Germany is the largest consumer market in Europe with a GDP of €3,386 billion and a purchasing power of €1,893 billion. As a result, the retail sector continues to represent a wealth of opportunities for new business, trading and investing. In this article we take a closer look at the German retail sector, the impact of Covid-19 and the trend towards online shopping as well as emerging retail start-ups in Germany.
The German Retail Sector at a Glance
The retail sector belongs to the top-3 German industries with a total annual revenue of €525 billion in 2018 and 50 million daily customers.
Germans spend the most money on the following categories: food, beverages, tobacco, clothing, footwear, cosmetics, body care products, furniture, appliances for the household and leisure items such as watches and accessories.
Overall, around 300,000 businesses belong to the German retail industry, the majority being small and medium-sized enterprises. The industry employs approximately 3,261 million people. Around 20% of retail businesses plan to increase their investment in the future. The majority of the investment will happen in the areas of marketing, business equipment, training or in the field of e-business.
Notably, sales of products that are sustainable, fair trade or organic have surged in the past few years. In 2019, regional products generated revenue of €32 billion, organic products €12 billion, vegan options €2 billion and fair trade products €1,3 billion. Another growing segment in 2019 was natural beauty products worth €2,6 billion which account for almost 20% of the whole beauty market.
A similar surge of sales accounts to the e-commerce segment. In 2019, the e-commerce segment generated a turnover of almost €60 billion in Germany. As a result, 55% of stationary retail businesses forecast that it is highly likely that in the future there will be a decreasing number of in-store customers as more people shop online. In addition, 48% of German retail businesses expect a reduction in the average store space as a result of the online shopping boom.
Overall, 9 out of 10 stationary retail businesses have incorporated digital solutions in their work processes. Only very small businesses do not use any digital applications. The most relevant concerns in regard to online shops are time constraints, not enough personnel resources, costs or legal issues as a result of new regulation for example.
Covid-19 and the German retail sector
The digitalisation influences many industries and sectors in Germany including stationary retail.
As a result, more and more retailers are turning to multi-channel strategies. The Covid-19 pandemic and related restrictions and measures have further reinforced this trend and accelerated the transition towards e-commerce. After a decade of growth for stationary retail, in 2020, the industry experienced a sharp decline. During 2020 and the beginning of 2021, for several months, stores were closed completely or customers were required to present a negative Covid test in order to enter the stores in Germany. Therefore, for many customers, it was more convenient to shop online. Some businesses claim a drop in sales of more than 60% due to Covid.
Online Retail Market in Germany
In 2020, online retail sales in Germany amounted to €73 billion. This represents an increase of almost €14 billion or 23% compared to 2019. Overall, almost 40% of all retail businesses have an online shop as one of their distribution channels.
Currently, more than 10% of stationary retail also distributes their products through eBay or Amazon and around 7% on other online retail platforms. In general, in 2020, 14% of retail businesses are only active on their online stores. This number has increased by 4% since 2017 whereas the stationary retail has decreased from 54% to 49%.
Around 32% of the German online shopping was paid by invoice, 20% by Paypal, and 18% by debit transactions.
Successful German Online Retail Start-ups
The Furniture Retail Start-up Westwing
The furniture and home decor market is a growing segment of Germany’s retail industry, as it contributes to around 7% of all consumer goods expenditure with revenue of €33 billion in 2018. Especially in 2020, the whole interior design industry has seen enormous growth as people spent more time at home and as a result invested more money into furniture and design elements in their houses.
The popular interior design and product start-up Westwing was founded in 2011 by the Chief Creative Officer Delia Fisher and the CEO Stefan Smalla. The Munich-based company partners with more than 5,000 furniture designers and interior companies from around the world and sells their products on the Westwing online platform or through the app. They are currently active in more than 11 European offices. Notably, their online presence also generates consumer interest. The company’s Instagram page has more than 1,3 million followers and the page of Westwing’s founder Delia has 150.000, providing potential customers with interior design tips and other editorial content. Recently, Westwing started offering its own interior products and design services as well. Since 2018, the company has been listed on the German stock exchange.
About you – Online clothing start-up
The Hamburg-based online fashion start-up was founded in 2013 by Tarek Müller, Hannes Wiese and Sebastian Betz and is part of the German retail giant Otto Group’s portfolio. The e-commerce brand’s revenue is mostly generated by sales within Germany. In 2020, the company’s net sales were worth €1,17 billion in the 2020/2021 fiscal year.
As of 2018 About You is officially worth over US$1 billion (€837 million) and therefore considered a German unicorn startup. To find out more about German unicorns read this article. In June 2021, About You was successfully listed on the Frankfurt Stock Exchange. The About-You IPO is so far the fourth largest in Frankfurt in the year 2021. In 2019, the company launched “ABOUT YOU Limited,” a private label for limited-edition collection pieces designed by social media influencers such as Lena Gercke and Stefanie Giesinger. This positions the e-commerce business as a pioneer in the industry. Overall, the company offers 400,000 articles from over 2,000 brands through the app or website to 30 million monthly active users from over 23 European markets.
Zalando – Online clothing start-up
Zalando SE is currently Germany’s largest online retailer and in particular popular with the younger generations due to the variety of products, customer-friendly return policies and provocative, creative marketing actions. The Berlin-based company was founded in 2008. The company employs more than 14,500 people and is active in more than 20 countries. From online retail to privately-owned labels, shopping clubs and style advice the company offers a wide range of products and services. The business works together with more than 2000 partners in the retail industry. Additionally, they have outlet stationery stores in several German cities. Next to clothing they also sell shoes and other accessories. Moreover, they advise established brands by offering access to their marketing services and logistic support. To read more about the German logistics industry read this article.
In 2020, Zalando generated record revenue of almost €8 billion. As a result of Covid, online retail has experienced major growth in 2020. Zalando has reported an increase of more than 25% in orders as well as website visits and a 20% growth of active customers.
Centurion Plus
Are you planning to found a retail business in Germany and need support in setting up your company? Or are you a stationery retailer looking to establish an online shop and therefore looking for a legal consultation?
Centurion Plus offers you and your company access to highly qualified legal professionals, who are experienced in the German retail sector.
Contact us today for an initial consultation.
