Germany experienced a record year in 2019 in terms of e-commerce, with multichannel retailers recording a particularly substantial increase in sales. As the fifth-largest e-commerce market in the world and the second-largest in Europe, Germany is attractive for foreign players. However, the German market has local and regional requirements that any new entrant should take into account. And how has the Corona crisis affected the German e-commerce market? FashionUnited has analysed German online shoppers and their habits more closely.
According to Eurostat, 95 percent of the German population will be using the Internet in 2020 - not a bad achievement considering that almost a quarter of all Germans is over 65 years old, i.e. of retirement age. It is precisely this part of the population that has discovered online shopping during the Corona pandemic, which allowed them not to have to leave the house. Eighty-four percent of the German population of 82.4 million had already shopped on the Internet before, and there is no gender difference in Internet usage. Add to that a gross domestic product that, according to the International Monetary Fund, reached 3.466 trillion euros last year, and that is not a bad starting position for online retail.
Germans love German sites and bank transfers
However, outsiders should pay particular attention to two peculiarities of the German market: For one, German online shoppers prefer sites that address them in their native language and have a .de domain; also, payment by cash on delivery and bank transfers are particularly popular. On the other hand, the Corona pandemic is changing both preferences: German online shoppers are now considering non-German sites and are getting used to other, faster payment methods.
Foreign entrants to the German online market should also bear in mind that Germans are used to fast, efficient deliveries with 10 percent expecting to hold an item that they ordered in their hands on the same day; Germany is not number one on the Logistics Performance Index for no reason. Also, German online shoppers pass on the risk to retailers when it comes to payment: Invoicing makes it possible for German customers to place an online order without providing payment information, just their name and address.
Fast deliveries, high returns
This means by the time German online customers hold an item in their hands, about to make the decision to keep it or not, they have not spent a single cent yet. This has led to a high return rate of 32 percent and 17 percent respectively, for clothing and shoes, the most popular category for orders placed via smartphone. This situation has deterred many small German brick and mortar stores from starting their own online shop - two thirds of them do not have one yet, according to the German Federal Association of E-Commerce and Mail Order (BEVH).
“Fashion and apparel, electronics and books drive German e-commerce and, thanks to the country’s advanced logistics infrastructure, almost all purchases are delivered to homes. This, along with a preference to pay on receipt rather than up front, has seen high rates of returns and this costly addition to e-commerce operations has, in some regards, held the market back. Indeed, many of the larger German retailers still aren’t ‘doing e-commerce’,” confirms RetailX CEO Ian Jindal, adding that the Corona crisis is changing this situation fast.
Smartphones are catching up
Even though 58 percent of online shoppers stated that they have made purchases from their laptops in the last 12 months according to the "Germany 2020" e-commerce country report by RetailX in partnership with Tealium, the smartphone is catching up rapidly at 49 percent. Twenty-six percent of those surveyed have shopped via tablet, 3 percent even via smart speaker and 2 percent from a streaming device. By the way, 29 percent of German online shoppers shop once a week, 30 percent every two weeks and another 30 percent at least once a month.
Spending has more than doubled, year-on-year, according to RetailX: from 669 euros per online shopper in 2015 to 1,444 euros in 2019. Among the payment methods offered by online merchants, bank transfers are well ahead with 92 percent, followed by payment on account or invoice (81 percent), prepayment (73 percent), cash or payment on pickup (55 percent), online transfer (14 percent), e-wallets (13 percent) or payment via smartphone (6 percent; according to a survey by Statista, the EOS Group and TNS Ilres).
When it comes to the drivers of online purchases in Germany, the convenience of home delivery ranks first, closely followed by 24-hour availability, more convenient shopping, lower prices, a greater product range, more possibilities to compare, an undisturbed shopping process, more product information and a general preference for online shopping, according to the Statista Global Consumer Survey.
Popular online activities
When it comes to catching German customers while they are spending time on the Internet, it is interesting to know how they use it: While the majority (92.6 percent) uses search engines, sending and receiving private e-mails is also high on the agenda (86.2 percent), followed by checking the weather (72.6 percent) or news from around the world (72 percent). Online shopping follows in fifth place (69.5 percent).
Checking regional or local news is the sixth most common online activity (64.5 percent), followed by online banking (60.5 percent). More than half of German Internet users visit chats or messenger (56.4 percent), social networks (51.9 percent) or watch films and videos online (51.3 percent; source: Statista, AGOF).
Less impulse buying, few miss browsing through stores
Germans plan what they buy, at least when it comes to major purchases: Almost three-quarters (71 percent) of those surveyed in the Statista Global Consumer Survey said that they always obtain information on the Internet, and more than half (57 percent) find customer reviews "very helpful". A good quarter (26 percent) made regular purchases directly from their smartphone or tablet, while a quarter (25 percent) also used it to search for information or for new, large purchases.
Only few online shoppers miss the experience that brick and mortar stores provide: Only 13 percent said they did. However, almost a third of those surveyed (31 Prozent) want to see an article before they buy it. As seen above, this is possible in Germany when online shoppers opt to pay after delivery. It remains to be seen if this option will lose in popularity in the future.
What does the future of German e-commerce look like?
“The lockdown has already led to strong growth in e-commerce and, in the short term, there will be a trend towards local and national providers because of transport routes and an increasing demand for everyday products. However, consumers’ purchasing decisions will still be dominated by their experience, trust and price. Even if the purchasing power of German consumers is strongly affected, many will buy local and national products to strengthen the economy. Online marketplaces will also continue their rise, which can support smaller companies,” expects Miki Müller, managing director, DACH EE at Tealium.
Concluding, Müller points out that the security of their data is very important for German online shoppers: “One major issue, though, is the security concerns surrounding personal data. Personalisation as well as data security are top priorities for all retailers.“
Photo 1: Stringer Imaginechina via AFP; Photo 2 & illustration: „Germany 2020“ report / RetailX