Planning to launch your e-commerce in Germany? Then read this first!
The German e-commerce market has ten times the potential, but equally you will face ten times the challenges. The purpose of this blog post is not to scare you off, but simply to encourage you to consider your choice of market carefully, before entering Germany.
Germany has a population of 80 million people, more than 200.000 webshops and the e-commerce business grew at a rate of 42% during 2013. The value of the market is €40bn. Clothing is by far the most important category, and the majority of consumers online, are women. (Source)
I have tried to prepare a non-exhaustive list of things to consider before you make your decision.
Why you shouldn’t enter Germany
- The market is highly competitive, but the prices are among the lowest in Europe. On top of that advertising cost in Germany is more expensive than anywhere else. Low prices+high costs=low/no margin.
- Are you selling a physical product? Be well aware that free returns are the standard norm in Germany. Although this requirement is soon to disappear due to EU regulations, it is considered a “must-have”. The largest e-merchants in Germany are handling up to 20.000 returns a day, and 50-60% returns are not uncommon. One e-merchant has even implemented a 100-day free return policy.
- The German consumers are very demanding, and your service and customer support can expect a lot more customer contacts, than you would receive in any other European country.
- Marketplace domination, Germany has 28 marketplace as of today offering similar services. Lots of traffic, but standing out in the crowd, will require patience, competence and money.
- The conversion of e-merchants in Germany is significantly lower than in comparing countries. Levels of 0.X conversation is not usual.
- Clicks & Bricks challenges. Some of the large successful e-merchants in Germany, are traditional bricks and mortar companies, with strong physical representation. Clicks & Bricks simply mean, that if you have bricks (physical representation) you are more likely to receive clicks. Bricks create trust and trust generate clicks and e-commerce sales.
- Legal representation is for free in Germany, if the attorney wins the case that is. It means you are likely to encounter a number of regulative restrictions, potentially slowing down your business.
Why you could enter Germany
- If you have got what the Germans want, you have a market of 80 million shoppers growing at a rate of 25%. The right business idea, combined with knowledge and resources, are the main drivers for many new foreign e-retailers dreaming of a successful launch in Germany.
- Berlin has developed into Europe’s equivalent of Silicon Valley. The cost of living in Berlin is significantly less, when compared to Munich. This creates an interesting environment for a lot of start-ups companies, which in turn attracts talented developers from many different countries.
- Venture capitalists are very much present in Germany, and it is said to be relatively easy to attract and obtain funding in Germany. If you have the idea and the technical expertise required to implement the idea, venture capitalists in Germany can help you get your business plan off the ground.
Having read the blog post now? Should you enter or stay away? No matter what your choice may be, you are always welcome to get in touch with DIBS. We have numerous alternative suggestions for your next market, and can also help you get the right help in Germany.