K-Zine

The realities of the online marketplace - the lessons to be drawn from a recent European Consumer Centre's Network study

A recent study published by the European Consumer Centre's Network entitled "Realities of the European online marketplace" (which included a review of 15 Irish web traders out of a total of 262 web sites) revealed some very interesting findings.

Over a period running from the end of 2002 into the early part of 2003, 114 orders for goods were made and 262 websites were examined.

The products chosen for the study sought to reflect the "popular Internet purchases" and included; clothes, computer consumables, CD's, DVD's, toys, books and a watch.

The primary focus was to see how the reality of the online shopping experience compared with the requirements of the Distance Selling and the E-Commerce Directives with a special focus on the cooling- off period.

For businesses that are trading online or intending to grow this channel there are some very important lessons to be drawn from this study.

Here are some of the more interesting findings;

Although the Internet is perceived as "a global marketplace" the majority of EU online traders surveyed only operate in their domestic market. A small minority operate cross border. Some of the websites surveyed specifically excluded cross border sales and others not engaged in cross border sales failed to make this clear.
Overall the study categorised the "online shopping experience" as poor. In many instances orders were not delivered, essential information about consumer's rights was omitted and the cost of returned goods was not reimbursed.
Of the total of 114 orders placed only 75 resulted in a delivery. In other words 34% of the products ordered were not delivered and in 8% of the cases the products were not delivered even though they had been paid for.
In 24% of the cases where credit cards were used, payment withdrawn before the goods ordered had been delivered.
Where goods were returned in 31.5% of the cases no refund was received and in only 37% of the cases did the return result in a refund including the delivery fee.
8% of the orders placed generated no response whatever from the online trader.
18% of the orders were confirmed but no delivery was effected.
In 5% of the cases no order confirmation was received but the goods were subsequently delivered.
8% of the orders resulted in an order confirmation, a charge for the goods but no delivery.
3.5% of the orders were confirmed, delivered but not charged.
57% of the orders resulted in confirmation of the order, delivery of the goods and the charge being deducted.
The overall delivery rate for goods ordered only amounted to 66%

The relevant EU Directives impose certain clear obligations on businesses selling to consumers online. The study revealed some interesting findings about these requirements which are briefly outlined below:

Final Cost

All websites selling to consumers as well as order confirmations must clearly state the total price of the transaction including delivery fees to be debited. A comparison between the confirmed and charged price found them to be the same in 96% of the cases.

Receipt or Invoice

Consumers must receive a receipt or equivalent record of the transaction. 83% of the deliveries included such a receipt.

Information in writing of revocation and returning rights.

Online traders must give consumers information on how to return goods if dissatisfied as well as outlining the consumer's right to return the goods during the "cooling off period".

Online traders can provide this information on the website or with the order confirmation but best practice would also include this information when delivery is made.

36% of the deliveries included this information. However only 56% of the deliveries contained information as to how to exercise the right in the case of the particular transaction.

After-sales service, warranty and guarantee conditions

Equivalent requirements exist here as for revocation and return. The study showed that only 31% of the deliveries included this information.

Returns

As referred to above, consumers have the right to avail of the right to return the goods purchased during the "cooling off period" and to be informed of this right. The study found that in 56% of the deliveries this information was not provided.

Consumers are not obliged to give a reason for returning the goods yet the study found that in 24% of the cases the web trader concerned demanded a reason for the return.

The Distance Selling Directive requires that the only cost that the consumer should pay in returning goods ordered is the direct cost of returning the goods - in other words the return freight charge. This means that if the web trader charged a delivery fee to the consumer this should be refunded.

The study found that in 63% of the cases where goods were returned either no refund was made or the refund made excluded the delivery charges that had been levied.

Conclusions

This study has thrown up some very interesting findings which point to some serious concerns about the realities of cross border consumer shopping - concerning the failure to meet the legal requirements laid down by the Directives.

As an example - the report authors point out that it is hardly satisfactory if only 66% of the goods ordered were in fact delivered, or that in 24% of the cases the consumer paid for the goods before delivery or that in only 56% of the cases did the web trader inform the consumer of its returns procedures.

This study suggests that in reality cross border consumer shopping is not yet that "consumer friendly" which would point to the existence of a clear inhibitor to the growth of this important sector.

The Director of Consumer Affairs is on record as saying that her office will take enforcement action for breaches of the Distance Selling and E-Commerce Directives - so it is important that Irish web traders take steps to address any deficiencies in their online operations especially as regards sales to consumers.