It has recently come to my attention that the states of Sao Paulo and Rio de Janeiro, in Brazil, have passed a law forcing retailers and service providers to specify the exact date and time range (morning, afternoon or evening) when products will be delivered and the companies may be fined if the arranged delivery time is not respected. This is not really new, as the law has been is place since October, 2009 (in Portuguese). What is new is that there’s a bill in Congress that would expand the law to the whole of Brazil. The law in Sao Paulo in applies to every kind of retailer and service provider, including e-Commerce retailers and it’s on this segment that I want to focus in this post. As expected, consumer groups praise the law and support its introduction at a national level, but in my view the customer is actually not really benefited and the impact on society is negative.
Besides the clear advantages regarding costs, the beauty of e-Commerce for the consumer is that products that once were only available in a limited geographical region can easily be purchased and shipped to pretty much any address. With such a law in place, online retailers must suddenly get deeply involved with issues outside of their core competence. To begin with, using regular post services is not an option anymore, as delivery time is not guaranteed, forcing them to use more sophisticated delivery services. All good, except that the retailer obviously can’t absorb this extra cost and must pass it on to the consumer. Then, the online retailer may have to understand local laws in each municipality in Brazil, because each of them can determine at what times deliveries can be made and if it’s made at a forbidden time a fine is obviously levied. To compound the issue, even condos can determine the time at which deliveries are allowed, which may or may not be the same as the municipal law. All this significantly increase the cost of doing business. Then let’s consider what happens when a delivery is not made at the agreed time. The customer must contact, as far as I know in person, Procon, which is the government customer group. This leads a) to lost productive time, as the customer may need to take time off work or study to go and complain, likely standing in a queue for a while and b) the need to hire more workers at Procon to take care of such issues, inflating even more the number of state workers in Brazil, what in turn increases the costs for the government and potentially the tax burden on business and customers, what leads to higher costs of doing business.
A much cleaner and better solution would be to let the market sort it out. Companies that are able to offer deliveries at a pre-arranged time with a minimal impact on costs would differentiate themselves, leading other companies to implement the same, in the end leading pretty much to the same goal that the law is trying to achieve, but at a much lower cost to society. Procon could even spend part of its marketing budged educating customers about what they should demand from companies, if the government still wants to be a part of it.
Increasing the costs of doing business across the board does not help anybody, including the customer. Brazil many times has a tendency to try to regulate every aspect of life by law, but this just inflates the state and ends up hurting society. I don’t believe that the market is the silver bullet to solve every kind of issue, but in this case it’s clearly the better option. Let’s hope that the law does not pass on a national level and the the existing state laws are eventually scrapped.
