Mail Order Selling In Europe--Direct Marketing, Mail Order, E-commerce News

Direct Marketing, Mail Order, and E-commerce News from the National Mail Order Association

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Distance Selling in an enlarged European Market
By; Juraj Sebo, Chairman, Slovak association of mail order trade.

(Note: In Europe, mail order and direct marketing is also referred to as Distance Selling.)

Today’s trends and issues in Eastern and Central Europe within the distance-selling
sector are much different than they were before. The effect of EU legislation on this
trade sector and the development of the cross boarder distance selling market, as
well as the challenges and obstacles, distance selling companies face a brand new
situation.

About distance selling

Years ago, the mail order sector was a purely mail driven business: catalogues were
sent and orders came in by mail and parcels were delivered by mail. Over the last
decade we have seen many changes due to the further penetration of the telephone
first and the Internet in more recent years.

This sector today encompasses therefore all forms of on-line communications and
commercial proposals through e-mail, websites, interactive television, mobile
communication or any other interactive means of communication.

The products and services offered, range from textiles, clothing, books, CDs and
electrical appliances, to gardening articles, wines, financial and travel services.
As the definition of “distance selling” gets wider under the influence of online
activities, the range of goods and services expands: airline and railway tickets,
theatre tickets, supermarkets like Carrefour and Tesco.

We see today a wide range of companies offering these goods, combining traditional
companies which have extended their online activities, online retailers and the TV
home shopping is starting to be an important part of distance selling sector in
eastern and central European countries.

Postal services remain important for distance-selling sector given the more than
25 billion items were sent, ranging from catalogues and mailings to parcels.

Telephone ordering counts for around 35 to 40 % in average.

M-commerce (mobile phone commerce) is emerging within the sector.

Distance selling sector is represented at European level by the European Distance
Selling Trade Association (EMOTA). EMOTA includes 19 national associations,
15 of which are coming from countries member of the EU, as it stands today:
Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany,
Great Britain, Hungary, Ireland, Italy, The Netherlands, Greece, Slovak Republic,
Spain and Sweden, together with Norway, Russia and Switzerland.

More countries are likely to join up in the coming years as Central and Eastern Europe
develops.

It is possible to define the sector today in two words, multi-channel and multi-market.

Multi-channel means that companies communicate and interact with consumers
through a range of “channels” or “means of communication”, such as catalogues,
mailings and other printed documents, telephone, call centres, the Internet, mobile
phone etc. A consumer today might call to receive a catalogue, looks for more
information on the website of the company and orders over the Internet or the phone.

He receives the parcel at the place of his/her choice delivered by the Post or a postal
competitor and has a variety of payment methods at his/her disposal.

What all these media have in common is the element of distance and the fact that
company and consumers do not meet face-to-face, although many of our companies
have set up shops.

The word multi-market refers to the opportunities and challenges that an enlarged
Europe offers to our companies. Many of our companies are present in different
national markets aiming to offer a competitive range of goods and services and
an even better and more direct service to customers. The importance of cross
boarder distance selling is increasing. Today it is approximately 4% of goods sold.

Importance of on-line

On-line is increasingly important in the sector; in some countries it is rapidly becoming
the dominating channel. (Czech republic 36 %, Hungary 15 %, Slovak republic 12 %).

Online helps the distance selling sector and especially new sectors such as food items,
airline and railway tickets or financial services to grow. In recent years, sales over the
Internet have increased rapidly, multiplying by three in some new EU countries since
2000.

In the past, mail order companies were able to take advantage of the the new
technologies, including, telephone, fax, mobile. The position of mail order trade today
in East and Central Europe is to find a way to promote and improve mail order as
the main sales channel using the E-commerce revolution as the method to fullfil the idea.

% of online total distance sales in 2004

The total turnover of the 19 countries represented today by EMOTA is estimated €67,7
billion in 2004. Online sales reached in 2004 an average level of around 25%, ranging
from 7 to about 50% of total distance sales, depending on the maturity of the
(fast growing) Internet market in the various countries.

Distance selling trade in new EU members countries

With an average growth rate of 3 – 7 %, most Eastern European countries
have a higher economic growth rate than Western European countries have:
e.g. Austria 1,6 %, Germany 1,1 %

When we look at the level of per capita sales in European States we see
that these vary significantly from around €255 in Germany to around €10 or less
in some of the Eastern European countries and Russia. (Russia only 2,5€!)

Turnover of Mail Order in EUR per capita, 2004

Because of the EU-enlargement and the opening of the eastern markets, Eastern Europe
has a high potential with 350 million customers in 20 countries.

Market size in million inhabitants

E U R O P E

Western Europe                                                                                Eastern Europe
380 Million. Inhabitants                                                                    350 Million. Inhabitants
20 countries                                                                                       20 countries

In most of Eastern European countries the distance-selling sector is still underdeveloped
for reasons such as consumer attitudes, legal environment, taxation and income levels, the
differences relate to the level of performance of postal services and the availability of retail
outlets, as well as varying levels of consumer interest and the degree of restrictive legislation.

Nevertheless, because of the rapidly developing availability of access to Internet and the
relatively good performance of postal services in eastern countries, we expect sales to
pick up in the next few years. Many distance-selling companies are active in the 10
new Member States and Hungary, Czech Republic and Slovakia are members of
European association. Companies are expanding to other countries such as the Baltic
States, Slovenia, Bulgaria, Croatia, and Romania.

Cooperation with Post

In Legal Issues it is important to keep the mailbox open. Postal operators ought to stand
side by side with distance selling companies. The prices in extension countries are more
acceptable than those in western countries.

Costs of delivery (Direct Mail)

The quality of postal services is comparable with the western European countries.
There are special quality measurement systems introduced.

Average delivery time in days (Direct mail)

Barriers in in central and eastern Europe

In principle the distance-selling sector is nowadays supported by new means of
communication such as the Internet, should enable goods and services to be freely
delivered and provided cross-border. East and central European countries are highly
interested to be involved in this process. Recent Commission study shows, direct
cross-border sales to consumers today, 12 years after the official realization of the
Single Market, still represent no more than around 4% of total distance sales. The
increase of cross boarder distance selling is a new challenge for the West to be more
involved in central and east European countries.

Although distance-selling companies are highly interested to expand their activities
and explore new markets, many barriers still continue to exist within the East and
Central Distance selling European market. One of the most important challenges
of distance sellers today is not to overcome barriers such as language and consumer
mentality, but to cope with the existing patchwork of legislation and different
interpretation of EU Directives as well as the additional legal requirements sometimes
imposed by Member States at the moment of implementation.

There is a need to work internationally with local implementation in order to be as
close to the consumer as possible, it is essential that no new barriers be added to the
existing ones of language and consumer mentality.

When talking about EU legislation, meaning is, that legal requirements should be set
on a level balancing the interests of both businesses and consumers. Such harmonization
should not allow introducing more restrictive provisions and should leave sufficient room
for companies to develop their own commercial approach in order to provide the
consumer with a real competitive choice. Self- or co-regulation in the form of codes of
conduct should be promoted to enable the trade sector to deal with the specific problems
and customer relations at hand.

The differences between national implementing laws deriving from the use of minimum
harmonization in Consumer Protection Directives is one of the problems of existing EU
legislation. Today is the right time to coordinate these initiatives and solutions on a
European level including the new EU member countries.

Distance selling today is characterized by a dynamic impetus inspired by the integration
of traditional and modern technologies. The potential of e-commerce to jumpstart
distance selling sales, both in-country and cross-border is huge. Some of distance
selling companies in the west European countries are already trying to overcome the
existing obstacles and to access new national markets in east and central Europe.

But others are still hesitating, because of the barriers. Although there are many risks,
the prospects outweigh them. The slow-down of growth in Western countries requires,
that west european mailorder companies grow even further and faster in the CEE markets!

I still believe that the future of distance selling sector lies in central and eastern Europe.

Any business likely to cross borders, especially small and medium-size enterprises,
legal certainty, transparency and simplicity with regard to the applicable rules are important
issues. This is essential not only for new EU members in order to have the confidence to
continue to expand consumer services and for the development of distance selling.
But I think this is significant not only for the eastern and central European markets.

As a final remark I would like to stress that the expected expansion of distance selling,
trade especially on-line shopping in eastern and central Europe is also a huge challenge
for the Post. As distribution is one of the most important issues of the distance selling
sector this situation is significant also for the post, as revenues from this service are
about 5% of total Postal revenues.

Please refer all questions on this article to; Juraj Sebo