Germany: Breaking Barriers for Retail and E-Commerce Startups
October 4, 2022
Retail and e-commerce entrepreneurs looking to break into the international market must, among other considerations, decide which market(s) to enter first.
Business owners will likely prefer a market with little to few barriers to retail and e-commerce startups – a place where new businesses can be set up easily along with a developed digital infrastructure that has been readily adopted by consumers. Ideally, this market would also provide a good base that enables startups to expand beyond its borders acting as a springboard for growth across the region.
Consider Germany, an economic powerhouse and regional market leader with a mature logistical infrastructure that’s ideal for retail and e-Commerce startups.
Let’s dive into the reasons why the 4th largest economy in the world is also one of the most popular destinations for market expansion.
The German Retail Industry is Booming
Revenue generated by German retail businesses has remained stable or even increased even during the slowdown caused by the COVID-19 pandemic. In 2021 alone, German retail sales revenue totaled over 500 billion euros.
Though shopping patterns may be changing, both due to the pandemic and the nature of the evolving consumer behaviour in general, the fact remains that the retail industry in Germany continues to do well – and having an online presence can only add to growth in the future.
Germany’s booming retail industry, efficient logistical infrastructure, and close ties with neighbouring countries make it an excellent market for startups to enter and mature while setting its eyes on international expansion.
German Customers Rely Heavily on the Internet
Customers in Germany have always relied on the internet when making purchases. Over 60 percent of German shoppers perform internet research before making major buying decisions, and half of these shoppers check online reviews of products before deciding whether or not to buy, or what to buy.
When many non-essential physical stores closed during the COVID-19 pandemic, German shoppers turned to online methods to get the items they needed. During the Christmas season of 2020, nearly half of Germans bought their holiday gifts online. Additionally, over 60 percent of online purchases were made using a tablet or mobile device – a greater percentage compared to the European average. In general, German consumers seem to prefer mobile channels when they make small recurring transactions or when buying gifts.
Apps that help businesses sell fashion items, in particular, are an example of how much German consumers appreciate digital methods for buying items. In 2020, the app Vinted (called KleiderKreisel in Germany) was downloaded more than twice as often as Amazon and eBay – certainly an impressive feat considering the power and market hold of those two large competitors.
As time goes on, e-commerce will only become more relevant. As it stands, German e-commerce revenue is expected to show a compound annual growth rate of over 11 percent for 2022-2025. Innovative business owners who move into the market at this time stand to do very well for themselves allowing them to poise their businesses for regional expansion by moving into the rest of Europe.
German Consumers Value Convenience and Flexibility when Shopping
Customers in Germany are known for focusing on efficiency and efficacy when they shop. They prefer to buy the right item for themselves in an easy and convenient way. Retailers and e-commerce business operators would be wise to build personalised services that cater to the requirements of their customers, such that these customers have a seamless experience whether they are shopping online or in a physical retail outlet.
Besides an integrated and personalised omnichannel experience, many shoppers will make purchase decisions based on whether the retailer allows online orders to be exchanged or returned in-store along with other considerations such as shopping costs. Customers also appreciate flexible payment options, as well as having control over how the items they buy are ordered, delivered, and paid for.
The bottom line? Simply this: German consumers prefer convenience, efficiency, and ease of use.
Are you Ready to Set Up your Retail or e-Commerce Startup in the German Market?
Overall, Germany is an outstanding choice for retail and e-commerce startups especially for brands that want to eventually break into other European markets. This is why entrepreneurs keen on international expansion should consider first expanding into Germany.
Scaler8 is supported by German Entrepreneurship and is part of Singapore’s Global Innovation Alliance. Our strong network of partners and mentors will be invaluable to any firm seeking to penetrate the German and European markets. In addition to a tailored expansion strategy designed by our experts, we’ll work with you to build a solid foundation for global growth by strengthening your business offerings and localising your products.
Ready to bolster your international presence? Speak with a market expert here.