In recent years, Germany has retained its position as a pillar of economic stability and strength in the European Union. Strong purchasing power, along with high digital penetration rates, makes selling in Germany an exciting prospect for small and medium-sized business owners looking to expand their global footprint.
But choosing to expand your e-commerce offerings in a country with well-developed economic fundamentals and solid tech infrastructure means your products will have fierce competition and sky-high consumer expectations. With an informed e-commerce strategy to target German consumers, you may, however, find a great avenue to fulfill some of your business’s overall potential in Europe.
Populous and prosperous, Germany’s overall economic strength can easily support e-commerce expansion from a company like yours. There are more than 82 million well-compensated residents of Germany who are classified by the World Bank as high-income. In the Bank’s Ease of Doing Business 2019 rankings, Germany came in 24th out of 190 countries. That rating stems from a score of 78.90 which is above the regional average of 77.80, outscores the numbers given to France, but comes in lower than Denmark.
The strength of the local economy translates to practical buying ability, which is ranked fifth-highest in the world. Germany’s domestic business sector is based largely on small and medium-sized businesses–70% of salaried German employees work at an SME instead of a larger corporation. With its economic strength and well-organized business structure, this economy presents a promising opportunity for business owners looking for a European country market to use as the cornerstone of a larger global expansion strategy.
The strength behind the modern German economy comes largely from heavy industry, with factories and corporations creating products for export. High employment and income stem from categories such as:
- High technology
- Mechanical engineering
Rather than being centered in a few cities, Germany’s industries are spread throughout the country. From Berlin to the port city of Hamburg to the high-tech hub of Munich and beyond, you’ll find a strong industrial presence in multiple regions with top-performing sectors and willing e-consumers in each.
The potential audience for products and services in Germany is well-connected. The U.S. Department of Commerce’s latest data on German e-commerce shows that nearly 63 million individuals (at least 15 years of age) have Internet access, and those buyers spent 66.8 billion Euros on online goods and services in 2016. As for the preferred payment method, PayPal is very popular in Germany. This could come as a great relief if your company already has a well-integrated PayPal option in its cart solution.
Germany’s strong digital penetration rates expand beyond desktops and laptops to extensive smartphone use. The Department of Commerce indicates that approximately one-third of 2016 e-commerce sales were processed through smart devices. If your business isn’t ready to deliver a great mobile experience, you may end up alienating some of your potential customers.
Return logistics are uniquely important in Germany, compared to other markets. Consumers have the right to return items for two weeks, and many shoppers exercise that right. Once you’ve confirmed that your products and shipping won’t disappoint, you may want to consider the logistics involved with becoming an importer.
Your first impression when importing to Germany from the U.S. may be negative, due to the fact that European Union rules are fundamentally geared toward easing friction within the EU, rather than aiding outside partners. For instance, you will not qualify for the Digital Single Market initiative. Even without the advantages of being in the single market, the fundamental strength of modern, IT-connected Germany is so strong that you should still find interested buyers for your products. The country’s foreign trade quota stands at 84.4% of GDP, indicating the openness and international nature of the economy.
Despite not being part of the EU, the U.S. is the second-biggest point of origin for German cross-border, e-commerce purchases. Only the U.K. makes more sales to German buyers; China comes in third. One of the largest issues involved in German e-commerce involves information sharing. The EU’s General Data Protection Regulation applies to German e-commerce and there are strict rules for how you and your partners collect and use data.
Doing Business in Germany
When your business is ready to tackle the promising, yet busy e-commerce market in Germany, forming an alliance with a local company may be your ticket to greater success. Make sure you review the norms and expectations of the German business culture to get off to a good start.
The U.S. Department of Commerce’s findings about German corporate etiquette include a major emphasis on punctuality. Set aside extra travel time, as delays from 5-10 minutes could make your business counterparts unhappy and 15 minutes or more could be seen as disrespectful. Be aware that offices may close early on Fridays, with no afternoon meetings.
When it comes to conversation, be cautious about giving compliments too readily. Trading positive banter this way could be embarrassing rather than flattering. Furthermore, German businesspeople may take the question “How are you?” more seriously than their U.S. counterparts, giving real answers– so using “Wie geht es Ihnen?” as a substitute for “Hi!” without expecting an answer may be an awkward beginning to a conversation.
Partnering with DHL
Becoming a serious player in the German e-commerce market means your company will enter a highly developed space with promising fundamentals, but ample competition for customers. Creating a strong enough e-commerce presence to rival both domestic sellers and other EU firms, aided by simple cross-border regulations, is a challenge for a small U.S. company. To maximize your chances of success, plan to form a partnership with an experienced logistics partner such as DHL.
With shipping and tracking options that can please even the most demanding modern shoppers, along with logistics capabilities that position your goods closer to customers, DHL is an expert at enhancing your company’s cross-border capabilities. When forming your international e-commerce strategy in Germany, plan to include a partnership with DHL to ensure maximum success in its booming e-commerce marketplace.
To learn more about your company’s best bets in German e-commerce, check out DHL’s country guide.