Blog post

European e-commerce needs better visibility into cross-border delivery prices

Consumers, retail shippers, and European and national regulatory authorities could benefit from enhanced visibility into the price of shipping goods a

Publishing date
25 May 2016

The European Commission released a multi-faceted plan to boost e-commerce in Europe on 25 May. The plan includes provisions to increase the transparency of prices for cross-border parcel delivery, with an eye to lowering prices as a means of increasing European e-commerce.

What exactly is meant by transparency? Who needs visibility into what, and why?

Based on a preliminary reading, the Regulation on e-commerce that the Commission has just proposed seems to be very much in line with the general principles that we sketch out here.

High cross-border parcel delivery prices as an impediment to cross-border e-commerce

Almost 4 billion parcels are ordered online and delivered every year in the EU. The potential for e-commerce is however far greater – while 44% of consumers buy online in their own country, far fewer (15%) order online from another country. One of the biggest obstacles is the high cost of cross-border delivery. EU consumers could save over €11 billion each year if they chose from the full range of goods and services available when shopping online. Cheaper and more transparent pricing could also encourage more retailers to sell online.

The Commission announced in its Digital Single Market (DSM) strategy that it will work on improving regulatory oversight in the parcel sector and will look into the issue of price transparency, including the prices for basic delivery of parcels for small retail shippers.[1] Express and courier shipments are generally felt not to be an issue, because many firms in this space are vertically integrated and compete with one another. The prices that small shippers pay for basic delivery are widely felt to be the area where concern is warranted.

Vice President Andrus Ansip (who is in charge of the Digital Single Market) said in his statement at the May 2016 Bruegel event on cross-border parcel delivery and e-commerce: “If Europe is to have a high functioning DSM, it must also have affordable and high-quality cross-border parcel delivery services. We want to make parcel delivery cheaper, more efficient and transparent - and hopefully reliable too, with more choice for consumers."

As we explain in our companion paper, “E-Commerce in Europe: Parcel Delivery Prices in a Digital Single Market”, small retail shippers have consistently indicated that high cross-border parcel delivery prices are a serious barrier to their ability to conduct online business in other EU Member States. Small shippers appear to have few alternatives to shipment by the national postal operators, and often pay them the full published price. There are legitimate reasons for cross-border shipment to cost more than domestic, but actual published prices seem to be far higher in many Member States than can be explained solely on the basis of known differences in costs.

Shining a light into the gloom

During his talk, Vice President Ansip called for transparency as regards retail prices of national postal operators for 15 different categories (standard, registered and track and trace postal services of different weight categories) of letter and parcel delivery. This is entirely appropriate, in our view, but it again begs the question: What exactly is meant by transparency?

As we have explained in our companion paper, hardly any publicly available data exists today on:

  • actual payments between EU national postal operators as recompense for parcel delivery in another member state - the nominal global caps set by the Universal Postal Union (UPU) are known, but not the actual payments;
  • parcel delivery volumes between the member states; and
  • the fraction of shipments that benefit from negotiated discounts, nor the degree to which prices are discounted.

It is difficult to see how sound policy can be crafted and maintained in the absence of even the most basic understanding of the economics of the sector. These gaps have been long-standing – they were already flagged in the postal Green Paper of 1991, which led to liberalisation of the sector. They are not likely to correct themselves spontaneously. Since the information gaps relate to cross-border issues, they cannot be properly addressed solely by actions at member state level (which likely would be mutually inconsistent in any case in the absence of European coordination). The need for action at European level therefore seems clear.

In the public discussion, transparency however often blurs together two very different dimensions:

  • visibility and simplicity of retail prices offered to consumers (addressed in paragraphs 1 and 2 of article 4 of the Regulation); versus
  • visibility by European and national postal regulatory authorities into the economics of the sector (addressed in paragraphs 3 and 4 of article 4 of the Regulation).

What consumers and small retail shippers need is clarity and simplicity in pricing. This could arguably include standard published discounts for avoided costs where the shipper takes on burdens that would otherwise fall to the national postal operator, such as pre-sorting and delivery to the destination post office.

Not all information can or should be made public. For instance, we do not suggest that the contracts and discounts negotiated with large volume shippers be made public. The national postal operators are businesses that face either competition, or at least the threat of competitive entry. These contracts are legitimate proprietary business information, the public disclosure of which might well reduce economic efficiency in many ways.

Regulators at European and member state level need greater visibility into cross-border parcel economics in order to properly do their respective jobs. As we have explained in our companion paper, an understanding of the payment flows among the national postal operators, the “spreads” between those payments and the nominal published prices in the member states, the degree to which prices paid by medium to large shippers differ from those paid by consumers and small shippers, and the volumes of shipments of various types between the member states are essential. In general, aggregated data could be sufficient for these purposes.

How to provide regulatory authorities with the detailed information they need, without opening business-sensitive information up to the public, poses issues of institutional design; however, these challenges can be addressed. Similar problems have already been solved in other sectors (see BEREC 2016).


About the authors

  • J. Scott Marcus

    J. Scott Marcus is a Senior Fellow at Bruegel, a Brussels-based economics think tank, and also works as an independent consultant dealing with policy and regulatory policy regarding electronic communications. His work is interdisciplinary and entails economics, political science / public administration, policy analysis, and engineering.

    From 2005 to 2015, he served as a Director for WIK-Consult GmbH (the consulting arm of the WIK, a German research institute in regulatory economics for network industries). From 2001 to 2005, he served as Senior Advisor for Internet Technology for the United States Federal Communications Commission (FCC), as a peer to the Chief Economist and Chief Technologist. In 2004, the FCC seconded Mr. Marcus to the European Commission (to what was then DG INFSO) under a grant from the German Marshall Fund of the United States. Prior to working for the FCC, he was the Chief Technology Officer (CTO) of Genuity, Inc. (GTE Internetworking), one of the world's largest backbone internet service providers.

    Mr. Marcus is a member of the Scientific Committee of the Communications and Media program at the Florence School of Regulation (FSR), a unit of the European University Institute (EUI). He is also a Fellow of GLOCOM (the Center for Global Communications, a research institute of the International University of Japan). He is a Senior Member of the IEEE; has served as co-editor for public policy and regulation for IEEE Communications Magazine; served on the Meetings and Conference Board of the IEEE Communications Society from 2001 through 2005; and was Vice Chair and then Acting Chair of IEEE CNOM. He served on the board of the American Registry of Internet Numbers (ARIN) from 2000 to 2002.

    Marcus is the author of numerous papers, a book on data network design. He either led or served as first author for numerous studies for the European Parliament, the European Commission, and national governments and regulatory authorities around the world.

    Marcus holds a B.A. in Political Science (Public Administration) from the City College of New York (CCNY), and an M.S. from the School of Engineering, Columbia University.

  • Georgios Petropoulos

    Georgios Petropoulos joined Bruegel as a visiting fellow in November 2015 and was a resident fellow from April 2016 to February 2022. Since March 2022, he is a non-resident fellow. He is Research Associate at MIT, Digital Fellow at Stanford University and CESifo Network affiliate. Georgios’ research focuses on the implications of digital technologies on innovation, competition policy and labour markets. He is currently studying how digital platforms should be regulated, what the relationship between big data and market competition is, as well as how the adoption of robots and information technologies affect labour markets, employment and wages. He holds a Bachelor’s degree in Physics, Master’s degrees in mathematical economics and econometrics and a PhD degree in Economics. He has also studied Astrophysics at a Master's level.

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