German Customers Go Digital
Enlarge image (© Colourbox) The German e-Commerce market totaled $62 billion in 2016 and is projected to surpass $82 billion by 2018. As the second most populous nation on the continent and the second largest e-Commerce market in Europe, Germany offers a buyer-rich landscape as well as developed fulfillment infrastructures for retailers.
According to new reports from Germany Trade and Invest, there are large gaps in the products that Germans prefer to buy in person versus online. While products such as books and electronics are bought by over 60 percent of German customers online, food products along with household goods and medications are still overwhelmingly bought in a traditional brick and mortar store. Food products especially are bought by 93 percent of the population in traditional stores.
Of the top ten online retailers from 2016, there are an increasing number of specialized businesses. Expectedly, large corporations such as Otto and Amazon top the list by offering a full product range. Further down the list companies like Apple and Tchibo, which not only have a limited range of commodities but also are not exclusively online, nonetheless manage a strong online presence.
These trends speak volumes about the culture of Germany as compared to other European and western nations. Laws against food preservatives and additives speak to a larger movement of valuing freshness of food products over time in Germany, making it an unappealing product for online stores. However electronics, which are often not produced in Europe and are offered in greater selection abroad, render convenience and variety when bought online.
Forging Digital Paths for German Consumers
German customers are unique in several ways, both in Europe and around the world. Germans have the highest purchasing power of any country in Europe, especially among customers over 50 years of age. Conversely to the United States, customers are not tied to brand, with data showing sporadic choices of customers between brands and price levels.
The most important influencing factors for a German customer online are primarily quality based. As tech-friendly and risk averse customers, Germans typically research products thoroughly before committing to a product and are apt to return products that do not meet their qualifications. As such, quality labels, seals of approvals, and reviews play the most important roles in swaying customers on purchasing decisions as opposed to advertising.
The largest barrier for online retailers wishing to attract customers in Germany is that customers are particularly risk and credit averse, requiring online retailers to ensure data security and build trust in order to attract customers willing to give out their financial information online. Of offline purchases, 52 percent are made with cash and only 7 percent with credit card. Given this, it is no surprise that this phenomenon transfers into customer’s habits online. A large fraction--30 percent, of online purchases are made on account, meaning customers pay after receiving the item. This is an added challenge to online retailers who receive delayed payments in comparison to customers from other countries but adds security to customers who want to ensure a quality purchase.
Enlarge image (© Colourbox)
With the increasing amount of stores moving their presences online, Germans presence in the virtual market place is expectedly only to increase. As one of the largest and highest income countries in Europe, there are major financial incentives for online shops to tweak their payment options and product line to the German customers’ preferences and security interests.