Brand restrictions are hurting small businesses

ban-restrict-prohibitedBrand owners who refuse to allow their products to be sold on marketplaces are killing European small businesses and stifling cross-border trade. According to research finding, more than half of European small businesses selling online (53%) say they have been affected by these restrictions with 91% of sellers noticing an increase in platform bans from brand owners compared to three years ago.

Of those businesses that have been affected by platform bans, 36% say the restrictions have reduced their revenue and 36% highlight that they are burdened with unsold stock. As well as affecting business owners, platform bans endanger the jobs of people who work for small businesses. Almost a quarter (23%) of small businesses have been forced to make staff redundant because of the restrictions.

One of the benefits small businesses see in online marketplaces is the opportunity to sell to customers all over the world. As reported by Copenhagen Economics, for small enterprises that use both online marketplaces and their own website, about 70% of cross-border turnover is from online marketplaces; this is unsurprising, since the majority of sellers (85%) consider it a major hurdle that their own websites lack sufficient traffic for selling online.

The increasing use of platform bans will have significant consequences for European small businesses, as three quarters (75%) of online sellers say that they would lose up to half of their revenue if all brands imposed bans.
If forced to stop selling via online marketplaces, businesses are unable to recover, with only 5% of online sellers able to recoup between 81% and 100% of lost online marketplace sales through brick and mortar retail or their own websites.

In fact, analysis by Copenhagen Economics shows that, if all brands imposed bans, this would cause a major upheaval in retail commerce, depriving online sellers of an estimated €26bn of online retail sales, diverted elsewhere.
There is a growing opportunity for brands to reach new customers via online marketplaces – now 81% of the items sold on eBay are brand new, with new manufacturers joining every day.

European competition regulators are currently examining the practice of platform bans as part of its E-commerce Sector inquiry due to be published in early 2017.

Paul ToddSenior Vice President for eBay EMEA, Paul Todd, said: “Europe’s small and medium businesses are the engine of economic growth so it is vital that we remove restrictions that prevent their businesses from growing and succeeding. Platform bans allow brands to keep prices artificially high, restrict consumer choice and may breach EU competition rules. We believe e-commerce should be open for all and call on the Commission to step up its enforcement actions against these anti-competitive practices.”