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This is a translation of one of the regular data analyses on big retailers' discount strategies, written by Jakub Balada. You can read the original Czech version of this article on his personal blog.
On May 28, 2022, the deadline for implementing the new EU Directive on Consumer Protection within national law was passed. And Czech legislation didn't make it in time. The draft amendment to the Czech Consumer Protection Act is currently in the comment procedure, though we're hoping it will still come into force in 2022. It would be nice to have this year's Black Friday with discounts you can trust, right?
Lawyer Petra Stupková from Legitas describes two possible consumer protection scenarios that could still take place before the Czech Consumer Protection Act finally gets approved and comes into force:
"In theory, first of all, a consumer can be harmed (for instance, by being shown a fake discount), and the new law will empower them to claim damages from the state since the state would have neglected its obligations. This is not an exceptional case in court.
Secondly, there is controversy over the so-called direct effect of the EU Directive. It introduces a theoretical possibility that the Directive can be used in place of a missing law. It's a rather complex and therefore expensive scenario, so we don't expect anyone from e-commerce to be interested in trying it out in practice”.
Basic rule for calculating discounts
Let's take a look at how Czech retailers have prepared for the new legal reality. We are particularly interested in how the online stores will be following the rule regarding the calculation of discounts (wording of the Czech proposal follows):
§ 12a
(1) Discount on the product price must contain information on the lowest price for which the product was offered and sold by the seller
a) in the 30 days before the price reduction;
(b) if the product has been on offer for less than 30 days, from the moment the product was initially offered and sold until the price reduction; or
c) in the 30 days before the initial price reduction, in case the seller chooses to increase the discount gradually.
(2) Paragraph 1 shall not apply to perishable goods or products with a short shelf life.
Simply put, Czech online retailers must calculate the discount from the minimum product price from 30 days before the current discount is offered. This approach should eliminate the not-so-fair practices we've been observing on the market for several years. Among them: calculating discounts from retail or fictitious prices, increasing the reference (crossed-out) price, increasing the selling price just before the sale (for one day), or having the entire product range discounted at all times.
New dashboard updated daily
Every day, Hlídač shopů (Shop Watcher) keeps an eye on the product prices across the largest e-commerce shops in the Czech Republic and Slovakia. Every year, the Shop Watcher team (Apify, TopMonks, and Keboola) sums up this data in a special Black Friday analysis that uncovers retailers' elaborate discount tactics. Last month the Shop Watcher team prepared a new dashboard, which not only audits all Czech e-commerce retailers but also automatically creates a daily report of their compliance with the EU Directive:
The overview table shows:
- total number of currently offered products
- number of currently discounted products
- average discount stated by the online shop
- average discount calculated in compliance with the EU Directive
- number of products with a discount mismatch (Shop Watcher data compared to what the retailer states)
- date of the latest update (usually early morning)
- Shop Watcher's star rating
- link to a spreadsheet with a list of products with discount mismatches
Furthermore, on the dashboard, you will find a comprehensive Shop Watcher evaluation of how prepared a particular e-commerce store is for the changes introduced by the EU Directive. Last but not least, the dashboard also includes the retailer's comment on the report sent to them - that is, if we have received that comment (the report was sent to all monitored online retailers listed in the dashboard; we've received answers from more than half of them).
The dashboard is helpful to both consumers and journalists, as well as to the retailers themselves. Every day they can get an overview of all products for which, according to our data, the stated discounts do not comply with the rules of the EU Directive.
How retailers adjust to the new EU Directive
According to our data, analysis, and communication with online retailers, we can divide the approaches they take into 4 categories.
- There are those who have been conscientious about getting ready for the new Directive and have prepared well for the transition. With this category of retailers, we are now discussing minor discrepancies typically caused by slightly different interpretations of the Directive.
- Then there is another group of online shops that have decided to remove all discounts as of the effective date of the Directive.
- Another group of online stores is trying to benefit from the current state of affairs for as long as possible by waiting for an amendment to the Czech Consumer Protection Act.
- Finally, we are dealing with particular cases which, in our opinion, are trying to find marketing loopholes even when facing the new Directive.
Trend-setters showing real prices
Last year, CZC.cz and Alza.cz were the first to sync their discount policy with us and set a course based on bonafide preparation for the new Consumer Protection Directive. The current Shop Watcher analysis shows the correct implementation of the new law, although we are still discussing minor methodology discrepancies. To give you an example, Alza.cz does not display negligible discounts. With CZC.cz we diverge in the discount calculation methods since CZC.cz starts counting not from the last 30 days prior to the discount, but rather from the last 30 days before the current date. They are planning to change their approach in favor of our methodology in the near future.
We were pleasantly surprised by TSBohemia.cz, who have already switched to the new calculation methods, and according to our data, successfully so (including this year's Black Friday campaign).
Other retailers such as Datart.cz, Megapixel.cz, or Pilulka.cz have also been preparing for the new Directive as current discounts are much more realistic than a few months ago. And although we keep finding hundreds of problematic products, most of these e-commerce retailers keep communicating with us and are willing to solve arising issues.
Quick fixes
Another strategy was to simply cancel all discounts currently on offer. Mironet.cz and Kasa.cz went this way, in particular. As of May 27, 2022, we had found over 8,000 discounted products on their websites. However, the following day none of those were displayed anymore. This is fine with us and we will gladly provide another report for these retailers whenever they come up with a new discount policy. Interestingly, Kasa.cz belongs to the HP Tronic Zlín group, as does Datart.cz, which decided to prepare for the new EU Directive in a more standard way (see the previous group).
Okay.cz responded to our report on the new compliance directive by claiming they are planning to get rid of all discounts on the website. Unfortunately, this hasn't yet happened at the time of writing (the original Czech language post).
Waiting it out
The largest category is retailers who are trying to take advantage of the rather slow-paced nature of the Czech legislation process. They are simply waiting for an amendment to the Czech Consumer Protection Act. Their discounts are therefore typically calculated from retail prices paired with randomly increasing crossed-out prices. Out of the larger e-commerce shops, Mall.cz, Elektroworld.cz, and Ikea.cz are the ones that fall into this category.
Some online stores still offer a discount for almost their entire assortment, e.g. Mountfield.cz displays 90% of their products as discounted.
Once again, we've encountered a problem with stores counting the discount from the stated retail prices, which at times can vary for the same product even within one online store. For example, we were unpleasantly surprised by a statement from KnihyDobrovsky.cz. They calculate the discounts transparently, with 10.5% from retail prices across all their products. However, when we noticed the retail price of a specific product changing several times and asked for details, their answer was as follows:
"This might happen for various reasons. We have a system that automatically adjusts the retail price of the product according to data received from the supplier or due to internal re-evaluation. When looking at this particular product, the retail price varies. Some retailers state 449 CZK and others 149 CZK; the price varies even within retail stores themselves. In such a situation, the online store price may adapt to this and change.”
The product in question can be seen in the screenshot below. Coincidentally, the change in retail price occurs exactly on the days when the online store price changes:
Another typical trick is a one-day-long price increase so that the new price can be subsequently used as a reference for the next reduction. One example is this product on Lidl.cz:
Marketing magicians
When working on the new dashboard, we once again came across a few gems from online stores still looking for discount loopholes. For instance, Notino.cz seems to have prepared for the new EU Directive well. For products displaying the information "YOU SAVE X%", the discount is calculated correctly:
Hovering the mouse over the crossed-out discount shows the tooltip explanation you'd expect according to the new rules.
However, for a number of other products, Notino.cz displays visually similar information, "X% MORE ADVANTAGEOUS PRICE", but in these cases, the discount calculation goes by some other rules:
After checking the reference price, you will find out that the original price is the one recommended by the retail supplier. This is how Notino.cz explained their approach to us:
"Apparently, there was a misunderstanding on your part and I will gladly explain it. The products you’re referencing are not discounted products. Purchasing them is considered more advantageous compared to the recommended retail price or the max price which we’ve been offering for the past two years, which is why we list them in the "more advantageous" category. The reference price explanation is displayed in the tooltip.”
In this case, it is interesting that even though the online store admits that these products are not discounted, the pink Special offers label lights up next to them anyway.
A similar trick is used by AAAAuto.cz. In some cases, they offer the crossed-out price together with the tooltip "Difference between the original price and the current price". Yet, according to our data, this car has never been sold in this online store for the original price:
In other cases, the crossed-out price goes together with the tooltip "Difference between the price of a new car and the current price":
This is interesting considering that this offer comes from a used car dealer who does not sell new cars, as he himself confirmed to us:
"Our company does not offer new cars, meaning we’ve never sold a used car for the price of a new one."
Legal gray zones in the new Directive
Based on our experience and communication with online stores, we would like to also briefly talk about a few gray zones in the EU Directive on Consumer Protection. It would be great if these problematic points would be reflected in the amendment to the Czech Consumer Protection Act.
Discount time validity
Neither the EU Directive nor the amendment to the Czech law defines the exact time period during which the e-commerce store can offer the discount. Our methodology (as well as Alza.cz or CZC.cz) defines this period as a maximum of 30 days (in case of a gradual price reduction - up to 90 days for Alza.cz). However, we can imagine how this could be interpreted by an online store, which could impose no limit on this period and display the discount for a few years even. We have found a note on this issue in the guidance on the interpretation of the Directive for EU Member States:
"The fairness of excessively long price reduction periods in comparison with the time when the item is sold at the 'full' price remains to be assessed under the Unfair Commercial Practices Directive (see also Section 3 on the interplay with the UCPD).”
Definition of a discount offer
Similarly, the term "discount" is not precisely defined, so it is unclear what exactly the new rules are being applied to. In the documents for the amendment of the law, for example, we found that the new rules do not apply to "fluctuation and price decrease." We would appreciate a more precise definition.
Shop Watcher as a tool for the European Commission?
The European Commission is currently preparing a tool to monitor the new rules for the Member States, and the Shop Watcher team is involved. Together with TopMonks, Apify has been preparing a Proof of Concept for the European Commission for a three-month-long project. During this period, we plan to develop a tool to be tested by representatives of individual Member States. This tool allows them to monitor product prices in various online stores. The monitoring and evaluation process will be very similar to how Shop Watcher currently works. So keep your fingers crossed for us 🙂
