell to at least one another EU country Sell only to consumers in [Country] 100 75 50 64 59 60 60 56 56 56 52 51 47 46 46 46 44 45 42 38 39 36 34 33 67 69 66 65 70 71 71 73 64 31 30 30 29 28 28 28 26 26 25 25 24 24 23 59 73 71 74 76 80 83 87 85 25 20 18 17 12 12 0 LU AT CZ SK MT DE SI BE NL LT PT EU15 CY EU25 IT EL IE DK FR ES EE EU10 LV UK SE FI PL HU NO Source: FLASH EB 186 October 2006 GALLUP Q6. To how many EU countries do you currently make cross-border sales to final consumers? % by country Overall, three-in-ten enterprises interviewed in the EU (29%) claimed to be selling cross-border to at least one other EU country. As previously stated, 9% indicated that they sell to three or more countries, the same proportion told Eurobarometer that they are trading cross-border with consumers in two EU countries, and another 12% sell to one other EU country). Such activity is less widespread in the new Member States (24%) than in the EU-15 (30%). Turning to the average proportion of cross-border sales per sales channel, answers were not weighted to reflect the market shares of the respondents, and only respondents who were using the given channel were polled. Therefore, they indicate the average proportion of retailers cross-border sales per sales channel, and not the overall percentage of cross-border sales compared to total sales. The highest proportion of cross-border trade in shops is to be found in Malta and Cyprus. In Malta, 29% of income in stores is spent by visitors, and in Cyprus, the figure is 24%. Belgian retailers also rely significantly on incomes from tourists or other EU-foreign nationals (22%), while the figure for Luxembourg is 20%. Spanish retailers estimate that about 17 cents of every euro spent, come from people visiting from another EU Member State. Managers do not see noteworthy income from EU visitors in Slovenia (2% of retail store income is attributed to such a source), Finland (3%), Sweden (3%), Denmark (4%), Norway (4%) and Germany (5%). Managers of EU retail enterprises that do use distance sales methods estimate that about 15% of the revenue generated via distant sales channels comes from customers living in other EU countries. The proportion of such revenue among total distant sales revenue is the highest in Malta (48%) and Cyprus (37%), and it is around 30% in Greece, the Czech Republic, Austria and Lithuania. At the same time, this percentage is perceived as extremely small by some managers, especially in Luxembourg (4%), Finland (4%) and Portugal (3%). Retailers do not limit their distant sales to EU countries. However, they are most likely to use the advantages offered by the EU Internal Market. Adding the revenue of non-eu cross-border sales to that achieved within the Union shows that about a quarter (27%) of all distant retail revenue is coming from cross-border transactions. In other words, only 73% of all sales via e-commerce, call centres, mail and in-home visits in the EU are performed domestically. Small companies usually have a somewhat higher proportion of domestic sales as compared to medium and large enterprises (26% of cross-border transactions of all kinds for small enterprises, and 31% for medium and large retailers). Cross-border sales are especially important for those enterprises page 6
that have outlets in several (EU) countries: in total 46% of the income they realise from remote sales channels is non-domestic. Prepared to make cross-border sales to DK/NA; 6% None, only prepared to sell in [Country]; 46% more than 10 EU countries; 18% 2-3; % 1 EU country; 5% 4-10; 12% Compared to actual sales activities, a surprisingly high number of retail enterprises are prepared to sell on a cross-border basis. Almost half of EU retailers (48% with no difference between the EU-10 and EU-15) say that they are currently prepared to sell to consumers in different Member States using distant sales channels. Businesses most likely to be involved in cross-border retailing are the medium or medium-large retail enterprises, with a limited number of outlets in other Member States and with significant language capabilities. This demonstrates the potential for development of Internal Market. Retailers prepared to trade cross-border, but who are not doing so is unusually high compared to those who are actually involved in such transactions in Ireland (35%), Finland (36%), the UK (32%) and Poland (34%). On average, 24% of EU retailers consider they are prepared to make cross-border transactions, but are not currently involved in such activities. The level of preparedness in the use of languages shows a polarised picture across the EU. In several Member States, the ability to speak several languages is the norm. At one end of the scale are Luxembourg and Malta where businesses universally speak at least two languages, together with three further countries where over 90% of retailers are able to do business in more then one language (Austria, Cyprus and Finland). At the opposite end of the spectrum are countries - such as the UK and Ireland that rely heavily on the wide speaker-base of their national language. In these countries about seven-in-ten retailers say they are only able to conduct business in English. Overall, 19% of EU retailers advertise in markets where they are not present physically. Five percent of EU retailers advertise in more than 10 Member States in order to facilitate their crossborder sales. On average, EU retailers involved in cross-border marketing spend about 14% of their marketing budget on encouraging distant sales to other Member States. Obstacles to cross-border trade A sizeable proportion of the retail businesses in the EU are not at all interested (between 25% and 28% of the respondents at EU25 level) in developing cross-border sales. The managers of such firms often refused to discuss barriers to cross-border trade in their own context as they found such obstacles to be irrelevant. Throughout the analysis of practical and legal obstacles below, we only present the results among those companies that did not immediately reject the possibility of making cross-border sales. Overall, the most important obstacle to cross-border trade identified by the retailers is the perceived insecurity of transactions (61% of respondents - that expressed at least a minimal interest in cross-border trade - consider it as a fairly important or very important barrier). Other obstacles are almost equally important: retailers are concerned about different national fiscal regulations (58%), the difficulty in resolving complaints and conflicts cross-border (57%), the differences in national laws regulating consumer transactions (55%), the difficulties in ensuring an efficient after-sales service Summary, page 7
Flash EB N o 186 Cross-border sales and consumer protection The Gallup Organization (55%), and finally the extra costs arising from cross-border delivery (51%). Only costs arising from language differences clearly stand out as being less important (43%). The analysis of the intensity of the responses, confirms that the primary barrier to cross-border retailing is the perceived fear that cross-border sales could involve a higher risk of fraud and nonpayment: 40% of retailers told Eurobarometer that this is a very important obstacle to cross-border trade. Practical obstacles to B2C cross-border trade Fairly unimportant Not important at all Fairly important Very important DK/NA Higher risk of fraud and non-payments in cross-border sales 15 10 21 40 Extra costs of compliance with different national fiscal regulations (VAT rules, etc.) 28 30 Greater difficulty in resolving complaints and conflicts cross-border 28 29 14 Extra costs of compliance with different national laws regulating consumer transactions 14 31 24 14 Greater difficulty in ensuring an efficient after-sales service 19 12 26 29 14 Extra costs arising from cross-border delivery 18 27 24 15 Costs arising from language differences 24 20 23 20 Source: FLASH EB 186 October 2006 GALLUP Q15. [ ] Please tell me how important do you think these obstacles are to cross-border sales. % EU25, base: those who did not spontaneously claimed that they are not interested at all in cross-border trade The extra costs of compliance with different national laws, that regulate consumer transactions, are considered to be a very important obstacle by 24% of retailers and a further 31% considered it to be a fairly important obstacle. The extra costs arising from cross-border deliveries are a very important obstacle for 24% of retailers. Somewhat contrary to previous observations of the report, where current language capabilities were found to be essential in the managers assessment of the preparedness for cross-border trade, retailers consider costs related to this aspect i.e. language differences - to be the least important obstacle (only 20% say it is a very important barrier). Obstacles appear to be less important for those already involved in cross-border retail trade. In every single question, those who have no direct experience with cross-border trade are much more concerned than those familiar with this form of sales. In most instances, the group that is prepared but still does not trade is even more concerned than those who are not prepared to sell to consumers in other Member States. The two aspects where we see the largest gap between those who trade cross-border and those who are prepared, but not yet doing business, are compliance with different national fiscal regulations (23% of traders consider this as a very important obstacle versus 37% of those who are only prepared to trade) and the concerns about fraud (33% vs. 47%, respectively.) The difference also exceeds 10 percentage points in the assessment of the difficulties of providing after-sales service (it is seen as an important obstacle by 21% of those who trade cross-border and 33% of those who are prepared to start trading). Divergent rules regulating consumer transactions are among the reasons that prevent retailers from engaging in distant cross-border sales to EU consumers. Seven possible examples of differences in provisions regulating consumer transactions were tested. A short explanation for each was provided, in case the respondents had difficulties in interpretation. page 8
Different legal provisions regulating consumer transactions as barriers of B2C cross-border trade Not important Not at all an obstacle Fairly important Very important obstacle DK/NA Differences in case of failure to provide information 24 18 27 20 10 Differences between Member States in their legislation regarding goods not in conformity with the consumer contract 26 17 26 20 11 Differences in the treatment of costs of return 27 18 26 19 10 Differences in the definition of delivery 26 19 25 20 11 Differences in the way consumers may exercise their right of withdrawal 28 21 25 17 10 Differences in information to be provided to the consumer 28 22 25 9 Differences in length of cooling off periods 31 21 22 10 Source: FLASH EB 186 October 2006 GALLUP Q. [ ] How important do you think these are as an obstacle to cross-border sales? In order to avoid misunderstanding, I will provide short explanations for each of the factors. % EU25, base: those who did not spontaneously claimed that they are not interested at all in cross-border trade Respondents tended not to differentiate much in their opinions about the various regulatory aspects. It seems that differences in regulations related to failure to provide information, or goods not in conformity with contract are slightly more of a worry for retailers than the difference in the cooling-off periods, but the differences are not at all dramatic. Retailers already involved in cross-border sales are less concerned by the regulatory differences presented, as compared to the opinion of those who have no experience of this kind of activity. Again, those not prepared to sell cross-border are the most reluctant to give an answer to these questions: they are more likely than others to say they do not know how important these legal differences could be in regard to cross-border trade. To sum up their opinions, all retailers were asked to assess the perceived costs associated with compliance to different national legal frameworks regulating consumer transactions. Fifteen percent of the retailers who trade cross-border are not sure about the costs associated with compliance to national regulations regarding consumer transactions. This probably indicates a lack of awareness that national laws are different and may also reflect the fact that enforcement in cross-border situations has been difficult for consumer agencies. Retailers involved in cross-border trade are also not particularly concerned about the costs of compliance; retailers who claim to be prepared (but are not yet trading on a cross-border basis) tend to give more importance to these costs. Across the EU-25, opinions are about equally split between high (49%) and low (51%) estimated costs, but the intensity of the low grouping is higher, with more retailers selecting the low-extreme answer (i.e. costs are negligible) compared to the high-extreme (i.e. costs are very high). A third of EU retailers who did have an opinion (34%) consider such costs to be negligible, and about one-in-seven retailers (14%) believe these costs to be very high. Summary, page 9
Flash EB N o 186 Cross-border sales and consumer protection The Gallup Organization Measures to facilitate cross-border trade Retailers agree though that harmonised regulations concerning consumer transactions throughout the EU would increase their cross-border sales. The opinions are similar when considering a possible increase of their Internet sales (27% would expect a slight increase in sales and 15% a significant one) and the amount spent on encouraging cross-border customers to make purchases (24% would expect a slight increase and 12% a significant one). Those who currently trade on a cross-border basis were very likely to on an unprompted basis, as this answer was not given as an option say that nothing would change. The majority, though, agree that such harmonisation of regulations could somewhat (or even significantly) facilitate their crossborder retail activity (53%). Those prepared to trade cross-border, but not currently doing so, are even more optimistic about the possible effects of harmonisation (58%). Those not prepared to get involved in cross-border trade do not generally expect to see any effects (46%), and they are much more likely to lack an opinion in these matters (21%). At a country level, retailers in Ireland, Portugal and Greece are especially optimistic about the possible effects of harmonisation on their cross-border sales activity. This opinion is slightly more prevalent among medium and large businesses (49% say it could increase their cross-border sales activity vs. 43% among smaller businesses). 63% of those who say compliance with different regulations (would) imply significant extra costs for them are also positive that harmonisation could increase the volume of their cross-border retail. Retailers in Norway, Estonia and Hungary are the least confident in regard to the positive effects of such a measure on their cross-border sales. It is essential for cross-border retailers to be informed about the various laws that regulate consumer transactions. The vast majority of EU retailers are not sure where to obtain information on consumer regulations in different Member States (62%). However, one-third (35%) of those interviewed said they knew where to turn to if they needed such information. The most confident retailers, in terms of finding such information, are those from Austria (61%), Malta (55%) and Slovakia (47%). The least informed retailers are in Norway (15%), the Netherlands (18%), Denmark (23%), Sweden (24%) and France (25%). Just over half (53%) of those who are currently active in cross-border distant sales say they do not know where they can find such information. Small retailers are slightly less likely to be aware of such information compared to medium-sized and large retail firms. Current EU measures Euro Info Centres (EIC) and European Consumer Centres (ECC) are not widely known (quoted by 0,4% and 0,8% of EU retailers, without prompting). page 10
ADR mechanisms The final question of the survey asked managers about their experience with Alternative Dispute Resolution (ADR) mechanisms: Very few retailers at the EU level use such mechanisms (only 3% say they use ADRs regularly and % claim to have some experience with them). The reason for not using ADR mechanisms is as much a result of the retailers not being aware of them (41%) as the fact that they are simply not interested (39% do not use such mechanisms but know some of them ). Have you already used ADR? 3 41 Retailers in Norway are the most likely to have some practical experience of ADR mechanisms (32%) but, 39 even here, very few of them use them regularly (2%). A Yes, regularly use those mechanisms similar pattern can be observed in Malta, where 25% of Yes, have used retailers have some experience, but only 2% use ADRs No, but know some regularly. Frequent reliance on such dispute resolution No, do not know such mechanisms mechanisms is the most common, in relative terms, in Luxembourg (10%) and Belgium (8%). Countries reporting the least experience of ADRs are Hungary (7%), the Netherlands (9%) and Estonia (10%). Medium and large enterprises are more likely than small ones to have experience of ADRs (19% vs. 15% respectively) and also to regularly use them (5% vs. 3% respectively) but the differences are not particularly significant. The use of out-of-court dispute resolution mechanisms is not widespread in any company segment among EU retailers. Summary, page 11