October 26, 2017

EuroCommerce boss talks the retail trade

Dr. Christian Verschueren, Director-General EuroCommerce (photo: Juha Roininen)
Juha Roininen
Christian Verschueren: "A week is a long time in politics"
Dr Christian Verschueren is Director-General of EuroCommerce, the principal European organisation representing the retail and wholesale sector.

In his role you need to be both a firm leader and have great tact. These characteristics are seldom found in one individual, but Verschueren combines them remarkably well.

His outlook is distinctly European, which is a sine qua non for an organisation embracing national associations in 31 countries and the interests of 5.4 million companies (including both multinational retailers, such as Carrefour, Ikea, Metro or Tesco, and many small family operations).

This means Verschueren has to deal with high EU functionaries and government officials while representing the often differing interests of EuroCommerce members.

Without standing upon the dignity of his office, Verschueren makes a strong intellectual case for the trade's importance within the European economy. After all, retail and wholesale provide a link between producers and 500 million European consumers who shop more than 1 billion a day.

The sector generates one in seven jobs, providing a varied career for 29 million often young Europeans and supports millions of further jobs throughout the supply chain, from small local suppliers to international businesses. 

Last but not least, EuroCommerce is the recognised European social partner for the retail and wholesale sector.

"We don't engage in witch hunts"

Dr. Christian Verschueren, Director-General EuroCommerce (photo: Juha Roininen)
Juha Roininen
Christian Verschueren
Dr Verschueren, should we be worried about the current state of the EU?

The European project has obviously been challenged as never before both by populist movements in a number of countries, as well as by Brexit. Some member states, e.g. those of the Visegrád group, are even fundamentally challenging the principles of the internal market and the rule of law.

However, I most certainly do not belong to the doomsayers who believe the dominos are falling one by one in Europe. The outcome of the major elections in the Netherlands, France and Germany make me much more optimistic that we have stabilised the ship. But the very recent election results in Austria and in the Czech Republic remind us that the challenges have not disappeared.

I am confident, though, that, once Angela Merkel has formed a government, she will work to leave a European legacy by working with Emmanuel Macron to revive a strong Berlin-Paris axis.

So let's stop talking down the EU, which has given us peace and prosperity over the last 60 years. One shouldn’t forget that a third of today’s EU countries were still ruled by dictators as late as the 1980’s.

And from the point of view of retailers or the consumers we serve, let’s remind ourselves of the fantastic advances and opportunities that the EU has brought us, whether opening up a single market for 500m consumers, harmonising food safety and food information rules, or bringing down interchange fees on credit cards, to name just a few examples.

Did the European Commission President Jean-Claude Juncker set the right signals in his recent State of the Union speech?

Juncker showed confidence in the European project. He announced an ambitious plan on the future of Europe, in particular in the areas EU economy, international trade, internal market, environment, big data and cybersecurity.

Why do you think a majority of UK voters opted for Brexit?

Many Brits still seem to be dreaming of former empire days, but this is not very realistic in a world where big blocs or whole sub-continents are the real powers in the world.

Could the Brits still reverse their decision to exit the EU?

A week is a long time in politics, as the saying goes, so God knows what will happen. Who would have guessed, for instance, that Theresa May would call a snap election and the ensuing result at the polls?

But even mentioning the concept of reversing the result of the 2016 referendum would be very difficult for the Conservative party, with Ms May surrounded by hard-line Brexiters within her own government. And, realistically, it can only be reversed after another referendum.

How do you view the outcome of the Brexit referendum for the British people?

It is a horrendous piece of self-mutilation in economic terms. The UK imports €56bn in food products alone per year from the European continent and 14,000 trucks cross The Channel each day in both directions. Levying customs duties and other checks at the border would be an incredibly time-consuming business.

One only has to look at how long lorries must wait on the border between Bulgaria and Turkey to realise that this would be a completely untenable situation, especially when one is dealing with chilled food products.

Where do you think this is all going?

Only one thing is clear at this stage: the Brits need to realise that they cannot leave the EU and enjoy the same trading rules and benefits as if they were still part of the EU. Once they fully realise this, the negotiations will progress.

So much for politics, the EU is obviously also a market for the exchange of goods and services. Is it functioning properly?

The single market is central to the present and future prosperity of Europe, yet we see too many member states nibbling away at the edges of the single market. It needs to be more efficient. Our role as a European organisation is to defend the principles of open trade and a liberal market, in the interest of our members and of consumers.

The European Parliament is pushing for unfair trading practices to be regulated, why does EuroCommerce oppose this measure?

We do not believe that EU legislation will bring any extra benefit for farmers. Retailers do not deal significantly with farmers directly, typically no more than 5 per cent of the contracts.

And, if most of the practices identified by the European Commission’s Agri-Markets Task Force apply principally or exclusively to retailers’ dealing with large multinational brands, what can EU legislation covering these practices do to help the position of farmers?

In addition, the context is so different in each and every country, and each of them wants to preserve the arrangements that they have, whether they are dialogue mechanisms or legislation. So what would be the added value of EU legislation if nothing will be harmonised?

But surely farmers must be allowed to protect themselves?

We agree with the Commission on many points in looking to improve the position of farmers – more transparency, better cooperation among farmers, and risk management. For example, we support farmers organising themselves better, which would make a big difference to their negotiating position within the supply chain.

Could the principles contained within the UK's Groceries Supply Code of Practice (GSCOP) be a way forward?

The UK model has some interesting features. However, the GSCOP began on a voluntary basis – an approach which we approve – but has now become legally binding. Also, the Code only applies to the ten largest retailers and not to suppliers, so it is a very one-sided approach.

That said, I think that implementation by the ombudswoman Christine Tacon is a success because she is primarily acting as a fast and informal mediator, persuading retailers to deal with complaints quickly, creating dialogue, rather than seeking long investigations and imposing sanctions. This is the sort of dialogue we would like at EU level, and have tried to achieve through the Supply Chain Initiative.

But won't sanctions always have more clout?

I am always very sceptical when adjudicators impose financial sanctions on a statutory basis. Look at France, where retailers have been fined for buyers’ behaviour that is often many years in the past. By the time fines are levied, company structure and practices have changed and people have moved on.

This doesn’t work with today’s pace of commerce, and only creates bad feelings and mistrust. What we need is a new culture of rapid dialogue.

How can the Supply Chain Initiative (SCI), created by EuroCommerce and other associations in 2013, contain unfair trading practices on a voluntary rather than a statutory basis?

The SCI has defined core principles regarding good and bad practices. It also encourages national dialogue. For example, we warmly welcomed the participation of the German retailers’, suppliers’ and farmers’ federations in the German supply chain dialogue. Belgians started very early with such a process.

Furthermore, we are in the final stage of announcing an independent chairman of the SCI governance group. He will have investigative powers. His appointment should dispel criticisms of lack of independence of the SCI.

European retailer buying groups are increasingly in the sights of anti-trust lawyers. Should the European Commission or Parliament monitor supranational terms & conditions?

Retailers have organised themselves, in a way consistent with the strict conditions applying under EU competition law, so that they can create volumes and efficiencies to help negotiate with big suppliers. National retailers are forming alliances with their counterparts in other countries; cartel law obviously prevents them from consolidating further in their home markets.

One also shouldn’t forget that European retailer buying alliances aren’t negotiating with small suppliers, but with multi-national brand manufacturers like Coca-Cola, P&G, or Unilever.

Do you agree with the European Commission's proposal (as part of its revision of the EU Energy Performance of Buildings Directive) that retailers and other owners of non-residential buildings provide charging stations for electrical vehicles in at least 10 per cent of their parking space?

The circular economy and energy transition are important objectives in decarbonising our business environment. A number of retailers now have solar panels on their roofs, use natural refrigerants in their cooling units or freezers, and spearhead electric transportation. Some even use food waste to create the biogas that drives their vehicle fleet. This is a true example of circularity.

The objective of encouraging electric vehicles is obviously good. However, there is no way that retailers can implement this on their own. A solid public infrastructure programme has to be there as well.

But do you believe that the proposal is practical?

There is too much simplification. It takes quite a while to charge an electric car. This usually exceeds the average time a consumer shops at a supermarket, i.e., around 30 minutes. That’s not enough time to make a full charge.

Obviously there are fast chargers, but these can cost €30,000 a piece, and few consumers currently need them. They can easily require 22kw/hour. So just four of these fast chargers would be the rough equivalent of what is required to power an entire supermarket during the same period of time.

As the '4th industrial revolution' gathers pace, how can you reconcile the interests of physical-store and online members?

Dr. Christian Verschueren, Director-General EuroCommerce (photo: Juha Roininen)
Juha Roininen
"It's good to have European online champions such as Zalando or Otto"
The digitalisation of our economy and society, as well as advances in robotisation and artificial intelligence, and the rise of platforms as business models, pose a number of challenges. And big global players, such as Alibaba and Amazon have a disruptive effect on the market. But they also offer the consumer many new alternatives and possibilities.

Also, no one wants to adopt a planned economy, so market forces must be given free rein. Our role as a trade association within a liberal economy is to resolve some of the tensions that can arise.

It is good to have European online champions such as Zalando or Otto. And all our members are adapting to omni-channel trade at an impressive pace and building the right skill-sets for the future. In Germany the apprenticeship programmes in retail and wholesale recently added digital and e-commerce to their curricula.

Should fiscal legislation be changed so that pure players are taxed fairly?

Competition is in our DNA, and we believe in open competition within a market economy. But all players have to be able to compete on a level playing field. We therefore welcome the recent initiative by some EU finance and economy ministers to bring this to the EU table. We support the EU and OECD work in the modernisation and harmonisation of tax rules to deal with the new economy.

One has to look at existing laws and consider whether they are still relevant to the modern world. For instance, should retailers be taxed on the basis of their sales space, as in France and the UK, when they are increasingly competing with global online giants who only have a few distribution centres?

That said, we oppose any kind of witch-hunt against the big online retailers. In addition to adapting the taxation system to create a level playing field between online and offline, the EU needs to ensure that all players respect social and environmental standards, and fulfil product safety requirements for all imported goods.

We also face problems from direct consumer imports which avoid VAT and exploit an outdated global postal system that allows developing countries (including China) to pay less or nothing at all for the final delivery of their products. We have pressed for the Universal Postal Union to look into this urgently.

Are we witnessing the slow death of physical retailing?

Definitely not; there may be overcapacity in some areas, and we see high rates of store vacancy in many cities. But we believe that bricks & mortar retailing will continue to be relevant, especially in food and clothing.

People enjoy the tactile experience and store ambience when shopping for these goods. If anything, consumers are demanding more local stores, more authenticity, and more convenience.

Can VAT regulations be simplified to promote a strong online market via, for instance, the EU's 'One-Stop-Shop' principle?

One of the great opportunities for the digital community is that you can sell internationally without having to set up shop across other borders. This, however, automatically creates challenges as regards VAT and national product specifications.

We therefore consider the one-stop-shop advantageous, if properly applied and if the complicated issue of international taxation is addressed.

Currently each nation sees the collection of taxes within its own borders as a prerogative, so the EU has an up-hill battle with the national authorities in having them entrust their neighbours with the collection of their tax money.

Why do you oppose regulating against geo-blocking?

EuroCommerce logo (source: EuroCommerce)
EuroCommerce logo
The horse has already left the stable, and we must make the best out of the de facto situation and try to mitigate the negative effects of the proposed legislation. We support the overall objective of selling across borders and think that there is a great opportunity for small web shops to expand.

In practical terms, this means that retailers shouldn’t geo-block their customers, who must be able to shop more cheaply from their website in another country, if they wish.

At the same time, we want to preserve commercial freedom and don’t wish our members to be forced to deliver while being exposed to the national laws and jurisdiction of their customers’ countries.

Should brand manufacturers be allowed to prohibit retailers from distributing via internet platforms, and will the European Court of Justice’s decision on Coty prove a landmark?

Dr. Christian Verschueren, Director-General EuroCommerce (photo: Juha Roininen)
Juha Roininen
"We wish to speak every day for what I call the miracle of retailing"
The ruling is not out yet. Digitalisation is clearly causing a tectonic shift in the economic landscape and provides both retailers and manufacturers with new channels and countries to sell to. However, manufacturers cannot be allowed to determine which retailers may sell something or what they can sell. One must not lose sight of the benefit to the consumer.

We therefore praise German law for not allowing brand manufacturers to remove products or ban retailers from online platforms, unless they can justify that a product has to have a very specific distribution channel.

There is also a danger here that manufacturers will talk directly to consumers and bypass the retailer. It is almost like a return to price maintenance. We think that manufacturers are trying to increase their margins still further via disintermediation.

What are the principal issues affecting the European retail trade, and what regulatory projects does EuroCommerce currently have on its watch list?

The first and most important issue is digital and the rules governing digital competition. The role of the retailer within our increasingly digital society will therefore be our top issue over the next three years.

We must also tackle the worrying increase in protectionism in Central Eastern European countries as well as in other parts of the world. Some of the EU member states pass legislation which aims at protecting local producers and retailers and which discriminates against foreign retailers.

EuroCommerce supports our local national association members and informs the European Commission when such legislation is in conflict with the EU Single Market principles.

We also have to address the image of our sector: foreign retailers and wholesalers have invested for more than two decades in these countries, they bring jobs, innovation, contracts with local suppliers and increased choice for consumers.

Another important issue are trading practices, and we will be watching what the Commission does here during the next six to twelve months, and obviously we are working with them.

Why have retailers not been very effective historically at representing themselves both nationally and internationally?

Retailers have to service their stores and keep them in good repair. Historically, they haven’t seen their role as engaging closely and regularly with politicians, as executives in some other sectors do. We nonetheless certainly encourage and support our members to engage with policymakers.

But this is of course what an association like ours is also there for. And, as a first step, we invite retail companies to join EuroCommerce, so as to make the voice or retail stronger. We wish to speak every day for what I call the miracle of retailing.

One only needs to go back a few decades when stores were not properly supplied to appreciate the difference. Today the customer can expect to be consistently and unfailingly supplied with both fresh and chilled food of good quality as well as all kinds of other products and services to live his or her life. This represents a formidable achievement along the supply chain.

Lebensmittel Zeitung with digital sister (photo: LZ)
photo: LZ
Our German retail B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Wir betreiben keine Hexenjagd' by legal editor Gerrit-Milena Strätling & international editor Mike Dawson on pages 38 & 39 of Lebensmittel Zeitung, no. 40, 06.10.2017

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