Germany is considered to be one of the biggest business hubs in Europe. It offers a lot to entrepreneurs who want to start a new business, especially an E-Commerce business. The existing E-commerce setups are doing great already, indicating the fact that Germans prefer to shop online. Hence, retailers can make the most of this opportunity by setting up an online business in Germany.
Current E-Commerce Market in Germany
Reportedly, almost 87% of the population prefers to purchase goods online from books, shoes, and clothing to electronics. This number itself is an indicator of how much potential does the online business have in Germany.
The German E-Commerce market is currently ruled by the International E-Commerce Giant Amazon, followed by local players such as:
- Otto.de (Headquarters: Hamburg )
- Zalando.de (Headquarters: Berlin)
- Notebooksbilliger.de (Headquarters: Sarstedt)
- MediaMarkt.de (Headquarters: Ingolstadt)
There are many other local retailers which dominate the local E-Commerce market. Some other international online retailers include Apple’s online store (German) and Sweden based Ikea.
Clicks and Bricks factor
Except for Amazon, almost every other top retailer has a physical presence locally. Therefore, it can be assumed that Germans to trust an online business which has a local presence. Many online buyers will hesitate in buying stuff from an unknown name, especially the one with no physical store. Being new in the online business will be not a problem if you can prove yourself authentic with an outlet.
If you are planning to start an online business in Germany, then brace yourself for the high return rate challenge. Germany is considered to have the highest E-Commerce return rate than any other EU country. It is a norm in the country to have free postage on return in case if one is not satisfied with received goods.
You can cover up this loss to some extent if you have a physical store in Germany. If you are not based in Germany, then the international postage fee that you will bear in case of returns will result in a big loss in your business.
Yet another important factor to consider is the payment method that you will offer. Germans will be reluctant to buy anything online from you if you are not offering the preferred payment options.
Paypal is the most preferred invoice option, followed by local payment options which include SOFORT banking and Giropay. Surprisingly, credit and debit cards are less preferred payment options.
If you will have a look at all the successful E-commerce players in Germany, they offer their website and services in German. Germans are comfortable with their own language and will prefer to buy something from a website which is completely in German as compared to a website in English.
Also, you can just rely on the online translations to switch your English E-commerce website to German. You may need the help of a Native German which can help in placing the right words on specific places.
VAT and Online Rules
You will be required to be VAT registered in order to comply with German law before you can start your online business in Germany. If your sales are below €100,000, VAT doesn’t apply to you. If you are eligible, then the standard VAT rate will be 19% in Germany.
Further, as an online retailer, you have to be fully aware of privacy policies, GDPR laws, and payment security.
In a Nut Shell
Well, there is competition, yet there is a lot for the new online retailers in the German E-Commerce Environment. If you are willing to launch your online business presence, you will have to invest your time in building trust with the local buyers and to make sure to offer what exactly they are comfortable with. Come up with the deals which will force the buyers to give you a chance and satisfied customers will help you with Word of mouth.