Consumer Focus - European Commission

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An integrated parcel delivery market for the growth of e-commerce in the EU. 2 ... We operate across the whole of the ec
Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of ecommerce in the EU February 2013

About Consumer Focus Consumer Focus is the statutory consumer champion for England, Wales, Scotland and (for postal consumers) Northern Ireland. We operate across the whole of the economy, persuading businesses, public services and policy-makers to put consumers at the heart of what they do. We tackle the issues that matter to consumers, and give people a stronger voice. We don’t just draw attention to problems – we work with consumers and with a range of organisations to champion creative solutions that make a difference to consumers’ lives. Following the recent consumer and competition reforms, the Government has asked Consumer Focus to establish a new Regulated Industries Unit by April 2013 to represent consumers’ interests in complex, regulated markets sectors. The Citizens Advice service will take on our role in other markets from April 2013.

Contents Consumer Focus response

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Background to our response

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Why does delivery convenience matter?

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Consumers’ increasing reliance on parcels

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Consumer detriment in the parcels market

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Our response

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Consumer principles

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Recommendations and next steps

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Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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Consumer Focus response Consumer Focus is pleased to be able to offer comments on the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of ecommerce in the EU. This is a very ambitious and wide-ranging consultation and the Commission will need to look at evidence from couriers/national operators/consumer groups/regulators/e-retailers when considering any future actions.

Background to our response E-retail is a huge market – recent research1 by the UK’s postal regulator Ofcom found that UK consumers spend over £1,000 per person a year shopping online – and one that continues to grow. However, this does not mean that it is a market without barriers to growth, and research suggests that consumers face multiple obstacles to cross-border ecommerce, including:  No/limited internet access: in 2012, 28 per cent of EU27 households did not have access to a broadband internet connection2  Difficulties with foreign languages: 11 per cent of consumers stated that they don’t buy cross-border because they don’t speak the language of foreign websites3. We suspect this percentage is higher in the UK: 39 per cent of UK respondents are able to hold a conversation in at least one additional language, compared to the European average of 54 per cent of respondents4. This issue spans both online ordering and subsequent contact with the e-retailer in the event of concerns about the delivery or items ordered  Complaint redress: 35 per cent of consumers stated that they don’t buy crossborder because it is difficult to solve any problems if something goes wrong5  Culture: 42 per cent of consumers stated that they don’t shop cross-border because there is enough choice in their country6

Why does delivery convenience matter? A major obstacle that consumers mention when considering online shopping, and that this Green Paper focuses on, relates to delivery of any items ordered, particularly crossborder. When consumers were asked about buying online cross-border they were more likely to cite certain delivery issues as a concern than when asked about buying online domestically7. 35 per cent of consumers were concerned about long delivery times when buying online cross-border (compared to 18 per cent when buying online domestically) and 27 per cent were concerned about no delivery when buying online cross-border (compared to 21 per cent when buying online domestically). Additionally, one in four consumers said that they don’t shop online cross-border because of longer delivery times (24 per cent) or extra delivery/customs charges (26 per cent).

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Ofcom (2012) The Communications Market Report: International Eurostat, Statistics in Focus 50/2012 Internet use in households and by individuals in 2012 3 Civic Consulting (2011) Consumer market study on the functioning of e-commerce 4 Special Eurobarometer 386 (2012) Europeans and their languages 5 Civic Consulting (2011) Consumer market study on the functioning of e-commerce 6 Ibid. 7 Ibid. 2

Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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16 per cent of consumers were concerned that delivery costs or final prices would be higher than those displayed on the website, a finding borne out in the experiences of rural Scottish consumers8 (see later section). Wider evidence converges on the conclusion that delivery convenience is a major issue for consumers when shopping online.  The impact of delivery factors on UK online shoppers9: - delivery factors account for 66 per cent of carts abandoned during online shopping - this cost e-retailers an estimated £1.1 billion in the last quarter of 2011  What do online shoppers in the UK want from a delivery service10? - 74 per cent want good delivery information prior to ordering - 85 per cent want access to online tracking - 70 per cent want ‘SMS’ confirmation of delivery day/time - 84 per cent want delivery progress updates  What delivery options do online shoppers in the UK want11? - 80 per cent wanted specific day delivery - 72 per cent wanted time-slot delivery within two hours with a £2 premium upper limit - 70 per cent wanted the ability to add specific delivery instructions - 36 per cent of shoppers said that they may not shop because of a lack of delivery options Different groups of consumers are likely to have different needs from a parcel delivery service, but the evidence shows that any review of the e-commerce market cannot be complete without considering the impact of parcel delivery factors on consumers’ behaviour.

Consumers’ increasing reliance on parcels In our role as the postal watchdog for UK consumers, Consumer Focus has gathered a body of research looking at how the rise in technology impacts on consumers’ changing use of the postal service. We commissioned 28 focus groups across the UK to investigate what motivates consumers when choosing a communication method and how they believe these choices will change over the medium-term, with an emphasis on postal services (see our report Sense and sustainability12). These found that residential consumers are sending and receiving far more packets and parcels as online shopping and trade continues to grow. Looking ahead, the majority of residential consumers feel their online shopping activity will increase, leading to an increased reliance on packet and parcel delivery. However, they want alternatives to the current system which many see as frustrating and no longer in line with the way they live. Similarly, SME consumers expect packets and parcels to make up the majority of their post.

Consumer Focus Scotland (2012) Effective parcel delivery in the online era – what consumers in Scotland need 9 Royal Mail (2011) Delivery Matters 10 IMRG – Blackbay (2012) UK Consumer Home Delivery Review 11 Ibid. 12 Consumer Focus (2012) Sense and sustainability – A report on the Universal Postal Service 8

Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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The results of this research show that parcels are likely to be the major driver of our use of the postal service due to a combination of declining letter volumes and our rising use of parcels to fulfil orders placed online. Much of this fulfilment mail does not fit through a letterbox and/or requires a signature on delivery, which places much greater emphasis on convenient delivery options for recipients.

Consumer detriment in the parcels market However, our research also shows that not all UK consumers are well-served by the parcels market, and we have identified gaps in service information and provision that already exist even within the UK. Consumer Focus Scotland recently published a report13 looking at parcel delivery practices within Scotland. This included a quantitative online survey of 1,000 consumers throughout Scotland, eight focus groups in four areas of Scotland, and a survey of a small sample of parcel delivery operators. The research found that consumers have to contend with inflexible delivery options and inconvenient delivery office opening hours. The report outlined specific concerns for those living in remote and rural areas who rely heavily on internet shopping and effective delivery solutions for basic goods in the absence of high street alternatives. Consumers in these areas faced particularly acute delivery issues, including:  Companies refusing to deliver to them  Hidden extra delivery costs  The use of broad-brush postcode area data to set delivery prices  Surcharges that outweighed the price of the item being purchased  Lengthy journeys to collect undelivered items  No choice of operator Although there is a regulated universal service provider whose prices must be affordable and uniform across the UK, there is no obligation on online retailers to provide this method of delivery to consumers. Consumers in rural and remote areas are therefore often faced with delivery options that are more expensive and less convenient than consumers in urban areas – and in some cases no deliveries at all. When considering the barriers to cross-border trade, some of these can be attributed solely to the fact that it requires communication and collaboration across multiple countries (see the list of obstacles to cross-border trade). This does not apply to deliveries: the national delivery issues that deter consumers from online purchases within their country are also likely to deter them from cross-border purchases.

Our response Those considering online retail need to address the issue that those shopping online can be considered as initiators of the delivery process who (directly or indirectly) pay for delivery, although the contract for those deliveries is between the e-retailer and the delivery company. Delivery initiators have no direct choice of delivery company or delivery options, and in the event of a complaint they have to go via the e-retailer for redress. This is a different role from passive recipients of birthday cards or advertising leaflets. We believe that this distinct delivery initiators role is not acknowledged sufficiently at the moment by e-retailers, delivery companies or regulating bodies. If these organisations can put the concerns of delivery initiators at the heart of their approach to e-retail this should serve to increase consumer participation both domestically and crossborder. 13

Consumer Focus Scotland (2012) Effective parcel delivery in the online era – what consumers in Scotland need

Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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The parcels market is considerably more competitive for consumers than the letters market, and this competition is likely to provide solutions to the problem of delivery convenience. Those companies that tailor their products and services to the varied and changing needs of consumers will win the increasing parcel traffic. For those who do not fall into market segments that benefit from competition (such as rural and remote consumers) the Postal Directive 97/67/EC ensures that universal service providers offer a basic parcels service at an affordable price across the EU. This comes with a performance target of delivery of 85 per cent of mail within three days of posting and 97 per cent within five days of posting for intra-Community cross-border post. However, although competition in the parcels market should act to improve the consumer experience over time, we are concerned that competition will not be effective if online shoppers (as delivery initiators) are not empowered to act on their experiences and preferences.

Consumer principles This background informs our approach to this consultation, which is to set out the principles that we believe would allow consumers to access online cross-border trade with confidence. 1. Utilising the existing universal parcels service: as discussed above, universal

postal service providers already offer an affordable parcels service with minimum delivery standards to all EU consumers via Directive 97/67/EC. We believe e-retailers should be encouraged to make more extensive use of this existing service, and should offer consumers, as a minimum, the option of a postal delivery service that is equivalent to that provided under the Directive for every online purchase that requires delivery. This would ensure that all consumers benefit from the extensive protections to consumer access to parcels services that are already in place. 2. Information: delivery information should be timely, clear and regularly provided

along the delivery journey for tracked items. E-retailers should allow shoppers to access all the delivery information likely to affect their decision to complete an order at an appropriate point prior to purchase. We recognise that there is a balance to be struck to avoid information overload on shoppers, but eretailers should provide core delivery information upfront, including: a. the timeframe for delivery: this is the most basic information about the delivery service that allows them to plan for the delivery of their items b. the name of the delivery company: this allows them to act on their previous experiences with delivery companies before they commit to the purchase c. the total delivery price: this should include any surcharges due to the location of the shopper and optional premium features, to allow easy comparisons between delivery services d. details of the returns process: to remind consumers of their right to return items and to allow them to compare the prices and features of delivery services on this important aspect of the process e. redelivery options and relevant details eg the distance to a pick-up point: in the event of non-delivery it is important for consumers to know what will happen to their items 3. Choice: consumers should be offered product features and delivery options

that suit their varied and changing lifestyles. This includes a choice of delivery speeds, optional premium features such as tracking, and the ability to choose how and when to receive delivery of items. Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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Failed delivery attempts are inconvenient and costly to the consumer (and the delivery operator). They are also factored into the price that the delivery company charges the e-retailer and therefore, ultimately, the price that the online shopper pays (directly or indirectly) for delivery. 4. Access to redress: e-retailers should establish a timely and effective

mechanism for resolving issues and settling disputes (including providing compensation) that consumers can access via one point of contact. The difficulty of obtaining redress can be compounded by the fact that multiple parties are involved: the delivery initiator makes a contract of sale with the eretailer, the e-retailer makes a contract with the delivery company, and the delivery company may make further contracts with other delivery companies for part(s) of the delivery journey. Redress should continue to be available directly from the e-retailer via the contract of sale, as although the online shopper is the delivery initiator they do not make the contract for delivery with the delivery company and thus have no legal standing with the delivery company. If the problem is with the delivery journey it is for the e-retailer to take this up with the delivery company, following the chain of contracts. 5. Compensation: consumers should be able to claim and promptly access

appropriate compensation from the e-retailer in the event of loss/damage/delay to their items. 6. Feedback: e-retailers should establish simple and effective mechanisms that

make full use of available technology for consumers to feed back to the eretailer about their delivery experience. Online shoppers cannot directly access the competition for their parcels delivery business, but the choices that e-retailers make on their behalf following clear and comprehensive feedback would act as a proxy influence on competition. We believe that many of the delivery-related barriers to e-retail would be reduced or removed if competition that addressed consumers’ needs in delivery aspects was increased. 7. Publicity for Quality of Service information: Quality of Service information

should be widely and easily available to help those buying (and selling) crossborder to compare the performance of delivery operators. This information is already collected by national universal postal service providers and independently verified, and should be collated on a central online database. However, non-regulated delivery companies and couriers might not routinely collect, seek independent verification for or publish such information. It would be for non-regulated delivery companies to choose whether to add independently verified Quality of Service delivery performance data to this database, but they should be encouraged to do so. Those companies who chose to do this would likely benefit from a competitive advantage because of the increased transparency of their service performance. Additionally, eretailers would likely benefit from displaying Quality of Service information showing that the delivery companies they use offer a good service.

Recommendations and next steps The scope of this consultation extends much more widely than the traditional national postal service providers, whose activities are governed by existing EU and national legislation and regulation. The Commission needs to look beyond these providers to actively engage with relevant delivery companies that are currently unregulated, including couriers and local delivery companies. It also needs to consider the mechanisms via which to implement positive changes. These could include self-regulation and voluntary schemes, but always with the possibility of targeted regulation as a last resort.

Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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It also needs to ensure that its conclusions rest on a foundation of up-to-date information from a strong and well-referenced evidence base. To this end, Consumer Focus is undertaking research on how well the national parcels market meets the needs of UK consumers. We are complementing this work with a preliminary study of UK consumers’ responses to cross-border e-commerce. The results of this research are due in March 2013 and we will be happy to share the findings with the Commission. For cross-border trade to flourish online shoppers need a strong voice across the EU and we look forward to working with the Commission to ensure that 21st century EU residents benefit from parcel services that meet their needs.

Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of ecommerce in the EU For more information contact Natasha Dare, 020 7799 8054 and [email protected] www.consumerfocus.org.uk Copyright: Consumer Focus Published: February 2013

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Consumer Focus response to the European Commission’s Green Paper consultation on An integrated parcel delivery market for the growth of e-commerce in the EU

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