E-COMMERCE SECTOR INQUIRY

 

E-commerce is the trading or facilitation of trading in products or services using computer networks, such as the Internet or online social networks. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction’s life cycle although it may also use other technologies such as e-mail.

The European Commission’s final report on the e-commerce sector inquiry identifies business practices that may restrict competition. It allows the Commission to target its enforcement of EU antitrust rules in e-commerce markets and has already prompted companies to review their practices.

Commissioner Margrethe Vestager in charge of competition policy said: “Certain practices by companies in e-commerce markets may restrict competition by unduly limiting how products are distributed throughout the EU. Our report confirms that. These restrictions could limit consumer choice and prevent lower prices online. At the same time, we find that there is a need to balance the interests of both online and ‘brick-and-mortar’ retailers. All to the benefit of consumers. Our findings help us to target the enforcement of EU competition rules in e-commerce markets”.

Choosing the right online store platform is very important for business owners. The two most popular choices for e-commerce are Magento and Shopify. While both offer many features and benefits, Magento runs 14 percent of the top one million shopping sites, and 10% of all ecommerce online.

The most important thing about the two platforms is how they are used. Magento runs very large websites such as Olympus, Ghiradelli and Nike. Shopify is used by the Los Angeles Lakers and Tesla but is usually the choice of smaller businesses.

Magento wins for SEO, generating much higher interest than Shopify. Another large difference is coding flexibility. Magento is an open-source application written in PHP. This means it can be easily modified for individual business needs.

Shopify’s code is proprietary, meaning it cannot be altered. This makes Magento a better choice for more complex stores that require extensive customization, such as seasonal templates, special URLs and meta descriptions.

Shopify is a hosted service that requires a monthly subscription fee. Magento is a self-hosted platform that is maintained by the business or a developer.The pricing scheme for Shopify starts at $29 per month and goes up to $179 per month. While the higher-priced Shopify tiers offer benefits like payment gateways and abandoned shopping cart recovery, the service also takes a percentage of each sale in transaction fees, which can quickly cut into a company’s bottom line. Magento’s community edition is free to download and host wherever the business wants to, according to need and budget.

Both platforms are very basic out of the box and require add-ons to build a store. Magento is the leader with over 5,000 add-ons, compared to 100 for Shopify. Magento also offers more upfront features for customers, including wishlists, coupons, related products, gift cards and a fast checkout.

One of the biggest challenges for an e-commerce presence is scaling as the business grows. Shopify is limited in its ability to scale, while Magento can be as large and flexible as a company needs, making it the right choice for future expansion. Magento is also 20 percent faster than Shopify, which provides a better user experience for visitors.

While both platforms include tools to build an online store, Magento makes it very easy for administrators to access reports, set up payment processors, organize products and manage customers. Easy management frees up time to expand the business and increase profits. Magento also has a strong community behind it that always available for help and advice.

When it comes to e-commerce platforms, the goals of the business and the budget at hand will decide whether Shopify or Magento is the better choice. For stores with a small number of products, Shopify is a good starting point. When a company wants unlimited growth and flexibility with a large inventory, Magento is the clear winner.

 

One of the main goals of the Commission’s Digital Single Market strategy is to ensure better access for consumers and businesses to goods and services. The e-commerce sector inquiry complements the Commission’s legislative proposals in this regard. The objective of the sector inquiry was to allow the Commission to identify possible competition concerns in European e-commerce markets.

The report published today presents the Commission’s definitive findings, taking account of comments received on the preliminary report of September 2016 and confirming to a large extent the preliminary report’s conclusions.

The insight gained from the sector inquiry will enable the Commission to target EU antitrust enforcement in European e-commerce markets, which will include opening further antitrust investigations. In February 2017, the Commission already opened three separate investigations into holiday accommodation, PC video games distribution and consumer electronics pricing practices that may limit competition.

Furthermore, the sector inquiry has prompted companies to review their commercial practices on their own initiative. This can help consumers to purchase products more easily cross-border and benefit from lower prices and a wider choice of retailers. The Commission is aware and welcomes that companies in the clothing industry – Mango (belonging to Punto Fa), Oysho and Pull & Bear (both belonging to Inditex), and Dorothy Perkins and Topman (both belonging to Arcadia) – but also other retail sectors (the coffee machine producer De Longhi and photo equipment manufacturer Manfrotto) have reviewed their practices.

Consistent interpretation of EU competition rules on e-commerce related practices is essential for businesses when devising their distribution strategies in the EU. On the basis of the sector inquiry findings, the Commission will broaden the dialogue with national competition authorities within the European Competition Network on e-commerce-related enforcement to achieve this. More enforcement by the Commission will also provide guidance to stakeholders on specific e-commerce related practices.

Main Findings

Consumer goods

The report confirms that the growth of e-commerce over the last decade and, in particular, online price transparency and price competition, had a significant impact on companies’ distribution strategies and consumer behaviour. The final results of the sector inquiry highlight the following market trends:

  •      A large proportion of manufacturers decided over the last ten years to sell their products directly to consumers through their own online retail shops, thereby competing increasingly with their distributors.
  •      Increased use of selective distribution systems, where the products can only be sold by pre-selected authorised sellers, allows manufacturers to better control their distribution networks, in particular in terms of the quality of distribution but also price.
  •      Increased use of contractual restrictions to better control product distribution. Depending on the business model and strategy, such restrictions may take various forms, such as pricing restrictions, marketplace (platform) bans, restrictions on the use of price comparison tools and exclusion of pure online players from distribution networks.

Some of these practices may be justified, for example in order to improve the quality of product distribution. Others, however, may unduly prevent consumers from benefiting from greater product choice and lower prices in e-commerce and therefore warrant Commission action to ensure compliance with EU competition rules.

Digital content

The results of the sector inquiry confirm that the availability of licences from contentcopyright holders is essential for digital content providers and a key factor that determines the level of competition in the market.

The report points to certain licensing practices which may make it more difficult for new online business models and services to emerge. Any assessment of such licensing practices under the EU competition rules has however to consider the characteristics of the content industry.

One of the key findings of the sector inquiry is that almost 60% of digital content providers who participated in the inquiry have contractually agreed with right holders to “geo-block”.

Content providers can engage in geoblocking for objectively justified reasons, such as to deal with VAT issues or certain public interest legal provisions. The Commission has already proposed legislation to ensure that consumers seeking to buy products and services in another EU country, be it online or in person, are not discriminated against in terms of access to prices, sales or payment conditions, unless this is objectively justified for a specific reason. The Commission has also made proposals on the modernisation of the EU copyright rules to notably increase the access to audiovisual content online across borders, while taking into account the important role that territorial exploitation of audiovisual content plays for the financing model of the European audiovisual sector. Both proposals are currently being negotiated with the European Parliament and the Council.

Any competition enforcement in relation to geo-blocking would have to be based on a case specific assessment, which would also include an analysis of potential justifications for restrictions that have been identified.

2017 will be another exciting year for eCommerce industry, but there are some major challenges for retailers. If you want to develop a winning e-commerce marketing strategy, you’ll need to start planning now. We live in the age of the digital buyer. Today’s customers are not average, they’re wise to the ways of marketing channels. If you really want to win a customer, you must be obsessed with him/her, understand their pain point or needs and provide a relevant solution.

Most of the people are spending their time online and prefer to shop products online. These days, 51% of Americans prefer to shop online rather than in stores—a figure that jumps to 67% for Millennials and 56% of Gen Xers. In 2016, total retail e-commerce sales across the globe reached $22.049 trillion. Sales will top $27 trillion in 2020, even as annual growth rates slow over the next few years. When it comes to e-commerce, men drive nearly as much spending online in the U.S. as women. Men are more likely to make purchases on mobile devices. 22% of men made a purchase on their smartphones last year, compared to 18% of women.

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