How the EU’s ban on geo-blocking encourages cross-border e-commerce repricing
E-Commerce repricing or dynamic pricing is a well-honed tactic used by many e-tailers like Target, Mediamarkt or Amazon. The goal of this tactic is to dynamically adjust item prices up and down to either increase sales (by offering the lowest price) or improve margins (by increasing the price when competitors are out-of-stock, for instance). Studies have shown that 62% of consumers worldwide are open to the idea of fluctuating prices as long as it seems fair. The landscape of repricing continues to grow in complexity; under recent EU legislation, cross-border purchases are facilitated and e-tailers increasingly need to take them into account in their pricing strategy.
Repricing and localization pricing trends
Pricing algorithms have been continuously evolving and improving. Studies suggest that Amazon can reprice items as often as once every ten mins. While repricing tactics might differ depending on the business context, all movements generally come down to one thing: increase sales without sacrificing margins.
In the US, the practice of dynamic pricing and price localization is quite common. Online retailers are using smart pricing software to ensure they are the source of the best offers on the market. Even the larger brick-and-mortar stores have begun to apply localized pricing, although mainly on their apps and websites. For example, Walmart has used Jet.com’s “real-time saving engine” to offer its customers discounts, and Target has admitted that the prices on their app vary if they detect that the shopper is currently in a Target store.
In the EU, the law favors equal access to prices, sales and payment conditions of any given EU-based e-commerce site for all EU citizens. Location-based price discrimination is not permitted; additionally, the European Council introduced a new regulation in early 2018 that rendered geo-blocking illegal. Consumers can access great deals from any site across Europe and get the same purchase conditions as local consumers. Only shipping fees on physical goods are allowed to differ under this new regulation. As a result, the new rule has changed the way EU e-commerce sites function and support cross-border purchases.
Namely, there are three things that e-commerce sites can no longer do:
- Block sales based on the buyer’s location (except if the site does not support deliveries to their country).
- Force-redirect to a national site. For example, if a Spanish shopper is browsing Fnac.fr, the site cannot force him to browse Fnac.es instead.
- Offer different prices for the same item on the same site based on the shopper’s location in the EU.
Despite these rules, the use of repricing remains completely legal (as long as it applies to all consumers simultaneously). Competitor-based repricing, in particular, is the most common strategy. Everyone working in e-commerce knows that e-tailers actively monitor each other’s prices and quite often align with the market’s current lowest price.
European deal-seekers are encouraging cross-border repricing – with the help of Amazon
Amazon runs six regional sites across Europe. Their infamous pricing algorithm monitors the top e-tailers in each country, and most of the time, Amazon will match the lowest price, forcing other national e-tailers to align with them.
Because of the ban on geo-blocking, Amazon cannot force French shoppers to use Amazon.fr, German shoppers to use Amazon.de, etc. This means that savvy deal-seekers have the flexibility to shop around and get the best possible price from any European Amazon site. In fact, sites like Hagglezon.com allow users to instantly compare all Amazon prices.
In cases where the price difference between countries is significant, Amazon will start to see an influx of cross-border orders. In an interview with Reuters, Amazon revealed that their cross-border sales revenue increased by more than 50% compared to the prior years, accounting for more than a quarter of all revenue for sellers on Amazon globally. As the number of cross-border purchases increases, Amazon sometimes adjusts its prices on other sites to boost same-country purchases. This reduces the cost of shipping and other cross-border expenses that might be incurred. In turn, other national e-commerce sites adopt the new price point for those products.
“Amazon is the link that spreads promos throughout Europe,” said a BlueBoard customer, Senior Sales Planning manager at a major audio brand. “If an e-tailer in Germany is doing a promo, then Amazon Germany is going to follow. And eventually Amazon France, Amazon Spain, Amazon Italy… Then the e-tailers in those countries will follow as well.”
Prices are no longer national. Single price drops can now trigger continental chain reactions. This is the closest we have ever been to the digital single market in the EU.
Towards the digital single market in Europe
In its crusade towards the digital single market, the European Council has found an unlikely ally in Amazon. A future where national e-commerce players will have to account for continental price competition is now easily foreseeable. Recent studies have shown that more and more European shoppers are now open to cross-border shopping.
This new context is especially impactful for brands and manufacturers doing business in Europe as analyzing price trends or organizing a promotional calendar at a national level may soon become irrelevant. Check BlueBoard’s Price Monitoring solutions to learn more.