EU may allow manufacturers to insist on B&M

No primary category set

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

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