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News - 2 April 2011

Growth in ecommerce could be stifled by EU legislation

IMRG estimates that the draft amendments to the Consumer Rights Directive voted through last week will cost online retailers an additional €10 billion per year in delivery charges, which amounts to 4% of the estimated worth of the e-commerce industry in 2012. The IMRG claimes this threatens to completely derail growth and prevent the development of the digital economy.

The cost of EU returns to e-retailers without the new EU legislation is around €5.7 billion, based on the prevailing rate of 90% domestic and 10% cross-border returns. With the new EU legislation in place that cost is expected to soar to €15.7 billion, which the IMRG believes is unsustainable. This hike in operating costs will force many smaller retailers out of business.

The changes to the legislation would give consumers greater powers of refusal ie longer to return goods and free returns. Human nature is such that people will take advantage of the terms to the detriment of busineses.

James Roper, CEO at IMRG, commented on the findings, “These new amendments from the EU are some of the most disastrous for the online industry yet. As well as being unnecessary they would inevitably lead to significant price increases being forced onto already hard-pressed consumers, pushing up prices across all retail channels, and disadvantaging SMEs to the point where many would be forced to cease trading online altogether.

“The internet has introduced levels of choice and price competitiveness that have greatly benefited consumers around Europe and the world, but this will be eroded if these damaging proposals go through, as the efficiency and transparency of the internet will largely be lost.

“SMEs are the lifeblood of Europe’s economy, innovating and generating wealth and jobs. Today, when anyone decides to set up a new business, the first thing they do is buy a URL and build a website – the internet is the route to business. This proposed legislation will bring risk, complexity and cost to trading online that will remove the option to do so for many start-ups, preventing smaller businesses from being able to get established in the market.

“e-Commerce is now a fundamental part of Europe’s economy, so it is critical that EU politicians carry out in-depth research and consult with those who actually operate the industry before making decisions that can seriously disrupt its development. In this instance they have tried to cut too many corners and these ill-judged amendments are the result. Without redrafting these extremely damaging legislative changes, the negative impact will not just affect the online shopping industry, but the entire economic recovery as a whole.”

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