By Florimond de Tinguy, VP of Sales – North Western Europe, VTEX
The tranquil surface of online shopping is about to be disrupted, with The European Union poised to drop a legislative bombshell that will require a fundamental reconfiguration in their business strategies and commerce technology infrastructure. New rules, aimed at tackling the proliferation of unsafe goods sold online, will place the onus of product safety squarely on the shoulders of online platforms like Temu, Shein, and even giants like Amazon.
This isn’t a minor adjustment; it’s a seismic shift that demands a substantial shift in supply chain visibility, investment in data infrastructure, and a complete reimagining of logistics. Businesses that fail to adapt quickly risk crippling fines, irreparable reputational damage, and maybe even exclusion from the lucrative European market, creating a significant void at the top of the ecommerce landscape. Coming off the back of the U.S. government’s move to end the “de minimis” provision which allowed retailers including Temu and Shein to ship low-value packages duty-free, the question now is: will prices skyrocket? Can small businesses survive this shift? And what will the future of online shopping look like in this brave new world?
Shifting the burden
For years now, the explosive growth of ecommerce, and its benefits to consumers, has been accompanied by a darker side: the flood of potentially non-compliant products infiltrating the market. From counterfeit electronics to toys posing choking hazards, the ease with which these goods could be listed and sold online has created a regulatory headache for authorities worldwide.
The EU, known for its stringent consumer protection laws, has decided to take decisive action. The forthcoming legislation will shift the responsibility for product safety from individual sellers – often obscure entities operating from outside the EU – to the platforms themselves. This means that online marketplaces will be legally liable for the safety of the products they host, forcing them to become gatekeepers of quality and compliance.
This new reality presents a significant challenge for platforms. They can no longer simply act as passive intermediaries connecting buyers and sellers. Instead, they must transform into active participants in the product safety ecosystem. This requires a complete restructuring of their operations, starting with a deep dive into their supply chains. Platforms will need to implement robust due diligence processes to vet sellers at scale, verify product authenticity, and ensure compliance with EU safety standards. This could range from scrutinising documentation all the way up to conducting physical inspections and audits of manufacturing facilities, particularly for goods originating from regions with historically lax regulatory enforcement.
The logistical tightrope
The sheer volume of products sold online necessitates a technological revolution. Platforms will need to invest heavily in sophisticated data infrastructure capable of processing and analysing vast quantities of product information, that fit within their existing tech stack. This includes developing algorithms that can flag potentially unsafe products based on various criteria, such as materials used, manufacturing processes, point of origin, and past safety records. They will need to create systems for tracking products throughout their lifecycle, from factory floor to consumer doorstep, to ensure traceability and facilitate rapid recalls in case of safety breaches.
Logistics, the backbone of ecommerce, will also undergo a dramatic transformation. Platforms will need to rethink their warehousing and fulfilment strategies to accommodate the increased scrutiny of goods. This could involve establishing specialised facilities for inspecting and testing products before they are shipped to consumers. The pressure to deliver quickly and cheaply will now be balanced against the imperative to ensure safety and compliance, creating a complex logistical puzzle that platforms must solve.
The new rules of the game
The implications of this legislation are far-reaching and will touch every aspect of the ecommerce ecosystem. The most immediate concern for consumers is the potential for price increases. The added costs associated with compliance, supply chain restructuring, and data infrastructure investment will inevitably be passed on to consumers, at least in part. However, this increase may potentially be offset by the long-term benefits of safer products and increased consumer trust.
The impact on small businesses is another critical consideration. While the legislation is primarily aimed at large platforms, small businesses and fast growing DTC brands destined for enterprise status will, realise that making the correct pivot for their brand will be more critical than ever, as the endless aisles of a digital marketplace continues to grow as a preferred online shopping experience. . They will need to adapt to the new compliance requirements, which could be particularly challenging for smaller enterprises with limited resources. There are concerns that this could create a barrier to entry for smaller sellers, potentially consolidating the market in the hands of larger players.
Prepare for the aftershocks
The long-term impact of this legislation on the future of online shopping is difficult to predict with certainty. Although it could usher in a new era of responsible ecommerce, there is a fear that it could stifle innovation and lead to a less competitive market. One thing is clear: the ecommerce landscape is about to change dramatically. Platforms that proactively embrace these changes, investing in technology, overhauling their supply chains, and prioritising product safety, will be best positioned to thrive in the new regulatory environment. Those that drag their feet, clinging to outdated business models, risk being left behind. The ecommerce shake-up is coming, and only the most adaptable will thrive.
