As Christmas draws near, I suspect many of you have been resorting to online shopping for some of your gifts this year. I’m already getting the messages from vendors telling me that I’m going to be too late for shipping to arrive by Christmas, so perhaps by now the rush is about over for them. But I suspect it will be another positive year for online sellers. In fact, having spent a couple of days out shopping this season, I ask myself why I don’t do everything online. With great shipping service, it is all too convenient just to let your fingers do the walking.
A recent article shows that internet sales options often have higher gross margins than other brick and mortar stores. A study by Forrester research indicates that such margins are double those of traditional stores. (That article can be found here:
Labor cost savings, as well as the avoided costs of expensive retail locations, are bound to contribute to the difference. However, one thing that really drives the alternative sales medium is the trust consumers have for the online experience. We believe we will be treated fairly, and thus we feel confident in ordering through the Internet.
One of the topics discussed at the IBLT conference (see my post from last Sunday) was the matter of retail selling on the Internet in the European Union. Gosta Petri, an administrator for the European Commission involved in consumer protection, spoke on the challenges of harmonizing national treatments for consumer protection. A survey of EU consumers found that only six percent made cross-border purchases on the Internet. By comparison, between 20 and 30 percent made purchases within their national boundaries. More than 50 percent thought that a cross border purchase would subject them to greater risks, and that their interests were less likely to be protected.
The business community also matched this sentiment. Only 25 percent advertised or marketed to members of other EU states. This low percentage was apparently attributable to the fact that some 42 percent thought that complying with the regulations of other nations was an obstacle to trade. (However, some 20 percent thought this was not a problem.)
Though I think in the U.S. we often have the option of purchasing goods from U.S. sellers, these purchases would often cross state borders. With the exception of wine merchants, who are still operating with some constraints on sales of alcoholic beverages within particular state borders due to regulatory requirements, we find few markets that are fragmented. Sales tax obligations perhaps come the closest to fragmenting U.S. markets, as some sellers have minimum contacts in some jurisdictions, but not others, which are sufficient to provide nexus for tax purposes. However, for the most part, we can thank the expansive interpretation of the dormant Commerce Clause for removing a lot of friction from the marketplace.
We all have some distance to go before we can truly have free trade. However, it appears that there is sentiment for greater harmonization and less friction in the E.U. We’ll see whether they can get that done. And in our own country, we need to focus on eliminating barriers that keep us from trading freely here within our own borders, as well as with other countries.