by Daniel Burstein
, Director of Editorial Content, and Dr. Liva LaMontagne
, Editorial Research Manager
In January 2015, BEVH, the German Ecommerce and Distance Selling Trade Association, conducted an online survey with Creditreform Boniversum asking a representative sample of 1,054 German shoppers, 18 to 69 years old, about their online payment habits.
Click here to see a printable version of this chart
We sat down with Nadine Späth, Manager of Consumer Markets and Ecommerce, Germany Trade & Invest, at the MarketingSherpa Media Center at IRCE 2015
to discuss German customers' preferred payment methods, and learn some tips for marketers entering the German market.
You can watch the full interview with Späth here, and read on for additional analysis and insights.
Identifying markets for global expansion
If you work for an American ecommerce company interested in expanding into Europe, your first choice may be the United Kingdom due to the common language.
However, you might want to consider Germany as your first (or second) choice. Germany's overall economy is slightly larger than the UK's — although the UK does have a higher online shopper penetration rate — and Germany shares a common currency with 19 other nations while the UK uses its own currency (the pound).
Germany is also predicted to be the fastest growing B2C ecommerce market in Europe, according to yStats.com. Mobile commerce is growing (currently close to 20% of all B2C ecommerce sales) and cross-border ecommerce is growing, with a small double-digit share of online shoppers making their purchases directly from ecommerce merchants in other countries.
How German consumers differ from American consumers
Successful international expansion takes far more than identifying a market rich with opportunity and dropping your store or products into the mix. It's important to truly understand your potential customers, how they perceive your potential offerings and how they interact in the marketplace.
We talked to Späth to help us learn about the German market.
How German consumers expect to pay for ecommerce products
As you can see in the chart above, online payment services have grown in popularity with German online consumers since 2012, with 41% of German consumers preferring this payment method in 2013, and leveling off to 39% of consumers in 2015. The online payment category includes Paypal, and some methods that are specific to Germany, like Sofortüberweisung.de, ClickandBuy and Giropay.
After online payment services, purchase on account is the second most preferred payment method, which is different from other countries, according to Späth. She said that Germans use online payment services for smaller purchases but for bigger purchases, like a sofa or TV, they prefer purchase on account, "Because, as you might know, Germans are very risk averse, so security for us is very, very important."
Späth explained how the purchase on account process works: you order a TV online, get it shipped and receive the product with an invoice saying "Please pay within 14 days." She explained that this is a very different practice from the U.S., where most payments of this nature are made with credit cards.
German consumers' propensity to return products
Because of this added security for customers in the case of purchase on account, there is a considerable risk of returns to retailers. As an example, Späth mentioned "Zalando parties." Zalando is the biggest apparel e-retailer in Germany. For a "Zalando party" teenage girls purchase clothes, take pictures with their friends, post the photos on social media and then return everything.
However, Späth added that there are measures available for retailers to protect themselves from the risk of returns. When customers enter their address on the checkout page, retailers can run a background check on the customers' payment history, which will determine what payment methods will be available to that customer.
Think beyond credit and debit cards
According to the Federal Reserve, "over the years, payments have become increasingly card-based" in the United States. The number of credit card payments is growing, and the number of debit card payments has increased more than any other payment type (2009-2012).
If you are opening an ecommerce store to German consumers, you can't expect card-based payment options to be enough. You may win them over to your products only to lose them when it's time to pay.
Späth explained that German customers' willingness to pay by credit card and debit card is lower compared to U.S. consumers because Germans historically have been reluctant to live beyond their means.
Also, she said that there are differences between the U.S. and Germany in what "payment by credit card" even means. In Germany, the bank will cover the outstanding balance on your credit card from your debit account within 30 days, and you will not be able to roll it over to the next month.
From the chart, it might look like debit card usage is very low. Späth explained that it might be because the chart reflects "preferred online payment methods," while actual debit card usage is much higher. As a retailer you would be well-advised to make that payment method available to your customers, but not only that payment method.
Three tips for marketing to German online shoppers
Assume differences and learn about them
The data in the chart above is but one difference that would be easy to overlook if you simply replicated your American ecommerce practices overseas.
Späth advised that it's very important to do research before moving into the German market (or into any new country, for that matter).
"Talk to partners. Talk to people who know the market," she said.
Local partners can help because some of the vital information you need may not be published in English. For example, this is the first time the above payment data has been published in English. Until this point, you may not have known this information if you weren't following German business information.
Understand German preference for modesty, green issues and social responsibility
Uwe-Michael Sinn, Managing Director, rabbit eMarketing, suggested that the following basic marketing principles apply to Germany: "Communicate consistently over multiple channels, use a one-to-one approach, take your customers seriously," he said.
However, there are some more focused areas that you might want to target with your message or its tone.
According to Sinn, company support for "green" issues and social responsibility will resonate well. "The German society has a bias to moderate views and low tonality that supports more the 'we' than the 'I'," he said.
Sinn also described German marketing compared to U.S. marketing as "less [show-offy]," adding that "the biggest, the greatest, the newest sound for Germans 'too much.' Most marketing messages need to be more reluctant and more modest in Germany compared to the U.S."
According to Sinn, humor is a common theme that both U.S. and German shoppers like in marketing messages. He added that, in Germany, marketers can afford to be less "politically correct" in their humorous messages. "Of course, everything that might be misunderstood as discriminating [against] foreigners or minorities is a no-go," Sinn said.
Security is key
Like Späth, Sinn highlighted the concern for security in the German customers' minds.
However, he added that there seems to be tension between concerns about data privacy and the desire for relevant, personalized offers: "There is a difference between what people 'officially' say (which is: 'I do not want to share personal data on the web') compared with what they expect ('of course I like product recommendations that fit ... my expectations')," Sinn said.
Related resourcesSubscribe to MarketingSherpa Chart of the Week
— Get the data and discoveries you need to better serve customers and improve results, delivered to your emailMarketingSherpa Media Center at IRCE 2015
— 43 interviews with ecommerce marketers, business leaders and expertsOffering Alternative Payment Options: 3 Questions to Ask Localize Your International Email Campaigns: 4 Proven Tactics C'est un Blog: Why appealing to an international audience is no joke
(from the MarketingExperiments blog)Email Marketing: Merging German and American tacticsThe 2013 Federal Reserve Payments Study
— Recent and Long-Term Payment Trends in the United States: 2003-2012Germany Trade & Investrabbit eMarketing