Half of retailers experience location-based supply constraints

For certain fast-moving consumer goods categories, half of retailers and wholesalers in the European Union experience supply constraints that are based on their location. These restrictions could limit traders to source goods in, and to resell goods to, other EU countries.

Last month, the European Commission published a study that confirms the existence of so-called territorial supply constraints (TSCs) in the European (online) retail sector.

The Commission thinks these constraints can contribute to the fragmentation of the single market. “They may impede or limit the ability of these traders to source goods in other EU countries than the one in which they are based. It can also prevent them from reselling goods to other EU countries than the one in which they are based”, it says.

These constraints can contribute to the fragmentation of the single market.

The Commission held a survey and found that for some FMCG categories, half of retailers and wholesalers experienced refusals to supply, differentiation of product packaging and content, and destination obligations when they purchased from multinational producers.

‘It because of internal structures’

Manufacturers say it’s because of their internal structures. Their national offices mirror the national structures of retailers and try to respond to the local consumers’ needs. But the wide range of prices charged across the European Union by manufacturers to retailers can’t be fully explained by factors such as different tax regimes or labor costs.

What if retailers could source from country with lower purchase price?

“The analysis also suggests that if retailers in all the countries with higher purchase prices than the country with the lowest purchase prices could source their supplies from that country, EU consumers could save an estimated €14.1 billion (or 3.5%) on their purchases of a basket of food categories.”

EU consumers could save an estimated €14 billion.