Amazon.com shows European Commission one way to eliminate geoblocking in e-commerce

Amazon.com hopes to woo small businesses with big ambitions to its distribution platform with the Pan-European Fulfillment By Amazon program

With its latest distribution initiative, Amazon.com might achieve what the European Commission has struggled with for years: the creation of a borderless online marketplace where the price of goods and the cost of shipping them is the same for all European Union citizens.

The e-commerce giant has long used its knowledge of shopping trends to ensure that its warehouses across the U.S. maintain stock close to expected demand, for Amazon itself and also for merchants using its fulfillment services.

Now with the Pan-European Fulfillment By Amazon program, it's planning to roll out a similar service for small businesses operating in the EU, many of which are reluctant to operate outside their home country. The program will enable small businesses to offer faster delivery, at lower prices, to more EU destinations, the company says.

The Commission has long dreamed of an online shopping experience free of "geoblocking" -- the practice of online retailers restricting their sales to certain countries.

The Commission is concerned that manufacturers may be to blame for such restrictions, using anticompetitive distribution contracts to prevent retailers from competing across borders. Such practices would allow manufacturers to ensure that their products sold for higher prices in richer countries, for example, and milking markets for all they are worth.

However, manufacturers of consumer goods are responsible for less than a third of retail sales geoblocking, a Commission survey of online retailers of clothes, shoes, sporting goods, and consumer electronics found earlier this year. Three in eight retailers questioned said they imposed geographical restrictions on sales, but only one in eight reported that this was due to suppliers' contractual requirements.

For the most part, retailers employed geoblocking because they refused to deal with the complexity and expense of foreign delivery services or foreign currencies and payment methods.

Those are two of the cross-border logistics challenges that Amazon says it will deal with for sellers that opt in to its pan-European fulfillment program.

By distributing goods across 29 warehouses in seven European countries to meet anticipated demand, and delivering directly from the one nearest to the customer, Amazon expects to reduce delivery costs and shipping times for sellers. It already makes such transfers for its own sales and stock.

More than 50 percent of Amazon sellers in the EU already use the company to sell in more than one country: The new program could bring their stock closer to customers and, Amazon said, allow them to participate in Amazon Prime, the company's flat-rate delivery service.

Sellers will only pay the local fulfillment fee of the market in which the goods are delivered: There will be no cross-border fee, Amazon said.

There are other barriers to cross-border commerce in Europe, though, including -- the Commission freely admits -- the language barrier. The European Union has 28 member states and 24 official languages.

Amazon operates five European marketplaces, for the U.K., France, Germany, Spain, and Italy, and can automatically translate listings from one marketplace when showing them to a customer in another. It also offers sellers a manual translation service for some listings.

One thing Amazon isn't offering to help cross-border sellers with is their VAT declaration. Value-added tax rates and rules vary among EU member states, and sellers are required to declare sales and tax due to authorities in each country where sales of goods to consumers exceeded a certain threshold, typically between €35,000 and €100,000.

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