Christian Verschueren, EuroCommerce: “Protectionism harms retailers”

EuroCommerce, the voice of the European retail sector, promotes a level playing field for all retailers, regardless of their location or their sales channel. Director-General, Christian Verschueren, is concerned at the global rise in protectionism.

Level playing field

In a rapidly-changing world, it is no wonder that the digital transformation is high on EuroCommerce’s agenda. The organization, defending the retail industry’s concerns on a European level, wants a legal framework to facilitate the retail industry’s digital transformation without discrimination against companies that choose to focus on physical or online stores, the Director-General said. 

“The topics are varied, from fiscal structures and from social to environmental legislation. Think about the stores’ obligation to take back electrical goods. We want retailers to be able to fight on a level playing field. For instance: some European countries have a tax on a store’s square meter floorspaces, something that online players can obviously avoid. 

EuroCommerce in principle represents every retailer, Verschueren emphasizes: “Retailers are diverse, differing in size, format, product range, channel, business model and so forth…Many of them choose to go omnichannel, regardless of their origin. Look at companies like Otto, Tesco or Amazon: they are European leaders in eCommerce, but with a hugely different background. One comes from the mail order industry, the other is a classic food & general merchandise retailer and the third is a pure online player.”

“We have many major retailers in our organization, often from a food or traditional background, but we are also talking to the largest online retailers. EMOTA and E-commerce Europe, two eCommerce sector organizations, are also EuroCommerce members.” 

Digital single market 

One of the biggest topics of discussion is so-called “geoblocking”, the erection of digital boundaries preventing customers from looking at web shops in other countries. EuroCommerce largely supports the consumer who wants to be able to buy across borders and to be able to visit IKEA Germany or Zara France’s online shops, even though he is not a resident of that particular country. 

“In many cases, that is not an issue. If a Belgian consumer visits the Albert Heijn website, he’s referred to the Belgian website, but he can also choose to visit the Dutch site. Retailers can limit particular services (like shipments, payment services or product range). They adjust their services to meet the specificities of each market”, Verschueren clarifies.

“You cannot force retailers to ship everywhere and we feel it normal that they can limit payment services and shipping addresses. We have to find a balance here: we want a digital single market, but retailers should also have the freedom to choose their own sales territory. If someone only wants to be active in Belgium or even Flanders, then he should be able to do so. If bricks and mortar stores can do that, then online stores should have the same option.”

Another point of discussion is how manufacturers sometimes impose limits on their distributors, so-called territorial supply constraints. “Sometimes, there are huge price differences between European countries and retailers want to be able to take advantage of these. We understand that the ‘selective distribution’ business model can be an important asset to smaller retailers, because it used to be normal that a brand offered one store (chain) exclusivity in its sales region. We see this, for example, in the luxury brand market.”

“However, in the online world, those limitations fall away and it is difficult to keep these in place. We are talking about ‘freedom to sell’ and the ‘freedom to buy’. There are retailers that want to get rid of it all, while others would like to keep some form of exclusivity, so there is plenty to discuss.”

Discriminatory taxes

The rise of protectionism in Europe and in the rest of the world is a worrying development, Verschueren said. “International retailers suffer from this trend, which already surfaced several years ago in Hungary, with the Czech Republic, Romania, Bulgaria and Poland following on from them shortly afterwards. Foreign retailers face discriminatory taxes and excessive checks in these countries, which is why we have already filed several complaints with the European Commission. We cannot accept this behaviour, which is against all the principles of the single market.”

There is also a global protectionist trend since Donald Trump’s election. Trade agreements are being postponed or even cancelled outright. EuroCommerce feels this protectionist surge makes no sense. Retailers usually tend to opt for shorter supply chains and look for local solutions, especially when it comes to fresh produce. However, a government should not enforce this, Verschueren feels. 

“We have to let the competitive nature of business free rein. Moreover, this is not a matter of East vs West. Look at Poland: a modernized food industry, which resulted in cheaper and better poultry. The same does not go for the Czech Republic, which is why an increased number of Czech retailers get their supplies from Poland. That is simply the dynamic of the market.”

“The single market is good for industry and for the consumer, which is why we will continue to defend it. In the textile sector only 7 % of production takes place in Europe, but we should not complain about it: this has led us now also have cheaper clothes and shoes.”  

Hard Brexit

What will the Brexit’s consequences be for the retail industry? “It depends on your position. For British retailers, Brexit will lead in the short term to higher prices, because the pound has gone down in value. For British companies focused on export, they can actually benefit from a cheaper currency.”

In the meantime, it has become clear Great Britain will go for a so-called “hard” Brexit. “The current zero tariffs will disappear and we will need to see what comes out of new trade agreements. As with other countries, we will probably get border tariffs again, which will impact our European companies’ entire supply chain, but that will not be the only issue to tackle.”

“A company like IKEA has several thousand expats in the United Kingdom. What will their situation be? There are very uncertain times ahead. We mainly regret losing the United Kingdom as a political ally striving for fewer rules.” 

Fair supply chain relationships

“The discussion about the commercial relationships between food retailers and their suppliers (including farmers and brand manufacturers) is very important. Do we need legislation to govern this or not?”

“If there is one country that does not need EU legislation on this, it is Belgium: there is a sustained dialogua among partners. There may be conflicts sometimes and pressure on one or other partners who adopt unfair practices. But such practices are sorted out through dialogue, and it works very well.”

EuroCommerce would like the same approach at a European level, with the Supply Chain Initiative. “We do not want silly and rigid legislation, because that often leads to bureaucracy and therefore a loss of efficiency and an increase in cost. Do we really need rules for payment or negotiation periods?”

“Does the government really need to address discount contributions, because that will only lead to a more tense relationship between negotiating partners. There is a legal framework for the 10 largest retailers in the United Kingdom, but it leaves plenty of room because of a smart and rapid application of the Code Adjudicator itself.”

Unfortunately, the agricultural sector refused to cooperate, Verschueren said. “We understand they face huge issues going forward and we would like to help them adapt to a more market-oriented approach. There have already been deals for milk and pork in Belgium, but we do not think a stricter legal foundation is necessary. On the contrary, such a framework would rather protect the major multinational brands rather than the farmer. Frankly, those companies are perfectly capable and willing to negotiate with retailers directly.”