Prices paid by online shoppers for cross-border deliveries in Europe are driven by e-retailer pricing policies and do not reflect the prices charged to e-retailers by delivery operators, according to an in-depth study commissioned by PostEurop which counters European Commission claims of “excessive” prices.
There is only a ‘low correlation’ between consumer delivery prices and parcel carrier rates, the study by Copenhagen Economics for the European postal association found. It also confirmed the dynamic growth of the e-commerce sector in Europe, which is driving rising parcel volumes.
PostEurop explained that it commissioned research institute Copenhagen Economics to carry out an independent investigation into the current state of the European cross-border parcel delivery sector, focussing on the factors which determine the prices for parcel delivery, to contribute to the debate on cross-border parcel delivery, as part of the European Commission's Digital Single Market Strategy for Europe (DSM).
Presented by the European Commission last spring, this strategy aims to help the EU’s Internal Market to ‘go digital’ by removing diverse obstacles such as geo-blocking, unconnected e-services – and inefficient cross-border parcel delivery services. Brussels claimed that one ‘digital obstacle’ is affordable cross-border parcel delivery, citing surveys showing than 85% of e-shoppers and 62% of potential cross-border sellers believe delivery prices are too high.
In December 2015, the Commission followed up by demanding ‘price transparency’ for cross-border delivery prices to encourage more retailers to sell online internationally and more European e-shoppers to buy from international websites.
The Commission citied a new econometric study on letter and parcel prices done by the Saint-Louis University which found that cross-border parcel prices are almost five times higher than their domestic equivalent in all products. The higher cost has little to do with the cost of parcel delivery in the destination country as there is no apparent link between the real cost and the prices of the delivery. In addition, in a public consultation on parcel delivery, a lower price for cross border delivery was identified as a main improvement that would make businesses and consumers buy and sell more online.
Vice-President Andrus Ansip, in charge of the Digital Single Market, stated: "Today, it often costs much more to send home something that you have bought from a website in another EU country than to have it delivered nationally, even when the distance is the same or shorter. The high prices and inefficiency of cross-border parcel delivery deter people from selling to, or buying from other EU countries. This means that e-commerce is not being used to its full potential.”
And Commissioner Elzbieta Bienkowska, responsible for Internal market, Industry, Entrepreneurship and SMEs, added: "Our objective is to make shipments of cross-border parcels seamless and more affordable for both individuals and SMEs – not by regulating prices or imposing caps but by increasing transparency and competition."
The Commission clarified that it does not plan to regulate cross-border pricing but said it intends to propose targeted measures to improve regulatory oversight and ensure transparency in spring 2016.
Jean-Paul Forceville, Chairman of PostEurop, said: "It's great to see the Copenhagen Economics report published today, ahead of the Commission's measures on cross-border parcel delivery in the spring. Let's not forget that delivery is only one part of an extremely competitive, dynamic e-commerce sector – and e-retailers play a leading role in setting the end-price online shoppers pay for cross-border parcel delivery."
Outlining the main findings, PostEurop said the report shows that “the price of parcel delivery is driven by a number of supply and demand factors, and the price online shoppers pay for cross-border parcel delivery does not reflect the prices charged by delivery operators”.
E-retailers play an important role in the end-price online shoppers pay for cross-border parcel delivery, it explained. A mystery shopping exercise revealed that there is a low correlation between the prices charged by e-retailers to e-shoppers and the prices that postal operators charge to e-retailers. E-retailers choose how to price the delivery service depending on e-shopper demands and the e-retailer’s general pricing strategy. For example, “free delivery” is offered if the purchase exceeds a threshold.
In other words, PostEurop explained, “in the delivery sector, as in other sectors, the price charged is market-driven. It is a commercial decision influenced by demand and supply factors such as consumers' willingness to pay, volumes flows or the relative bargaining power of e-retailers.”
The report also confirmed that the European e-commerce market is thriving, with domestic and cross-border online shopping on the increase. As a result, the parcel delivery market is benefiting with rising volumes while competition is also increasing, according to the report.
“A strongly developing market such as e-commerce draws many actors towards parcel delivery activity. Today, e-retailers have an abundance of choice from a wide-range of delivery operators, while big players like Amazon are expanding into delivery logistics. E-retailers can pick and choose how their goods can be delivered to meet their needs, provided by a diverse delivery sector. This benefits consumers in turn,” PostEurop stated.
The association also noted that figures published by Eurostat on cross-border online shopping underestimate its actual development. For example, e-shoppers tend to perceive a transaction as domestic if the website they order on is in their own language. In another instance, goods ordered from a local website may actually be delivered from a warehouse in another country. In 2014, 40% of online shoppers making their latest online purchase assumed the purchase to be from a domestic seller while the goods are from another EU country.
Summing up, PostEurop pointed out that European national postal operators deliver millions of parcels a day and play a key part in the delivery sector. “They are actively contributing to the success of a well-functioning, developing e-commerce market by providing affordable, high quality delivery services across Europe.
“The Copenhagen Economics report demonstrates that the e-commerce delivery sector – and delivery process – is highly competitive. It also challenges some myths and common misassumptions made about cross-border parcel delivery prices.”
