Are you attracted by the prospect of generating profit in the German market? Based on our experience with expansion, we have compiled 11 key specific matters that you need to consider in order to succeed.
You will learn what the German customer is like and why you should not forget to include Amazon and Ebay in your strategy. You will find out whether it is worth investing in link building or founding a GmbH (the German equivalent of a limited liability company).
Why set up an online store in Germany?
Germany is the fifth largest e-commerce market in the world and the second largest in Europe (after Great Britain). This country is one of the main drivers of the digital economy, and e-commerce there is growing at a dizzying pace.
Global E-commerce Statistics, data from Statista.com
How to win the trust of the German customer
Germans are considered to be some of the most cautious customers in Europe. Understand where their mistrust is coming from and you’ll win them over.
Most Germans prefer using local companies for three main reasons:
- they don’t want to have to wait a long time for their goods,
- they are not willing to pay higher costs associated with shipping from abroad,
- and they are not interested in having to deal with cross-border returns.
If you eliminate these concerns, they will happily buy from you.
The establishment of a GmbH is the foundation
In the long term, we recommend setting up a German company. The most common type of an established company is a so-called ‘Gesellschaft mit beschränkter Haftung’, or GmbH, which is similar to a British limited company (Ltd.).
The capital contribution required here is €25,000 and you must pay at least half of it at the point of registration. Additional fees related to the administration of the company set-up come to around €5,000.
A survey from Statista some time back predicted that in 2020 , 96% of Germans will be making purchases from domestic online stores. Practice has confirmed this trend.
What does GmbH mean to Germans?
By establishing a German company, you are giving customers a guarantee that the online store is subject to German laws and institutions.
This is a relatively expensive solution, and it is not a necessity right from the start. Many companies operate without a GmbH, but its existence is a huge advantage.
If you have a lower budget, opt for a “mini GmbH”
An alternative to the GmbH is its newer version, the UG or Unternehmergesellschaft, which is also called a ‘mini GmbH’. It is aimed at companies that do not have such a high capital available to invest.
What are the conditions?
- The minimum capital amount is set at one euro.
- The company must set aside a quarter of its annual profits ‘in reserve’ until it has raised the capital needed to form the GmbH.
Are you interested in the specifics of other countries? Download our foreign market analysis.
Your online store needs quality certificates
SSL certificates are a standard for every online store. Customers expect maximum data protection. ISO certificates are also a requirement in some specific segments.
Secure shopping mark
In addition to the classic SSL certificate, it is worth investing in a so-called ‘secure mark’. The most popular secure shopping certifications (Gütesiegel) are Trusted Shops and EHI.
Trusted Shops is one of the most popular certificates in Europe. You can obtain it following a request and a subsequent check by Trusted Shops.
They will look not only at how you handle your customers’ data, but also at your customer service, transport methods, transparency of the way you display prices, the purchase process and legislative requirements.
You can also opt for a certificate from the EHI Retail Institute, which gives you the EHI “Geprüfter Online Shop” mark. It is used by more than half of the hundred largest online stores in Germany (even including giants like Otto and Lidl). The verification process is similar to Trusted Shops.
How will the mark benefit your online store?
- It guarantees that customers have a secure shopping experience (relating to data protection, communications, etc.).
- If you have not established a German company, the mark represents an alternative to help you come across as trustworthy.
- It is a sign that your online store meets all legislative and administrative requirements of the German system.
- It protects buyers from financial loss (for example, Trusted Shops guarantees money back for purchases made through verified online stores).
Always display information about your obtained certificates on the website and when summarising the shopping cart.
Certificates generate references
Another reason to invest in security marks is references. Both EHI and Trusted Shops offer them as part of certification packages.
Adjust the purchase process to the market
Not only does communication and marketing need to be different, but the purchase process also requires adjustments. Germans expect certain functionalities from the website, and even the smallest details make a difference when making a purchase.
German language mutation
Don’t even think about using an English version. Germans need to have everything written in German – and flawlessly at that. Definitely invest in a good-quality German copywriter.
Displaying prices for products and shipping
Display the shipping price at the stage when the customer is viewing the product. Don’t forget to list prices both with and without VAT (a must in the B2B sector).
Germans also expect transparency in shipping prices. You can indicate the postage alongside the product in the form of a link to a subpage with postage prices. The second option is providing this information in the top bar at every step of the purchase process.
Supply of goods
Customers prefer speed and are willing to pay extra for it. If next-day delivery is for a fee and free delivery takes three days, Germans usually choose the paid option.
In the last step of the purchase process, display a summary of the entire order. At the same time, adjust the settings so that the basket is fully editable in this step as well.
Payment method
PayPal payments and alternatives like Apple Pay are on the rise in Germany. However, many people still prefer to pay by invoice. You send the goods to the client together with the invoice, and they have a certain period of time to pay it.
Credit and debit cards, which are favoured in many other countries, here come only in third place. Three quarters of consumers want to use their preferred payment method regardless of the store or product they are buying.
E-commerce is dominated by giants Amazon and Ebay
Many German customers search for goods through Amazon and Ebay more often than through Google. In 2019, Amazon had a 46% share of online sales in the entire Federal Republic.
Amazon has an extremely aggressive policy. It tries to gather almost all types of online stores into its sales system. It doesn’t matter whether you are big or small, or whether you sell your own original products or other brands.
To succeed on Amazon, you must have:
- sufficient margin,
- high-quality products with low fault and returns rates,
- and a perfectly managed warehouse management, logistics and customer support.
Amazon’s commission is as much as 15%
Amazon fully exposes business weaknesses which are not necessarily significant in classic online store sales. The company’s range should correspond with the range offered on Amazon. We advise that there should already be demand for your product range when your company enters Amazon.
The portal takes its commission depending on the product, which is usually around 15%. In light of this expense, the pricing policy must be adjusted.
Linkbuilding in Germany is expensive
The German market was hit particularly hard by the Google Penguin update, which is a basic component of the Google algorithm. Three years ago, there was an enormous aversion to link building.
Today, the situation is more favourable, because it is difficult to improve organic reach without link building. However, it is still true that obtaining links is financially more challenging.
Paid content must be of extremely high quality
Links in news portals usually cannot bought. Portals publish purely based on their own free will and choose only high-quality content.
Of course, getting content into the relevant media is not impossible, just difficult and expensive.
Sales on comparators
More than ¾ of German customers first check the price via a comparison tool. Up to 37% will do so with every purchase, as you can see in the chart below.
Investing into a price comparator with a well-set out strategy can pay off. Comparison shopping is one of the most powerful channels in Germany. This method delivers a high return on investment and has a higher conversion rate.
Popular price comparison sites in Germany
The biggest comparator is Idealo. It is followed by Biliger, which has lower traffic compared to Idealo. Other comparators used are Günstiger, Preis, Geizkragen and Geizhals.
Certificates issued by the comparator
It is also worth paying for a certificate from the comparator, which you can publish on your online store. The certificate also displays the number of stars that your online store received based on customer reviews.
PPC and Google Display Network
In Germany, advertising through the Google content network (GDN, Google Display Network) is significantly more expensive than in the Central European region.
In the field of PPC advertising, it pays to do consistent regional bidding and analysis. The best results and conversions tend to be around cities.
What is a typical German customer like?
- A large number of customers are interested in the terms and conditions and they often read them. It pays to invest in a decent lawyer who is familiar with German law.
- The purchase process is quite long and customers do extensive online research before they actually buy. This also applies to offline purchases.
- They are price sensitive, while also relying on reviews and references. They notice promotions and discounts and visit price comparison sites several times before making the purchase.
- Returns are a common phenomenon. In the field of fashion, expect to receive up to ⅔ of the goods back in the form of returns.
- Fast delivery is one of the decisive factors.
- The use of superlatives in product descriptions looks suspicious.
- Certificates and ratings from comparators or shopping portals like Amazon are a trusted source of information for customers.
Avoid superlatives in communication
Forget the American style of communication. Exaggeration and superlatives are taboo. The conservative and rational German customer does not trust the words cheapest, best or fastest.
Communicate your competitive advantages purely though facts and rational statements. Having said that, this does not mean that you should put your emotions aside. They too belong in your campaigns and communication.
Don’t forget about social responsibility
Customers are interested in organic products and the methods of production used. The reach is so striking that ecological or “green” companies have higher CTR. Germans are even willing to pay more for environmentally friendly products.
How to expand and not get burned?
Germany is both a challenge and a huge opportunity for every online store. Finances tend to be a particular problem, because entering a mature market is more expensive. Invest every euro wisely.
We are leading our clients to do the same. Expansion must be supported by data. We draw ours from unique Google export tools.
Thanks to this, expansion is more predictable and we can say with more accuracy which activities will bring the most money to the client.
Do you have an online store and want to expand to Germany with minimal risk? Take advantage of a free one-hour consultation and find out what we can do to help you succeed.
