The time has come for another “Start selling in” article. Last time, obviously, we talked about Poland. Today, we would like to show you what the potential German market presents. Although the COVID-19 pandemic has harmed the German economy, it’s still a rapidly developing country with broad access to the Internet and openness for online shopping. That sounds like a recipe for success, right? Stick to some ground rules, and the German market is at hand!
First of all, let’s take a closer look at the current situation in this country. In fact, just like in many other places, coronavirus has caused significant damage to the German economy.
The German gross domestic product (GDP) fell sharply by 9.7% in the second quarter of 2020. The good news is that, according to the German Federal Statistical Office (Destatis)[1], the GDP drop in the second quarter of 2020 was not quite as steep as initially reported in the first release (July 2020, reported–10.1%).
Image source: Destatis.de
Still, the German economy’s slump was much more extensive than during the financial and economic crisis of 2008/2009 (-4.7% in the first quarter of 2009). Actually, it was the sharpest decline since quarterly GDP calculations for Germany started (in 1970).
The retail industry was severely hit as well. According to the Germany Ecommerce 2020[2] report, total retail sales in the country are currently predicted to fall 8.2% year over year in 2020, from almost 898 billion USD to slightly over 824 billion USD.
Does this mean that it’s not a good time to conquer the German market? By no means!
German eCommerce on the rise
You have to know that, as the report mentioned above states, eCommerce sales in Germany are on the rise! The worldwide lockdown caused many consumers in Germany to shop online more. Moreover, Germans started to buy online products they usually purchased in brick-and-mortar stores (like groceries or medicines). As the authors of this report predict, retail eCommerce sales should generally rise by over 16% this year, and total over 92 billion USD, compared with 79.5 billion USD in 2019.
Similarly, the predictions are very optimistic when it comes to mobile shopping. In 2019, mobile retail purchases in Germany amounted to almost 32 billion USD. In 2020, they should rise by nearly 20%, to over 38 billion USD.
„It’s difficult to imagine a better moment to start selling in Germany. We are currently in the second stage of the COVID-19 pandemic, which is also clearly visible in the German market–87% of Germans plan to buy even more online. As Handels Journal reports, 30% of German customers are going to buy electronics, and 29% are planning to buy groceries in the coming weeks. It’s an absorptive market. There’s still plenty of room for new sellers”–comments Marek Włodarczyk, Head of Sales for the DACH markets.
A developed market with tremendous potential
When it comes to Germany, the numbers are indeed impressive. Take a look at some crucial facts and figures that come from 2019[4]:
- Population: over 83 million
- Internet penetration: 93%
- % of e-shoppers: 83%
- E-GDP: 1.71%
Furthermore, you should know that Germany is a wealthy country. According to the Federal Statistical Office of Germany[5], in 2018, the average gross annual salary was 46,560 EUR (3,880 EUR per month). That’s almost 55,000 USD a year (over 4,500 USD per month). The minimum wage is currently 9,35 EUR per hour (around 11 USD per hour).
So, you have a country of 83 million people who generally don’t complain about their financial situation, and over 80% of them are familiar with online shopping. It all sounds like every eCommerce entrepreneur’s dream! And on top of all that, thanks to their central location in Europe, excellent infrastructure, high technological standards, and amazing warehouse space quality, Germany occupies first place in the Logistics Performance Index, with an unmatched score of 4.20[6].
It all sounds great, but where is the catch?
If you want to conquer this market, you have to get acquainted with it and stick to some ground rules that determine your “to be or not to be”. Thankfully, we know these rules, and, after reading this article, you will as well!
Understand the way the German market works
The very first thing you need to know is that Germans are distrustful of foreign eCommerce companies. As another report (Ecommerce Report: Germany 2019[7]) states, if Germans decide to do some cross-border shopping, they choose almost exclusively large online stores that offer service in their language. When asked about their habits and barriers related to foreign purchases, they say:
- I prefer large stores when buying abroad (68%)
- I would not be comfortable shopping abroad on a website that is not in my language (55%)
This means that, if you want to win the German market, you have to:
- Start a German branch of your store, or at least
- Provide a German version of your website and customer service in this language. The .de domain also seems indispensable.
Secondly, if you want to succeed in this market, you have to understand the Germans’ habits and behaviors. According to the European Ecommerce Report 2019 Edition, Germans prefer:
Payment methods
- PayPal: It’s by far the most popular payment method. Over 52% of surveyed customers answered this way.
- Invoice: 26%. This is interesting. As it happens, German store owners have been actively promoting this form of payment for the last ten years. You have to take that into account, as about 90% of German stores offer deferred payments.
- Debit/credit card: Only 12%
- Cash on delivery: Surprisingly, only 1% of buyers choose this option! Interestingly, German online shoppers tend to have no specific concerns about delivery times or online shopping safety. Only 5% are afraid of online payments, and just 3% are worried about the delivery issues!
Delivery methods
- Deutsche Post DHL: 57%. Yes, the vast majority of Germans willingly choose their national post operator.
- Hermes: It’s an Otto Group’s carrier. Otto Group is a large eCommerce company that comprises many online stores that promote delivery via Hermes.
- DPD: 7%
- UPS: 3%
- GLS: 1%
When it comes to delivery, the German eCommerce sector still has room for improvement. In July 2020, a company called ParcelLab published an E-Commerce Shipping Study 2020[8] report that shows what can be done better regarding delivery:
- One in four eCommerce companies sends just one email after checkout. In fact, 9% of surveyed stores do not send any emails after the purchase!
- Only 30% of surveyed companies offered parcel tracking.
- Just 25% of stores offer express delivery. And just 3% offer the same-day delivery option.
- The COVID-19 pandemic has significantly lengthened the delivery process. Delivery times are taking now from three to four days and up to several weeks in some cases!
This suggests that offering express delivery and parcel tracking is a great idea to stand out from the competition. And this is exactly what we offer at Omnipack!
Marketplaces
Germans love marketplaces. If you want to conquer this market, you simply have to be there! We are going to show you the most popular marketplaces in Germany:
Amazon
29% indicate Amazon as their favorite eCommerce platform. Amazon’s undoubted advantage is the ability to reach a wide audience. Also, Amazon offers great opportunities when it comes to paid promotion of your listings. On the other hand, selling here means high competition and relatively high fees.
eBay
eBay ranks second when it comes to the favorite German marketplaces. It is used by 23% of the German population. In the case of this platform, you have extensive possibilities for customizing your store and individual product pages.
Rakuten
This Japanese marketplace is also gaining popularity in Germany. Just like Amazon, besides the sales platform itself, Rakuten also offers many online services: Rakuten TV or Viber messenger.
In summary, if you are interested in expanding your business to Germany, go for it! It’s a mature and wealthy market, with excellent infrastructure and high culture of online shopping. There are some valid questions, though. You have to provide a website and customer service in the German language. It would be perfect if you had a branch or office in this country, and used their domain and phone number. All these elements build your credibility as an eCommerce business owner. And don’t forget about marketplaces. Germans love them. Therefore, you should be there too!
Last but not least, there’s the logistics question. We know the German market inside out. That’s why we decided to build our second warehouse right at the Polish-German border. Thanks to our warehouse in Gorzów Wielkopolski, we can offer delivery in 1-2 working days within Germany! That’s the quality German consumer expects! With us, you can fulfill these expectations and build a solid reputation in this demanding market.
„Launching a new warehouse during pandemic was a great challenge, but thanks to it, and cooperation with local partners, like DHL, Hermes, DPD, and GLS, we can guarantee quick delivery within Germany, even if this difficult times”–explains Marek Włodarczyk.
Get in touch with us to find out more about our services for companies that operate in the German market.
[1] https://www.destatis.de/EN/Themes/Economy/National-Accounts-Domestic-Product/_node.html
[2] https://www.emarketer.com/content/germany-ecommerce-2020
[3] https://codesthq.com/german-e-commerce-ecosystem-why-is-it-a-booming-market-for-online-retailers-with-potential-in-providing-tech-solutions/; https://www.statista.com/outlook/243/137/ecommerce/germany
[5] https://www.iamexpat.de/career/working-in-germany/salary-payslip-german-minimum-wage
[6] https://lpi.worldbank.org/
[7] https://blog.arvato.pl/rynek-e-commerce-w-niemczech-analiza/
[8] https://ecommercenews.eu/ecommerce-shipping-in-germany-2020/
