CONSUMERS AND THE EURO
The successful introduction of the euro will largely depend on its acceptance by the man in the street. Public authorities will naturally play a major role but it will be at the bank and in the shops that consumers will effectively exchange their old currencies against euro notes and coins. Following a request to AMUE by the European Commission to give a corporate view on how the introduction of the euro could be effected with the best possible result for the consumer, AMUE and the Irish Business and Employers’ Confederation (IBEC) held a workshop in Dublin on 17-18 April to explore the views of the corporate sector. What follows are some of the conclusions of those workshops.
The Retail Sector will be a pillar of confidence
It is accepted that the authorities, including those responsible for production of notes and coins, the banks and the retail sector will all play a crucial role in the introduction of the euro in terms of the efficiency and logistics of its introduction, its acceptability by the general public, the speed with which the changeover takes place and the continuity of normal trading conditions. However, even more than the banks, the retail sector will be the pillars of confidence for the consumer, because it is only when the consumer actually spends the euro (as opposed to obtaining it) that he/she will start to learn about its value, and be confronted with a new set of reference prices that have little or no meaning. Competition will ensure that retailers provide a high level of consumer information.
The retail sector, in addition to helping the consumer, will play a major role in withdrawing the old currency from circulation and introducing the new one. As such the views of the retail sector with regard to the timing of the introduction of notes and coins and how best they can inform the consumer should be given their due weight. The more prepared the consumer is for the euro, the less confused he/she will be when euro pricing appears in the shops, and the less will be the problems that the retail sector has to overcome. The benefits that stem from this are twofold: the cost to the retailer is minimised thus reducing the necessity of price increases, and the amount of information to help the consumer is reduced thus avoiding information overload at retail outlets.
Dual displays
There is an onus on national administrations to produce, with the help of communications' consultants, a clear changeover plan which is meaningful to the general public. Other government departments such as tax authorities and social welfare departments should also produce information and begin to show dual displays on key amounts. Public utilities such as telecoms and electricity companies should begin dual displays on their bill totals prior to the introduction of notes and coins. Banks should also dual display final balances on statements and more important dual display cash withdrawals on ATM receipts. Employers should be encouraged to dual display net salary amounts on pay slips as part of their training requirements to familiarise their employees with the currency changeover. We believe that it is of the utmost importance that the same message is given to consumers from whatever source. Information on the euro, therefore, requires not so much competition but co-ordination.
Timing of the Changeover
The bottom line for many retailers is that the euro notes and coins should be introduced in March 2001, the period of dual currency should ideally be no longer than one month, (this is a matter for subsidiarity), and there should be a coincidence between the introduction of notes and coins and the redenomination of scriptural amounts by banks. The period October to mid February should be avoided because of the inability to deal with dual currencies at the height of the Christmas season or to train staff adequately to help the consumer in mastering the new currency. The beginning of phase C should be advanced, not delayed, because the three year transition phase is already too long and gives rise to a long period of on-going costs, most of which cannot be recovered.
Retailers and banks agree in most EU countries that January is a most inappropriate time to make the changeover. However this view is not shared by French and some Spanish Employers’ associations. January coincides with the busy period where price discounting would only add to consumers' confusion regarding prices. It comes after the busy Christmas period, which would make it impossible to undertake the essential training of staff required to provide the information service to the consumer. The retail trade is equally ill disposed to the introduction of notes and coins in October because they could not adequately cater for a period of dual currency during the Christmas period which they define as starting at the beginning of November.
The question then arises as to whether the period should be March 2001 or March 2002. Much of business, including the retail sector - but excluding IT specialists confronted to the change of millennium - , take the view that the three year transition period is too long. Any extension runs counter to the original intentions where the words "January 2002 at the latest" carried with it a strong implication that the transition period would be shorter than the three year scenario. Administrations must take the necessary actions to ensure that the notes and coins are produced in adequate supply on time and are geared up to make the changeover by March 2001. It is incumbent on all economic agents both public and private to take the necessary steps to facilitate the changeover to the euro; the efficiency and competitiveness of public administrations is as important as that of the private sector.
It is imperative that there is coincidence between the introduction of notes and coins and the date for the re denomination of scriptural amounts. The introduction of notes and coins must mark the ending of phase B. It, therefore, seems inescapable that the draft regulation be modified. It is difficult to see what merits there are in not ensuring coincidence between the introduction of notes and coins and the redenomination of scriptural amounts. Failure to have coincidence would prolong rather than shorten the period of dual currency. This would result in additional costs and an extended period of confusion. From a consumers' point of view, there is no gain, but added complexity.
Objectives of Retailers
The objective of retailers is to maintain customer confidence during the changeover period. This will lead to retailers providing as much information as possible to the consumer in the least confusing way. It should be understood that this help should not go beyond that which is needed to maintain customer confidence and to assist the consumer to learn new reference values. It is not the function of the retailer to provide information on why the euro is being introduced or what happens to pensions etc.
Information Instruments
Different means are likely to be employed by different types of outlet and the individual retail business is best placed to know what methods will be most useful and acceptable to the customer. Information Leaflets: will play an important role in bringing the message of EMU to the consumer. It is our opinion that there should be co-operation between retail outlets and indeed banks in ensuring that the same message and same vocabulary is used in all retail outlets. This would imply therefore that one agency - public or private - should draw up the information. Excessive competition or individualism may confuse the customer and lead to additional costs which could not be recouped. Posters: it would be difficult to have full conversion tables on posters as the amount of information would be too great to be meaningful. However, posters with some key conversion rates such as 20 cents, 50 cents, 1 euro, 2 euro... up to 10 euro, 20 euro, 50 euro could be used. Such limited information posters would help the consumer to establish reference prices rather than fulfil the role of conversion tables. Conversion Tables: Simple conversion tables using a slide rule mechanism could be produced easily and at low cost, but because of the quantity of information the script is small and would not be that easily used by a busy shopper or more particularly an older person. One Function Calculators: One function calculators are the electronic version of conversion tables. They would have the advantage of using larger display characters and would be a useful tool for the consumer to refer back to the national currency price. While both of these above mechanisms will allow consumers to make price conversions easily, they may have the negative function of reinforcing price comparisons with the old currency and thus retard the learning of the new value of the euro. Advertisement Posters: Specific product advertisement posters with dual prices could help consumers familiarise themselves with new prices. After e-day, when banknotes and coins are introduced, price adverts should be either in dual currencies or euros; there should be a prohibition on advertising the price of products in the national currency only.
Dual Pricing
Dual pricing will play an important role in the information and education of the consumer. However, full dual pricing of all products is unlikely for practical reasons. The need for dual pricing is inversely proportionate to the level of awareness of the consumer by all other means, including general education and awareness campaigns. The retailer wants to serve the needs of the consumer in respect of the euro, but at a reasonable cost. During the short period in which the euro is introduced, there is a danger that competition will drive retailers to ever more elaborate and costly dual pricing procedures which may be to the ultimate cost of the consumer.
It is clear that the variety of retail activity does not lend itself to prescriptive legislation or regulation on dual pricing. For example, the dual pricing of a suite of furniture in a department store is easily achieved in comparison to the dual pricing of cosmetic products on a shelf edge label where the lack of space makes dual pricing difficult. The dual pricing of the two or three prices of cinema seats can be easily achieved on a notice board compared with, say, the dual pricing of a taxi meter or petrol pump display, where only the unit price could more readily be displayed in dual prices by way of a notice. In a bar the top 10 or 15 drinks consumed could be displayed by notices on tables or at the bar counter, whereas in restaurants a full dual priced menu might be appropriate. In most large retail stores pricing is on shelf edge labels rather than on products.
Product by product dual pricing on the till receipts would not be practical; the official conversion rate, however, should be included at the top or bottom of the receipt. Product by product dual pricing would probably result in information overload and confusion. Dual priced display on the tills would be costly and not worthwhile for the short period in which dual pricing is needed. Dual pricing on shelf edge labels for cosmetics and other small sized items would not be possible as, in trials, dual pricing yielded shelf edge labels too small to read. On some products, for example cheese, where weights differ, the price of the product is embedded in the bar code and dual pricing would not be possible.
There should not be a fixed date before the introduction of euro notes and coins on which dual displays should come into force. Dual pricing may well be a creeping process. Goods which contain pricing on the packaging will have to dual price well before e-day for fear of obsolescence. We believe that the dual prices should be displayed in equal magnitude without having complicated rules about which is the dominant and which is the derived price.
For the small retailer dual pricing may be a bigger problem. The small retailer would have to rely on a totally manual system with all the possibilities of error. As the small retailer also uses the price label to register the amount in the cash register, the possibility of taking the wrong price is high and mistakes may work to the detriment of either the consumer or the retailer. The small retailer may have to rely on a one function calculator at the till to provide the total in euros.
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