Abstract
The European Commission (EC) believes tariffs for parcel delivery services paid by low-volume senders (small and medium enterprises (SMEs) and individuals) are “too high” and are impeding e-commerce market development between EU Member States. In May, 2016, the EC released a proposal aimed at solving this problem. They notably proposed that national regulatory authorities assess the affordability of parcel delivery tariffs offered by national postal operators (NPOs) within their jurisdictions (article 5).The objective of this paper is to analyze the extent to which parcel delivery price affordability stimulates online exchanges between EU Member States. The novelty of this analysis is to view parcel delivery within a broader supply chain. After reviewing the economic literature on the meaning of affordability, this concept will be applied to parcel delivery services. Afterwards, the European Commission’s approach to affordability will be examined.
Economist, in charge of the department “Doctrine et Modélisation” in the Direction of Regulation and Institutional and European Affairs, Groupe La Poste and associated professor at the University François Rabelais, Tours, France. The opinions expressed here do not necessarily reflect the position of La Poste. I sincerely thank Anna Möller Boivie, economist at Copenhagen Economics, for her valuable comments.
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Notes
- 1.
Article 3(1) of the Directive 97/67/EC requires Member States to “ensure that users enjoy the right to a universal service involving the permanent provision of a postal service of specified quality at all points in their territory at affordable prices for all users” and Article 12 requires Member States to take steps to ensure that the tariffs for each of the services forming part of the universal service comply with a number of principles, including that “prices shall be affordable”. The Directive does not specify how affordability is to be measured; this is left to the discretion of Member States.
- 2.
The quantity that is consumed is notably an important factor in judging whether a good is affordable or not. For example, in the case of water, the water bill would remain affordable if it does not involve an abnormally (or abusively) high volume. Given that the “standard” or “normal” quantity consumed varies with the household composition, it is important to take into account this parameter into the affordability analysis.
- 3.
In the UK, postal spend accounted for less than 0.15% of average household expenditure and less than 0.25% of low income household expenditure in 2009. According to the latest data available on the Eurostat website (Eurostat data 2014), postal services represented on average 0.12% of consumption expenditure of European households, this percentage varying between 0.02% in Spain, Poland and Latvia and 0.49% in Bulgaria.
- 4.
In this approach, a good could be considered as unaffordable if its purchase would pull down the household, initially above the poverty line, below it. But again, no consensus exists on what the necessary level of residual income should be.
- 5.
Data on consumers’ postal send and spend patterns, broken down by consumer type and over time; data that compares expenditure on postal services against expenditure on other ‘comparator’ items and household total expenditure, broken down by consumer type and over time; and qualitative consumer research to explore whether low income and vulnerable consumers face constraints on their ability to send postal items and, if so, whether they suffer detriment as a result.
- 6.
Notice that cross-border B2C e-commerce is particularly well developed in “small” EU countries (such as Luxembourg, Malta, Cyprus, etc.), where domestic supply may be limited due to the reduced size of the domestic market. More data on the characteristics of e-consumers in these countries would be needed to see if vulnerable consumers are not excluded from cross-border transactions and if access to foreign goods is affordable to them.
- 7.
Dealing with final goods, these authors consider that “price rise would be affordable if there is a high cross-price elasticity, indicating strong availability of substitutes. Low budget share and significant cross-price elasticity between substitutes and other goods would indicate that prices are affordable, while a high own-price elasticity and a low cross-price elasticity with substitutes would indicates that prices are unaffordable. Similarly, a low own-price elasticity, a low cross-price elasticity with substitutes, and a high price elasticity with other necessities would indicate that prices are unaffordable.”
- 8.
At cost or with a positive or negative (“free delivery”) margin.
- 9.
Relying in particular on the study of Claes and Vergote (2015), the European Commission thinks that.
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Borsenberger, C. (2018). Are European Cross-Border Parcel Delivery Services Affordable?. In: Parcu, P., Brennan, T., Glass, V. (eds) The Contribution of the Postal and Delivery Sector. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-319-70672-6_8
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