Chapter 5 Selling to Germany: The Mature Marketplace Attracting Global Sellers
Germany is a large ecommerce market. It’s well-populated with buyers who are smart, savvy and well acquainted with online shopping. It’s a mature marketplace, showing slowing growth, yet its size, infrastructure and advanced state of ecommerce are still attracting global sellers.
Main characteristics of the German marketplace and consumers
Germany is a heavily populated country with a high Internet penetration rate and millions of consumers making online purchases on a regular basis. It belongs to the top markets in Europe when it comes to population, Internet use, and total purchasing power. German is spoken by 95% of the local population.
German ecommerce market in numbers
- 80.69 million – Population
- 89% – Internet penetration
- 87% – Population shopping online
- 44 million – Eshoppers
Online buying behavior
A typical German shopper is between 30 and 40 years old and living in an urban area of the country. There are differences between German shoppers from Western Germany and shoppers from the East, which has to do with World War II.
In Eastern Germany, incomes tend to be lower and unemployment rates higher. Online sellers should accommodate cultural and historical differences by offering a variety of delivery, payment and return options.
Furthermore, dealing with German online shoppers, international ecommerce sellers should definitely take into account cultural differences. For instance, Germans have more private personalities than Brits and when making online buying decisions, their level of trust is lower.
Thus, giving German sellers reassurance regarding the use of personal data is of vital importance. German consumers are also security-oriented and usually don’t like paying upfront.
Further, sellers shouldn’t be surprised by the German buyer’s curiosity about legal aspects.
Before buying a product online, 82% of Germans will read the terms & conditions of the sale first.
Trust, loyalty, familiarity, quality, and security are core consumer values in Germany. Since trusted and recognized local retailers are favored, international sellers should aim for a localized website, with the .de domain if possible.
Additionally, a legal statement confirming the owner of the site, a.k.a. Impressum should be included on websites.
Quality seals of approval, certificates, badges, and symbols are also likely to bring German shoppers closer to your brand.
It’s also worth noting that due to the competitiveness of the German marketplace buyers can afford to be picky and demanding when it comes to customer service and delivery deadlines. To meet their expectations, you must be reliable, fast, careful, secure and knowledgeable of German laws.
Finally, according to German law, consumers can return their purchases within 14 days with no need for explanation.
This results in higher return rates.
Popular product categories
Among top products purchased by German online buyers are clothing/footwear, books, home electronics, CDs and films/DVDs.
And what do Germans like to purchase from abroad?
- Vehicle Parts and Accessories
- Clothes, Shoes, Accessories
- Home and Garden
- Sporting Goods
Logistics, delivery, and shipping
The German infrastructure is well-developed with a concentrated network of logistics. In Germany, there is a privatized national mail service (Deutsche Post). Its subsidiary, DHL, plays a significant role in the European shipping landscape.
Other strong market players in Germany include myHermes (Otto Group) and DPD.
The most popular delivery method in Germany is home delivery, preferred by 87% of the population. However, German buyers are becoming more and more open to delivery alternatives, such as click & collect and delivery to pickup-up points, e.g. parcel lockers, which saves the buyer from paying a premium for rush orders.
International online sellers should remember that Germany has one of the most precise customs procedures in the world.
Hence, if the parcel is being held for further investigation the result will be extra delays.
If you use a fulfillment center in Germany to store your stock to deliver to your private customers, you will need to VAT-register in Germany. Once VAT-registered, online sellers must provide an invoice to customers.
Shipping prices can be reduced by offering delivery to pick-up points. It’s a good way to remove the premium cost paid in the case of home delivery.
Further, to have a successful shipping & selling strategy in place, it’s necessary to account for the high return percentage in Germany. That’s why your marketing messages for German sellers should include free returns. It’s of high importance to understand the reasons for returns. This way, you’ll be able to efficiently manage your product catalog available to German buyers.
The content in your product listing should thoroughly describe the item, its quality, and functionality, which can be achieved using high-definition photos, the image zooms, rotate function and detailed product descriptions. This way, the buyer will know exactly what to expect. As a result, the chance of them being disappointed by a product that didn’t meet their expectations and wanting to return the item will be much lower.
The preferred payment methods for German buyers are credit/debit cards (29%), invoice (26%) and digital payments (22%). However, the truth is that some risk-averse Germans want to avoid credit card or debt in any form.
Additionally, compared to British online shoppers, Germans feel less trustful and less confident about entering payment card details.
It’s important to reassure the German buyer that they’re dealing with a secure payment system. When ordering products online, it’s quite typical of German consumers to pay afterward. Thus, paying by invoice, as opposed to paying upfront, is quite common.
Other online payment methods used in Germany include PayPal, ELV, GiroPay, Sofortüberweisung, RatePay, and cash on delivery. If German online shoppers can’t find their preferred methods of payment during checkout, 25% will abandon the shopping cart.
The mobile share of retail ecommerce sales in Germany amounts to 38%. Even though Germany is a bit behind the UK (52%), which ranked first, it’s still one of the ecommerce leaders in Europe.
Germany hasn’t experienced rapid growth in mobile usage for ecommerce purposes. However, mobile commerce is growing steadily and seems to be finally catching up.
Shopping from a mobile device is fuelling the growth of ecommerce in Germany. It’s fair to conclude that ensuring proper mobile optimization and a great mobile buying experience should be on online sellers’ priority lists.
53% of German Internet users purchased a product from abroad in 2015, which is a good result compared to other European countries. Further, Germany is responsible for 15% of global cross-border sales. Online shopping destinations of German online shoppers include the UK, the USA, and China.
Benefits and challenges of selling to Germany
Germany is strategically located in the heart of Europe and belongs to the strongest economies in the world. Being a well-populated country with high purchasing and spending power as well as a well-established, logistics-friendly infrastructure, it presents opportunities for international ecommerce sellers.
The maturity of the German ecommerce market means more competition, but also more predictability and popularity of online shopping
The standard VAT rate in Germany is 19% (reduced rate of 7%). It’s lower than in some other countries, for example in the UK (20%). To take advantage of the lower VAT rate in Germany and increase your profit margins, it’s possible to voluntarily VAT-register there.
It’s also worth noting that Germany is one of the leading European markets for cross-border trade. In other words, Germans are keen on shopping from international websites. This means that setting up and localizing your online store on the German marketplace may bring you a lot of extra revenue.
Finally, having established your online presence in Germany, you can also consider other German-speaking ecommerce markets, e.g. Austria and Switzerland. Due to linguistic similarities and geographical proximity, many Austrian and Swiss shoppers are eager to buy from Germany.
First, online sellers planning an expansion to Germany should consider the maturity of that market and a large number of competing businesses. For some online store owners, it may be better to test emerging markets.
Second, high return rates may be a bit of a nuisance for retailers. Return rates range from 5-10% for electronics to 70% for fashion in online sales. This is motivated by consumer protection laid out by the local legislation and high consumer expectations. Thus, a good solution may be a local return address.
Third, since German is spoken by 95% of the local population, some sellers can see the language barrier as an obstacle.
Germany belongs to the top ecommerce markets in Europe, and as such, should be considered by growth-minded international online merchants. The market may have its challenges, such as maturity, high return rates, and demanding consumers, yet its total purchasing power presents big opportunities for online store owners.
Winning the trust of German buyers may take some time, but your efforts may result in customers that will be keen shoppers, loyal to your brand for a long time to come.
So do some research and once you’ve identified opportunities for your online store on the German marketplace, win the local buyer with a localized buying experience!
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