Geo-blocking is the term used for blocking access to a website or page on the basis of IP address, which is usually geographically defined. It is currently used by web shops for a number of valid reasons, most of which are beyond the web shop’s own control. You will find some examples of situation were geo-blocking is used below.
Today’s discussions on geo-blocking in eCommerce are often confusing and mixing geo-blocking (IP address based access to web content) with blocking of eCommerce transactions based on physical address. For example, payments can be refused because the bank does not accept a payment method from a specific country or delivery addresses are refused because the logistics company does not deliver in a specific country or region. These forms of blocking a transaction are mostly beyond the control of the web shop.
Outright misleading are the one-on-one comparisons between offline and online purchases. Misleading are suggestions like: “If I go to a shop in Berlin, they do not ask me for a passport and certainly not refuse me a sale for not being German”. Web sales involve different countries with different pieces of legislation, mostly because the EU regulator has not yet had the ability to harmonise these laws. This does not apply to offline sales. Examples:
In web sales, you do not physically see the customer and transactions will be based on electronic data
The web sales are governed by a dedicated consumer EU law, which is not fuly harmonised
The web shop has to respect also the law and language of the consumer, unlike off line sales
In web sales, products have to be delivered cross-border, with the costs and additional efforts involved
In web sales, products cannot be delivered in countries where the product has no service centre
Web sales may be illegal in some countries and geo blocking is needed to comply with the law
There are many more difference between online and offline sales, but unfortunately some misleading comments are out there as if things were the same.
A small web shop selling food supplements does not have the resources to adjust the products and labelling to conform different national laws. The allowed levels in, say a vitamin sports shake are different from the Netherlands compared to Denmark. Selling the Dutch shake in Denmark will be illegal, and the shop has not the means to adjust the vitamin contents to the Danish requirements. He decides to geo-block and only sell his vitamin shake were it is allowed.
A web shop based in Malmö, Sweden starts selling Swedish design furniture in Spain. When sales reach the level of €35,000, he is obliged to register in Spain for VAT. It means he will have to present himself to the Embassy of Spain in Stockholm and to the authorities in Madrid, He will have to appoint a recognised VAT consultant in Spain and open a Spanish bank account. For the latter, he will have to legally establish the company in Spain. Considering the time and money spent on this, the web shop may decide that sales in Spain become unprofitable. He decides to no longer take sales from Spanish customers
A web shop in Greece sells high end electronics. In case of problems with these products, the electronics company has a service centre based in Athens. The web shop considers to sell in Romania, but realises that the electronics company does not have a service centre in Romania. This means that customers with a product problem will have to return the goods to Greece for repair. Looking at the tremendously high cross-border parcel delivery costs, the web shop realises that sales to Romania are not commercially viable. He decides not to take orders from Romanian customers.
A web shop in Rome is very successful in Italy and decides to expand its market to France. This means an important decision for the web shop. It will for example have to spend many resources to French search engine optimisation. Without it, it will not be ‘discovered’ by French consumer on internet searches. Furthermore, it will have to translate the webpage in French, develop a French marketing campaign, ensure that documentation is available in French, hire a French speaking customer representative, etc. In order to make an impact in the French market, he offer special offers for French customers. He will use IP geo-location to ensure that customers based in France will receive these special offers.