Omnibus directive – how does it impact pricing strategies and promotions?

On 27 November 2019, the Directive (EU) 2019/2161, more commonly known as the omnibus directive, was published. And, since it has just been transposed into national laws and must be applied by May, 2022, we decided to take a quick look at the most important changes that this new law introduces. Long story short – many online stores will need to adjust their pricing strategies.

The general idea behind the omnibus directive is to protect consumer rights across the European Union. The major changes affect significantly the following elements of retail and e-commerce:

• Price reductions (they have to be more transparent)
• Seller information (has to be extended)
• Consumer reviews (have to be authentic)
• Price optimization algorithms (you will have to inform about using them)

We can shortly say that, with this directive, consumers will have to be clearly and transparently informed about the seller, their reviews, and pricing before placing an order. The EU legislators hope that these changes will prevent customers from making adverse or oblivious purchasing decisions.

Let’s start with the changes affecting product prices.

How the omnibus directive changes pricing policies

The major change related to pricing is based on two paragraphs of this directive:

“Any announcement of a price reduction shall indicate the prior price applied by the trader for a determined period of time prior to the application of the price reduction. The prior price means the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction.” – omnibus directive.

Omnibus directive – What does it mean in practice?

Both brick-and-mortar and online stores will have to inform about the previous price of the product on sale within at least the past 30 days. This puts an end to raising product prices before holidays just to “lower” them to a regular level during Black Friday or Christmas. At Dealavo, we are well aware of this strategy and its popularity. That’s why our price monitoring platform has a feature that allows you to track past prices not just at your store but at your competitors’ stores and marketplaces as well. All the historical data is legibly presented in the form of a report or a chart.

With this strategy removed by the omnibus directive, online stores will have to look for other ways to optimize their prices. And that’s where we step into the game. Dealavo offers an advanced price automation solution called dynamic pricing. With it, based on predefined rules, you can automate prices in your store. Our algorithms make sure they are at optimal level 24/7, all year round. To ensure that, we constantly monitor your competition and the entire market. With our platform, you no longer need dodgy pricing techniques to maximize profits.

If you’d like to find out more about modern pricing strategies, download our free ebook on price management in e-commerce:

 

Let’s take a look at yet another change in pricing strategies:

“where applicable, that the price was personalised on the basis of automated decision-making”

What does it mean? As we can read in one publication analyzing the omnibus directive, “consumers should be clearly informed when the price presented to them is personalised on the basis of automated decision-making, so that they can take into account the potential risks in their purchasing decision.”[1]

Of course, the omnibus directive goes beyond pricing. For instance, it introduces important changes in product reviews and marketplace trade. Let’s talk a bit more about that.

Other changes introduced by the omnibus directive

Here’s what you should know:

CONSUMER REVIEWS

“Where a trader provides access to consumer reviews of products, information about whether and how the trader ensures that the published reviews originate from consumers who have actually used or purchased the product shall be regarded as material.”

In other words, you, as a seller, have to make sure that reviews that you present on your website are authentic and come from real users. Most likely, this new law will severely limit this unfair practice of buying opinions and reviews just to look more trustworthy in the eyes of potential customers.

PROFESSIONAL TRADER VS. INDIVIDUAL SELLER

In the “Additional specific information requirements for contracts concluded on online marketplaces” section, we can find this new paragraph:

“whether the third party offering the goods, services or digital content is a trader or not, on the basis of the declaration of that third party to the provider of the online marketplace”

Marketplaces will have to inform whether the seller is a professional trader or an individual person. That’s important because the EU laws apply only to professional traders, and customers must be aware of this.

Quick summary: Prices after the omnibus

Will the omnibus directive be like a breath of fresh air in European retail? Time will tell. Surely, these changes have the potential to make online trade more conscious and mature. We hope customers will benefit from these new laws and sellers will seamlessly adapt to them.

And remember, if you’re looking for an effective pricing strategy that’s fully compliant with the European laws, check our two main services for online stores:

• Price monitoring tool: Understand how prices change (both now and in the past) and use this knowledge to optimize them in your store.
• Dynamic pricing platform: Automate pricing strategy by applying some predefined rules that will help you continually keep prices in your store at the optimal level.

If you need more information – check our video about price monitoring & dynamic pricing, and contact us!