(619)2.1 The concentration of manufacturers and retailers in the sectors covered by the sector inquiry -
The degree of market power of parties to an agreement is a relevant aspect for the assessment of vertical restraints, as acknowledged by the Vertical Block Exemption Regulation ("VBER").96 While the sector inquiry covers broad product categories that do not constitute relevant markets for the purposes of EU competition law, the results of the sector inquiry offer general insights regarding the level of concentration in the product categories covered, both at the retailer and manufacturer levels.
-
In order to approximate the level of concentration of manufacturers and retailers in the product categories covered by the sector inquiry, the Commission requested manufacturers and retailers to name their "most important competitors" in the product categories in which they are active.
-
The main manufacturers are active in the majority of Member States, with the exception of the category of house and garden where most manufacturers are only active in a few Member States. In clothing and shoes, more than 20 manufacturers are mentioned in each Member State, with the same 5 to 10 brands listed throughout all Member States. In the toys and childcare category, also the same 5 to 10 manufacturers are typically mentioned as main competitors in all regions of the EU. More than 20 manufacturers are mentioned in consumer electronics, in all Member States, referring largely to the same players. 10 to 20 manufacturers are reported in electrical household appliances, and sports and outdoor equipment. Over 20 main brands are mentioned in all Member States in cosmetics and healthcare, with a significant portion of those listed in the majority of Member States.
-
At the retail level, in clothing and shoes, consumer electronics, as well as in cosmetics and healthcare, a significant number of retailers are mentioned as main competitors, with however a few retailers being active in nearly all Member States, and the leading (most mentioned) retailers varying from one Member State to the other. In household appliances, computer games and software; and in media, apart from one online player that is active in most Member States, the main retailers differ from one region of the EU to another.
-
The findings of the sector inquiry do not indicate a high level of concentration at the manufacturing or retail level in the covered product categories. These findings are, however, without prejudice to the assessment of the relevant product and geographic markets in a particular case.97
Summary
The responses provided in the sector inquiry do not generally point to a high level of concentration at the manufacturing or retail level in relation to the covered product categories: the number of manufacturers and retailers perceived as main competitors is significant throughout the different regions of the EU.
(620)2.2 Main parameters of competition -
In order to understand better the competitive landscape in the sectors covered by the sector inquiry, the Commission sought the views of both retailers and manufacturers regarding the importance of various parameters of competition.
Figure B. : Rating the parameters of competition by manufacturers98
-
Although there are some differences between product categories in terms of the importance of each parameter, product quality, brand image and the novelty of the product are given the greatest importance by manufacturers in all product categories (with the exception of media products99). Ranked on the basis of the proportion of respondent manufacturers that have attached to it the highest level of importance, price only comes at between the fourth and sixth place, with on average only about 20 % of the manufacturers considering it as highly important.100
-
Under "other" parameters, manufacturers mostly stress the importance of the creative / innovative nature, the safety, the design, the ease of use of the product, the quality of the distribution network, the individual shopping experience, the ability to offer personalised advice, the satisfaction of individual customer needs, the number of points of sale, the delivery time, the diversity of products and environmental/sustainability considerations in the production process.
-
Responses by retailers show a different picture. In particular, ranked on the basis of the proportion of respondents that have attached to it the highest level of importance, price emerges as either the most or the second most important parameter of competition throughout all product categories. The range of brands, availability of the latest models and quality are the next three most important parameters of competition. However, the importance of parameters varies according to the sales channel the retailer uses. Figure B. shows the responses by hybrid players which operate both offline and online shops, while Figure B. represents the responses by pure online players.
Figure B. : Rating the parameters of competition by hybrid players101
Figure B. : Rating the parameters of competition by pure online players102
-
Price is the parameter which is considered highly important by the highest proportion of both hybrid and pure players in nearly all product categories.
-
However, in terms of proportion of retailers which attach to it a high level of importance, quality and customer service is often higher ranked by hybrid players, while the range of brands and/or availability of latest models are typically higher ranked by pure online players. In the product category of cosmetics and healthcare, a higher number of both hybrid and pure online players attach the highest level of importance to quality, rather than to price.
-
Marketplaces were also asked about the importance of various parameters of competition with other marketplaces for buyers. For them, the range of available products as well as the marketplace image and user-friendliness of the website precede price considerations.
Figure B. : Rating the parameters of competition with other marketplaces for buyers103
-
Marketplaces were also asked to indicate the level of importance of a number of pre-defined factors for attracting sellers to their platform. On average, across product categories, the factors to which marketplaces attach the highest importance are number of buyer visits followed by conversion rates and charges to professional sellers.
Figure B. : Rating the parameters of competition with other marketplaces for sellers104
-
Price comparison tools were asked about the importance of several factors for competing with other price comparison tools for buyers. As can be seen from Figure B. , price comparison tools consider the availability of the latest product models as well as the range of available products as important. User-friendliness and the number of registered sellers are also factors considered as important. The ability to be found by search services, speed, and the accuracy of data/prices were also mentioned as key factors for competing with other providers.
Figure B. : Importance of certain parameters of competition with other price comparison tools for buyers105
-
Price comparison tools were also questioned about the importance of several factors in attracting more sellers on their website/app. The factors considered of highest importance by the largest proportion of respondents are the number of customer visits and charges applied to sellers followed by the image of the price comparison tool and the quality of product presentation. Geographic coverage as well as product and customer reviews were considered as less relevant.
Summary
Product quality and brand image are considered to be the most important parameters of competition by manufacturers, while price is considered as most important for both pure online and hybrid retailers. Quality and range of available brands are the second and third most important parameters for hybrid players, while the range of available brands and availability of the latest models are respectively the second and third most important parameters for pure online players. Marketplaces consider the range of available products, the marketplace image, user-friendliness, and the price of products as the parameters of the highest importance for their ability to compete for buyers.
(621)2.3 Pricing -
The results of the sector inquiry show that the increased price transparency online is the feature that most affects the behaviour of customers and retailers. It lowers search costs for customers who are able to instantaneously obtain and compare product and price information online and switch swiftly from one channel to another (online/offline). Manufacturers and retailers are also able to easily monitor prices.
-
The ability to directly compare prices of products across a number of online retailers, leads to increased price competition, affecting both online and offline sales. The ability to easily compare prices furthers cross-border trade as customers can more easily compare between products or services from different Member States and benefit from price differentials of competing retailers.106 Likewise, if a retailer in one Member State is contemplating entering the market in another Member State, this is facilitated by better awareness of the conditions in that market.107
-
53 % of the respondent retailers track the online prices of competitors, out of which 67 % use automatic software programmes for that purpose. Larger companies have a tendency to track online prices of competitors more than smaller ones. The majority of those retailers that use software to track prices subsequently adjust their own prices to those of their competitors (78 %).108 For more details on price tracking and price adjustments, see section B.4.6 Pricing restrictions.
-
The frequency of online price adjustments depends on the sector, but daily and promotional price changes are reported as the most prevalent ones, as can be seen from the Figure B. below.
Figure B. : Frequency of modifying online prices109 based on the responses of retailers
-
Price comparison tools report that daily online price changes are prevalent across sectors, whereas weekly price changes are also frequent. Seasonality plays a role for the category house and garden, and somewhat for sport and outdoor equipment, as well as clothing. Marketplaces indicate that almost one-third of prices change on a weekly basis. Most of them report daily changes for computer games, software and consumer electronics.
-
Dynamic/personalised pricing, in the sense of setting prices based on tracking the online behaviour of individual customers, is reported as rather rare. 87 % of the retailers participating in the sector inquiry declare that they do not apply that type of pricing. No pattern in terms of size or profile can be established among the few retailers (2 %) explicitly declaring that they use or have used such dynamic/personalised pricing. Such pricing strategies may, however, be used more frequently in the future, as the technical ability to collect and analyse large amounts of customer-specific data increases possibilities to differentiate between customers and provide targeted, individualised advertisements or offers (see also section B.5.1.3 The use of data in e-commerce and potential competition concerns).110
-
In order to understand the pricing strategies of the different market players, the Commission requested information on various aspects of manufacturers' and retailers' pricing, and in particular on (i) the differences between online and offline pricing of goods; (ii) pricing in case of cross-border transactions; and (iii) agreements on pricing between manufacturers and retailers. This section reports on online and offline pricing. The findings on the latter two issues are set out in sections B.4.3.2.6 Geo-filtering and cross-border price and offer differences and B.4.6 Pricing restrictions respectively.
-
Most hybrid retailers that responded to the specific question (80 %111) do not set different prices online and offline. Retailers that do so give diverse reasons for setting different prices. According to their explanation, the response depends among others on the business model of the company. Some respondents see their online business as ancillary to their offline activities. For instance, they sell online only to clear/liquidate stock and therefore set lower prices online. Others have the opposite business model. They are mainly active online and have a few showrooms to complement their online activities. Other respondents do not treat their online and offline activities interdependently and manage their online and offline businesses separately. Finally some of the respondents have a genuine omni-channel approach and consider these channels as parts of one single distribution system.
-
The majority of retailers that elaborated on price-level differences explain that their online prices are lower due to more intense price competition online. Others indicate that lower online prices are also due to lower costs, such as the lack of showroom costs and substantially lower pre-sale services' costs. In turn, others suggest that online prices for some products are higher. The main online-specific sales costs retailers mention are delivery costs, platform commissions and payment transaction fees. The main offline-specific ones are showroom and staff costs.
-
The majority of hybrid retailers (70 %112) do not achieve different margins online and offline. However, two thirds of the hybrid retailers that charge different prices online and offline113 also achieve different margins across the two sales channels and about a fifth of the hybrid retailers that charge the same prices online and offline114 also achieve different margins. Half of those achieving different margins charge different prices across the two channels, while the other half do not. The majority of those achieving different online and offline margins report that their online margins are lower.
-
The results of the sector inquiry also indicate that any existing price differences between the online and the offline channels cannot be explained by different wholesale prices. Only 26 respondent retailers115 report that they pay different wholesale prices depending on whether products are meant to be sold online or offline and only half of them pass these differences on through the retail prices.116
Summary
Increased price transparency and price competition are the features that most affect the behaviour of market players and customers.
Online prices are adjusted frequently. Retailers increasingly track online prices of competing sellers and many of them react instantaneously to adjust their own prices accordingly. 53 % of the respondent retailers track the online prices of competitors, and 67 % of them use also automatic software programmes for that purpose. Larger companies track online prices of competing sellers more than smaller ones. 78 % of those retailers that use software to track prices subsequently adjust their own prices.
The majority of the respondent retailers do not set different prices online and offline. 70 % of hybrid retailers do not achieve different margins online and offline. However, two thirds of the hybrid retailers that charge different prices online and offline achieve different margins in these two sales channels. Respondents indicate that online prices are lower due to greater price competition and lower operational costs.
(622)2.4 Differences between online and offline offers -
The Commission also investigated to what extent retailers differentiate their product offering online and offline.
-
Approximately 70 % of respondent retailers117 offer roughly the same number of brands online and offline. Slightly less than 20 % offer more brands online than offline, while approximately 10 % offer a greater brand choice in their brick and mortar stores.
-
In terms of models (within the offered brands), 21 % offer a greater choice of models online than offline, while only 6.5 % provide a greater choice of models in their brick and mortar stores.
-
The main reasons mentioned for offering a greater choice online are as follows: space and stock level constraints in brick and mortar shops (not enough space to show and/or stock all brands and models); competitive pressure by pure retailers to present an exhaustive offer online; marketing reasons (such as avoiding to show models in brick and mortar shops where many sizes are no longer available, whereas the models with "missing" sizes would only be available online as many customers search by size or to clear stock); greater flexibility (easier to add or remove products, change prices, add product-descriptions online, etc.); shipping of products from centralised warehouses allows for easier logistics; and the complementary nature of the types of products offered in different sales channels (typically, the more popular brands/models would be sold online while the more exclusive ones offline, the older models online while the new models offline).
-
The main reasons listed by respondent retailers for offering a wider choice in their brick and mortar shops are: less developed website with the desire to keep the core business in the brick and mortar shop (one of the main reasons for this mentioned by the retailers is the quick price "erosion" online/low online profit margins); limits on the sale of certain brands or certain models of a brand (high end products, new models) online; the avoidance of delivery issues; and the cost and resource-intensity of maintaining a complete online catalogue.
Summary
72 % of the respondent retailers offer an equivalent choice of brands and models offline and online. Approximately 20 % offer a greater choice online while less than 10 % offer a greater choice offline.
Dostları ilə paylaş: |
