Key trends and challenges shaping the ecommerce industry in 2021

2020 came with brutal changes to our way of living and economies. In these difficult past months, ecommerce has been crucial for the continuation of economic activities and society in Europe. The ecommerce sector has proven resilience, and many businesses have gone through an accelerated digital transformation, leading to changes in consumer behaviour and the development of new seamless commerce solutions – from payments to omnichannel logistics solutions such as contactless click and collect. In parallel, the European Commission has reinforced its ambition for a more digital and greener Europe via the proposed twin transitions in its recovery plan, stating that investment in digital and sustainable infrastructure is required to rebuild a strong European economy. 

While 2021 will be the year of recovery and an attempt to return to ‘business as usual’, key trends and challenges – sometimes highlighted or accelerated by the COVID-19 pandemic and our response to it – will certainly shape the ecommerce sector. 

Ecommerce Europe has laid down its priorities for the European Union (EU) for 2021, to allow innovation, stimulate digital and sustainable development, and unlock the cross-border potential of European businesses by taking down remaining barriers in the Single Market. 

Seamless commerce: from market reality to policymaking 

During the national confinement measures, many brick-and-mortar retailers had to close their physical stores and develop an online presence to stay afloat. They relied on the use of seamless commerce solutions to accommodate consumer needs during that period, and this trend is set to accelerate. 

However, from a regulatory perspective, online and offline commerce are often treated separately, creating fragmentation and unnecessary barriers for both businesses and consumers, who have been moving beyond this distinction. Such a division could be illustrated through the upcoming Commission proposal on an EU digital levy, which will likely target specifically digital companies, thus creating division in the way offline and online commerce is regulated and taxed, in a world where it becomes more and more complicated to actually separate offline from online. 

The ring-fencing of digital commerce from traditional retail creates additional regulatory burdens and disproportionately affects small retailers who have successfully relied on the Internet to remain in business during the health crisis. The lack of harmonisation in the way seamless commerce solutions are regulated within the EU and even within the Member States poses an additional challenge for the sector. The diverging rules regarding the access to click and collect solutions during the COVID-19 crisis demonstrate how the lack of legal certainty and harmonisation across the Union could pose a significant barrier to businesses and prevent consumers from accessing the necessary goods and services. 

Online payments: a year of transition 

2020 has been a pivotal year for payments, acting as a catalyst for key trends such as the digitalisation of payments, the importance of risk reduction and trust, but also the development of regional initiatives. All these changes are taking place on the backdrop of various policy developments at EU level, which can create the right conditions for these trends to benefit all. 

But one of the main challenges on merchants’ mind at the beginning of this year has been the transition to Strong Customer Authentication (SCA). The remaining differences in the level of preparedness and enforcement at national level make it difficult to navigate and to clearly estimate the impact of the transition, as many countries have opted for gradual enforcement of SCA. 

While the overall impact still has to be assessed, the flexibility implemented throughout several markets seems to have smoothed the transition to SCA and prevented a brutal and widespread impact. However, we are currently observing an increase of transaction failure rates across the EU, with possible new cliff-edges coming with gradual enforcement if certain issues are not addressed.  While the penetration and use of 3-D Secure (3DS) continue to grow, network issues, challenges with enrolment, challenges with availability and usability of exemptions, and other identified issues continue to impact the market. The focus of the next months should be on gathering data on performances, costs of implementation of SCA, and the impact of SCA implementation on fraud, rather than focusing solely on compliance data. 

More generally, merchants will have to continue adapting to the demand for seamless payments, especially with the continued growth of mobile and wearable payments. Data-driven offerings and seamless authentication and authorisation through digital identity will become increasingly important to secure conversion rates in the future. 

Brexit: a deal, but new challenges 

The UK formally left the EU’s Single Market and Customs in Union on 31 December 2020 at midnight. Despite a last-minute Trade and Cooperation Agreement having been reached on 24 December 2020, the effects of Brexit have been felt widely. 

The reintroduction of customs and border checks has created chaos, especially at the French and Irish borders. Long lines of trucks could be witnessed at various crossing points, with shippers and exporters testifying of increased delays and costs. Entire supply chains were disturbed, with certain shipping companies choosing to keep products in warehouses until they had the assurance that their drivers were provided with the correct paperwork to cross the border. 

On the consumers’ side, online shoppers have seen their purchases’ cost increase, due to changes in charging of VAT and application of customs duties. Certain companies have also started charging extra for delivery, in order to compensate for the time spent filling in administrative paperwork. Increased shipping costs due to new administrative burdens, in addition to VAT and customs duties on shipments sent from the UK to the EU, have pushed many British businesses to invest in distribution networks within the EU. As a result, Dutch logistic and warehousing companies are being flooded with requests from British companies looking to rent warehouse space within the EU. 

Related to Brexit as well, Mastercard has announced that the interchange fees charged to EU merchants for card-not-present UK consumers will increase fivefold in 2021. The change is due to the reclassification of the UK as an ‘inter-regional’ market following Brexit. The latest announcement means that an EU merchant selling to a UK consumer online will see their interchange fees rise from 0.2% to 1.15% for a debit transaction. For a credit transaction, the fees will increase even further from 0.3% to 1.5%, with a clear impact to come on EU online merchants. As new developments already take place in relation to card fees, it will be important to continue monitoring any future related changes to costs of payments in the context of Brexit. 

New rules for online platforms and product safety 

The platform economy is redefining the way retailers sell goods or services online. This process has been intensified by the COVID-19 outbreak when more and more brick-and-mortar shops had to start using online platforms such as ecommerce marketplaces to be able to continue selling their products. In general, this trend is creating intense new competition within and beyond European borders. Issues such as responsibility and liability of the various actors in the value chain, consumer trust, and loyalty, as well as how SMEs can thrive and compete in an increasingly competitive world are thus becoming even more important. 

It will be up to the EU legislators to strike the right balance between fostering innovation and growth in the sector and strengthening the competitiveness of the diverse online retail landscape. There are a number of ongoing EU initiatives addressing the platform economy, such as the two Commission proposals on the Digital Services Act and the Digital Markets Act. These pieces of legislation have two main goals: to create a safer digital space in which the fundamental rights of all users of digital services are protected and to establish a level playing field to foster innovation, growth, and competitiveness, both in the EU Single Market and globally. 

Finally, on the product safety aspect of retail, the European Commission is preparing a revision of the General Product Safety Directive (GPSD), to address the difficulties regarding product recalls and lack of enforcement, negatively affecting European consumers. The successful implementation and enforcement of product safety rules, as well as the creation and maintenance of a level playing field between EU-based and non-EU-based businesses, will be key for fostering the European ecommerce environment as well as for providing European consumers with safe access to goods and services. 

About Luca Cassetti 

Luca Cassetti is the Secretary General of Ecommerce Europe. He is responsible for leading and coordinating the public affairs team and activities of the association. Luca Cassetti advises the Board of Directors and the Executive Committee with respect to policy challenges and ensures that the association acts accordingly at EU level. 

About Ecommerce Europe 

Ecommerce Europe is the voice of the European Digital Commerce sector. Ecommerce Europe represents, via its 23 national associations, more than 100,000 companies selling goods and services online to consumers in Europe. Ecommerce Europe acts at European level to help legislators create a better framework for online merchants, so that their sales can grow further.