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Comment: Trading into Germany

Interest in Germany as a cross-border market is growing and it now ranks among the very top targets for many UK retailers.

And it is not hard to see the appeal – Germany has Western Europe’s largest population and the strongest economy after all – but it is the increasing sophistication and maturity of the eCommerce market there, expected to grow 12% in 2015 to €47bn and second only to the UK in Europe, that is driving this surge in interest.

So what do you need to know about trading into the German market?

Customer expectation

There are a number of fairly standard expectations that are common to shoppers in most markets – such as site speed and convenience and addressing concerns over fraud – but what particularly characterises German shoppers is they expect to have a strong sense of clarity around their rights when purchasing from a retailer, as well as knowing how to resolve issues should they arise.

This means that it’s important to ensure key information such as customer support, T&Cs and FAQs are easy to access – irrespective of device.

They are also more sensitive around data protection than other European shoppers and retailers need to work hard to gain the trust of German shoppers. It may seem obvious, but things like misspellings or any other factor detracting from the general overall professional appearance of the site will quickly turn customers away.

Trust symbols are quite common in Germany and can be a useful tool for building up brand reputation.

Payments

In the UK we are well accustomed to using cards to make payments online, but in Germany these are not the dominant form – credit card penetration is around 20% and not all debit cards can be used online.

PayPal is widely used and e-wallets are gaining in popularity due to the increase in mobile commerce, but the most popular payment method remains open invoice.

Using this method the customer receives the goods with an invoice, which they settle by transferring payment to the merchant’s bank account. This is particularly popular for sectors with high return rates such as fashion, where customers can order a number of different sizes – effectively see and try the products before purchasing – and only pay for the items they keep without the inconvenience of refunds.

Logistics

Home delivery remains the most popular delivery choice in Germany and according to the Hermes 'Usage and Attitudes Survey' from 2014, 82% indicated it as their preference.

As with the UK, alternative delivery options are gaining in popularity – delivery to parcel shop (25%) and automated locker stations (8%) were the preferred options where home delivery is not viable.

But returns are very important in Germany – in fact free returns were formerly required under German law, although this has now been replaced by EU legislation.

However, just because it’s no longer a legal requirement doesn’t mean shoppers don’t have high expectations in this area – Zalando, for example, has a 100-day free returns offer as standard.

For some sectors return rates can exceed 40%, which is particularly supported by the open invoice payment method, allowing shoppers to only pay for what they keep. There is an upside to these high return rates however, as conversion rates when offering open invoice typically exceed the European average.

Legal framework

While there are clear moves by the European Commission to harmonise laws across the EU, and Germany is central to that process, the interpretation and enforcement of those laws can vary across different countries.

In Germany a key practice businesses need to be aware of is the extensive system of cease and desist letters.

This system works by enabling a company to send such a letter to any competitor they believe is behaving unlawfully, demanding they cease doing so with the promise of a contractual penalty for any infringement included.

In addition, the company in breach of the law has to cover the costs for the letter (such as attorney fees).

On your radar?

Clearly a lot of factors need to be considered when deciding whether to target the German eCommerce market – will your proposition work there, level of demand for your product range, can you stand out from your competitors somehow; the list goes on.

The traditional cross-border shopping destinations for German shoppers have typically been Austria, Switzerland and the Benelux, but the UK does have strong existing trading links with Germany – being one its largest trading partners across all industries.

And for the right type of business with the right type of proposition, it presents an excellent growth opportunity.

To find out more about the German ecommerce market, download your free copy of the Germany Cross-Border Trading Report 2015, published in association with arvato.