In 2018, the EU introduced a regulation that affects online business. The new legislation aims to fight the geographical segmentation of markets and prevent companies from charging differently based on where a customer is located.
It’s regulation that the EU claims will boost cross-border commerce. For retailers active across many markets, it has implications for your digital presence as well as how you conduct your operations.
The new rules essentially say companies have to provide the same online service across all EU member states and with the same conditions. It means retailers can’t discriminate based on where a customer is located within the EU.
It’s important to note that the new rules won’t force companies to charge the same price to all customers. It merely insists that customers must be able to see what other customers pay.
Although retailers aren’t obliged to deliver everywhere in the EU, they must make arrangements for customers to collect products they have bought. So even if, for example, you don’t deliver to Estonia, you’ll need to make it possible for Estonian customers to collect their purchases within your domestic market.
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For businesses in the U.S., this approach may seem rather complex. But in many parts of Europe, it has a long history. It was once quite common, for example, for Germans to hop over the border with Poland to fill their cars with cheaper Polish gas.
Across the EU, many people commute across borders for work on a daily basis. This makes it more likely that customers will insist on having access to the cheaper version of your product.
These new regulations also cover services. This means you can’t price-discriminate against customers from any EU member state when renting a car or a hotel room. Services that are delivered electronically (such as web hosting) are also covered by these new rules.
Wide reach
The new rules apply to companies based within EU member states, as well as those outside the EU selling to EU customers—including many in the U.S. Frustratingly for many EU web users, online content is already being geo-blocked by companies who want to avoid complying with the recent GDPR legislation.
GDPR is already having an impact on EU web users visiting non-EU websites. But the new EU geo-blocking regulation affecting online businesses is quite different.
People located in EU member states have been frustrated to discover they have been denied access to many U.S. sites since May 2018.
U.S.-based news sites such as the LA Times found it easier to block EU-based users or offer very stripped-down content after GDPR came into play.
However, this isn’t the kind of geo-blocking that the EU is trying to fight with its new legislation. Instead of forcing non-EU sites to make content available to EU citizens, the new regulation aims to prevent market segmentation that allow businesses to charge different rates to customers in different markets, or even in particular locations within the same markets.
It’s all part of the EU’s strategy of trying to create a single digital market within Europe.
Digital implications
If you’re currently serving multiple markets online, you need to be aware of how you’re delivering content to customers. The new rules state that you mustn’t automatically serve the local version of the website to a customer based on their location. This means if a customer visits your .com website and you identify their location as Italy, you cannot simply redirect them to the .it version of your website.
Instead, you must offer all customers the ability to browse your original website as well as give them a way to navigate to a different version if they so choose. From a language perspective, this makes perfect sense, as many users prefer to access a website in its original language rather than the language of their location.
H&M’s .com site always gives users the option to choose a country, as opposed to redirecting them to a version of their site based on their location.
Geo-blocking rules have been active since early December 2018, so it’s vital that you ensure your site is compliant. For some, this may mean a major reorganization of their site, especially if the site automatically redirects.
Remember that you don’t have to set the same prices across all EU states, but be aware that customers will now have access to the prices you are charging elsewhere.
This new regulation may have an impact on your company’s reputation, so be sure to proceed carefully. If you’re running sales or other promotions in some territories but not in others, be careful how you structure these offers so as to remain compliant with the new rules.
Research by the European Commission suggests that geo-blocking is in active practice right across the European Union. In 2016, 63% of eCommerce sites wouldn’t let you buy if you were based in another country.
Research has also shown that geo-blocking is most often practised in the household appliances and consumer electronics/computing sectors. Clothing and apparel were also commonly geo-blocked. Note that the new regulations may impact these sectors in particular.