It’s no secret that business-to-consumer e‑commerce revenues are booming in Germany, with online sales in the country set to top EUR 100 billion in 2020 (2013: EUR 39 billion). German B2C e-commerce revenues in 2013 were about 12% that of the world’s largest e-retail market, the United States. German per-capita B2C e-commerce spending is the second-highest in Europe and has already reached a promising 67% of US per-capita online spending. But while domestic sales in Germany have soared, cross-border purchasing in the EU has remained flat in recent years.
One of the reasons: Until recently, consumer rights regulations differed significantly in each EU member state. Such disparities increased compliance costs for traders wishing to engage in international business, and led to potential cross-border sales going unrealized.
The new EU consumer rights directive has changed this. It has harmonized the applicable rules, removed inconsistencies, and closed unwanted gaps. EU legislators aimed to balance a high level of consumer protection and the competitiveness of enterprises.
What has changed in Germany?
Under the new rules, consumers must be informed about their rights in a clear and timely manner before the order is completed. The legislation includes changes to where and how this information must be shown.
For the first time, there is an EU-wide withdrawal period, meaning the time a buyer has to cancel the contract, of 14 days from the receipt of the purchased goods as well as a standardized withdrawal form.
A number of other changes were also made.
The changes were incorporated into German law and became effective on June 13. The new information requirements are more stringent, and e-retailers have had to adjust their web sites and ordering processes accordingly.
Returns: to charge or not to charge?
Until recently, German consumers bore the cost of returning products with a value of less than EUR 40. This limit has been removed under the new rules meaning the costs for return shipments – regardless of the value – can be charged to the customer provided he or she was informed adequately before the order was made.
This was met initially with enthusiasm by online retailers as the return rate in Germany is higher than elsewhere – especially for fashion articles – and managing return rates is a daily undertaking for online retailers. Companies are of course still free to cover the costs themselves under the new regulations as a gesture of goodwill or as a competitive strategy to attract or retain customers.
And it seems that this is just what they are doing: 85 out of the 100 biggest online stores (Amazon, Otto, and Zalando, among others) are continuing to cover return costs. Smaller traders who charge customers for returning goods are therefore likely to be at a competitive disadvantage unless they operate in a niche market.
Ikea recently took the extraordinary step of offering lifelong returns on the majority of its products in Germany – whether they have been used or not. The furniture giant’s online business is set to grow and the company has drawn a link with the move.
New pitfalls: the price of not acting
If a retailer continues to provide old or incorrect withdrawal information, the withdrawal period is extended automatically from 14 days to twelve months and 14 days. This means a customer could return a product a year and 14 days after receiving the purchased product and demand their money back – a clear incentive for businesses to get it right the first time.
What is more, under German law, online retailers that do not comply with the changes leave themselves open to written warnings from competing companies’ lawyers – together with a demand to cover the legal costs. The first reports of this occurring came on the day the changes came into force.
And yet there are still around 15 million examples of products being offered on German web sites with outdated withdrawal information, according to the online legal portal eRecht24.
Furthermore, the Higher Regional Court in Hamm ruled in 2013 that online retailers from other countries – even non-EU countries – that target German consumers are required to observe German legal notice obligations (Impressumspflicht). The case in question involved an Egyptian cruise ship website that addressed German customers without a complete and proper legal notice on its site.
Online shops that are commercially oriented towards the German market are subject to German national law, e.g. with regard to the legal notice obligations, even if they are based abroad. The Higher Regional Court in Hamm found it was sufficient in this case that competitive relations in Germany were affected, that the web site was in German, and that the company could be contacted in German.
Whether this claim can actually be enforced against the foreign operator is another matter. Enforcement abroad is more difficult but not impossible.
New opportunities
Whilst the changes mean online businesses have had to make some adjustments, eliminating disparities between the member states’ regulations will reduce compliance costs for businesses, stimulate cross-border trade, and increase consumer confidence.
With the new Directive on Consumer Rights, the European Union has levelled the playing field and reduced transaction costs for cross-border traders, especially for sales via the internet. The standardized forms and the new clarity regarding information requirements on the right of withdrawal have made life easier for businesses.
There has never been a better time to invest in e-commerce in Germany, the biggest market with the greatest customer potential in Europe.
Germany Trade & Invest is a government-backed agency that promotes Germany as a business and technology location and supports foreign companies that are planning to establish a physical presence in Germany.
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