The Homa Files

TakeAway:  Who should have more control over where goods are distributed – manufacturers or retailers? 

Seems like the maker of the good (i.e., the manufacturer) should have the say over where its goods are made available for sale. 

Not so in Europe.  The European Commission is prepared to mandate retailer-favored distribution policies.

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Excerpted from WSJ, “EU to Overhaul Online-Retail Rules,” By Peppi Kiviniemi, April 19, 2010

Heavy lobbying from luxury-goods companies has led the European Commission to water down proposals aimed at expanding online sales of goods in Europe …

The new rules … will protect luxury-goods manufacturers against damage to their image by allowing them to insist in many cases that online sales be restricted to retailers who have “bricks and mortar” stores … This would prevent online-only retailers like Amazon and Ebay from selling the goods directly.

Preventing consumers from buying clothes or cosmetics brands over the Internet from a company that has an “online-only” business model will limit consumer choice and lead to higher prices and less innovative goods, said Director General of the European Consumers Organisation BEUC. But famous names like LVMH and Estée Lauder have argued that an uncontrolled push online could damage their image, and that online entrepreneurs shouldn’t benefit from the brand recognition they have worked hard to build up …

With the Internet now the fastest-growing retail channel in Europe, the overhaul of the competition rules has been long expected by the industry. Previously, luxury-goods makers had full control over who could sell their goods and they were able to prevent most online sales.

Overall, the new EU-wide rules will open up online sales by ensuring that manufacturers cannot discriminate against online shops when setting up their distribution networks, the document shows.

Any qualitative conditions that manufacturers set on who is allowed to sell their products must apply equally to high-street and online sales. This means that shopkeepers who are allowed to sell branded goods on the high street can also set up a store inside eBay or elsewhere on the Web to sell the same products online, provided that their online presence meets the brand requirements for look, feel and pre- and after-sales services …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB10001424052748704671904575193993537322862.html?mod=WSJ_business_whatsNews

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This entry was posted on April 29, 2010 at 7:10 am and is filed under Mktg - Distribution. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.