EU may allow manufacturers to insist on B&M

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bloke shopping onlineAmazon Europe VP Greg Greeley has spoken out against European Union proposals which could allow manufacturers to insist they’ll only supply retailers with a “bricks and mortar” physical outlet. The EU is consulting with member states on the proposed new rules, which, if adopted, could significantly damage businesses based on pure internet sales like Amazon’s. Retailers would also be allowed to insist on minimum sales, either in value or volume, in stores they supplied.

Those in favour of the proposals argue that b&m stores make a significant investment in the brands they’re selling – for example, in staff training and in-store promotional materials – and that allowing ecommerce businesses to piggy-back on this is unfair.

Not so, says Mr Greeley. With customers increasingly using the internet to research all purchases, whether online or off, you might argue the high street’s piggy-backing on the internet. And why shouldn’t retailers with lower overheads pass those savings on to consumers? I’m with Mr Greeley – I don’t think that giving an orange-painted saleswoman a bottle of perfume to shoosh on me as I go into Debenhams represents much investment in a brand, and if I can buy that cheaper or just more conveniently on the net, I will. In any case, I haven’t seen much evidence of trained staff in any of the shops I’ve been in recently: they’re all too busy hangning up banners saying “have you visited our website?”

Mr Greeley concludes

Manufacturers should remain free to determine their own distribution strategies and to choose their retail partners, but only on the basis of objective and non-discriminatory criteria. European policy makers, including the commission, should adopt rules that are neutral to business models and which do not permit arbitrary discrimination against pure-play retailers.

But as many small business owners could tell him, that’s an incredibly optimistic view of wholesale. The harsh reality is that many manufacturers already *do* discriminate who they supply to on the basis of where they’re going to sell it. “Not online” is not so widespread as it once was, but “not on eBay” is still common. And even if you stop discrimination, you can’t really stop it: orders go missing, things are mysteriously out of stock, or you get put on hold forever.

In some sectors, eBay sellers themselves are entirely to blame for this. In the rush to the bottom to be cheaper than anyone, margin on some products has been cut to, or even below, wholesale price. No manufacturer wants to see that happen, and I can’t exactly blame them for saying “no more”. But there are other ways: insisting on a minimum order quantity that cuts out the people who are playing at shops, for example.

And longer term, I think the issue will resolve itself. Online shopping currently accounts for 10% of all retail sales in the UK – and is predicted to grow from £38bn in 2009 to £42bn in 2010. Online is where it’s at, and no amount of protectionism is going to change that.

Image credit: © Marco Lensi | Dreamstime.com

11 Responses

  1. We have had huge problems with finding suppliers who would sell their brands to us when we started a new site to sell branded only jewellery.

    We would go to trade fairs start chatting and as soon as they found out we were online only (even though we probably take 3-4 times more in turnover than a shop may do) they wouldn’t deal with us!

    Then to top it off a brand that did we visited their stand last Autumn at a show and found we were talking to our local rep and she said “We don’t bother to visit online only customers”, so I cancelled the order I placed and closed the account!

    We are now concentrating on selling our own brands and import our own goods rather than try to battle for other peoples brands!

  2. Speaking with my manufacturers hat on, we have become permenently engaged on occasions. You simply have to or a couple of wannabee retailers can completely ruin a product.

    Business is fairly simple, everyone has to make a profit, from the factory shop floor to the retailer, as a manufacturer I believe we have a responsibility to our customers to ensure a fair market for all.

    As for eBay, we gave up chasing the bottom feeders a few years back, our success is based on excellent customer service, qaulity and value.

    The future of retail is definitely heading towards online domination, but that should not be at the cost of UK jobs, the whole market should work together and that is unlikely to happen anytime soon until some businesses understand that everyone has to make a profit, including themselves.

  3. We discovered this at a recent Trade Fair. We don’t have a B & M shop and were told we couldn’t open an account. The supplier was very honest and said they didn’t want the price of their products trashed on eBay and Amazon. It’s hard to disagree with them.

  4. I’m all for manufacturers having an imput on how their goods reach the market place.

    What i’m not in favour of is giant overseas based bussiness/multi nationals dictating the market and deciding what’s good for the market (free market my arse).

    I would also like to see the EU taking a stronger hand in preventing overseas based etailers avoiding local regulations, taxes etc.

  5. I see the manufacturer’s point of view here. Why spend money developing/distributing/marketing simply to see some ******* trash the price and undermine the product’s value ? It’s not rocket science ….

    Sadly we live in a society where people see “cheapest is best” and very few people seem to care about anything else. Until we change that mentality this sort of protectionism will happen as eBay has (in my opinion) been one of the strongest driving forces behind the “cheapest is best” mentality. It’s not just at the shops where you see it, it happens right down to the car boot sale level where someone will say “I can get it cheaper on eBay” (the answer to that being “well go buy it there then”). eBay themselves haven’t helped, with compulsory free P&P and sorting by cheapest etc. At least when the top page of search results was based on “what’s ending soonest” everybody got a “bite of the cherry” once in a while.

    Manufacturers themselves have been getting in on the act and have been selling on eBay/Amazon. In DVD this started with Prism (now defunct) selling their DVDs on Amazon, although to be fair to Prism they did list them at RRP and didn’t undercut everybody else. Many have had a bite, DVD.co.uk, EUK, The Hut (don’t be fooled BTW zavvi_outlet is just The Hut by another name) etc. I would assume it’s not just DVD either, and happens in other products.

  6. It’s about time that the EU supported retailers who invest time and money to display and properly stock products.

    Whilst many ebayers are proper businesses, I have seen too many people with £1000 in a back pocket who think they are entitled to buy a few boxes of a premium brand to sell on the web.

    This should at least help address the inequality.

    Perhaps they should consider creating legislation enforcing a minimum retail price next – which would protect even more legitimate businesses.

  7. The ironic thing about this discussion is I see so any Manufacturers & importers who purport to be trade only setting up their own retail web sites.

    THEY are just doing what they forbid new (mone B&M) customers from doing, & the prices are too trim for their own customers to compete.

    We are only a small Co & DO have B&M, but no Retail section.

    I see so many businesses selling on ebay etc’ that have their own web sites, but know where the traffic is.

    Thankfully, we are building our suppliers’ list from the Far East & any UK/EU Supplier that does not like our market, can go & jump somewhere.

    Online is here to stay. Any Maker that stops (or tries too) customers selling online only will regret it later.

    When I see national chains selling items
    @£5 & we can sell @£2 (still making 10x {+} cost), I wonder who’s conning who!!!.

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