Germany

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Payments

Domestic and Preferred Card Schemes

The preferred payment method of online shoppers in Germany is open invoice. A recent survey showed that 58% of the online customers in Germany order online and pay afterwards. Credit cards are also popular, as 34% of the customers use MasterCard, VISA or American Express. Other frequently used payment methods are PayPal, ELV, GiroPay, Sofort Überweisung , RatePay and Cash on Delivery. [1]

The most preferred online payment method (38%) is ELV (short for Elektronisches Lastschriftverfahren), an electronic direct debit payment method that’s supported by banks in Germany. In the Netherlands a similar method is the absolute number one. iDeal, also a payment method that’s supported by the majority of local banks, is the preferred payment method for 55% of online shoppers. [2]

38% ELV 25% Visa/MasterCard 16% PayPal 15% Sofort Bank 6% Giropay [3]

Alternative Payment Methods

Germany has a tradition of bank account-based payments such as bank transfers and direct debits (ELV). Credit card penetration is low. Online banking as supported by mainly Sofort Bank and to a lesser extent Giropay are steadily gaining popularity. Only slightly more than one quarter of the population has a credit card, but 95% has a bank account and therefore access to ELV and Sofort. [4]

  • Domestic and Preferred Card Schemes

Of the 53.3 million personal credit cards in Germany, they are almost evenly split between MasterCard and Visa. MasterCard takes a marginally greater share at 51.9%.

  • Alternative Payment Methods:
  • PayPal – Being an eBay Inc. company, it was founded in 1998. It provides its clients the flexibility and choice to use their bank accounts, credit cards, etc. in a single account to pay a merchant, without the need to share confidential information with the merchant.
  • Giropay – An online payment method, which is supported by more than 1500 banks, and a client can use the service provided as long as an online checking account at a participating bank is available.
  • Sofortüberweisung.de – An easy and simple way to process online payments. Unlike other online transfer payment methods, there is no account registration. Credentials provided by the customer’s bank and a Transaction Authentication Number (TAN) are necessary to progress through the payment process.
  • Prepaid Voucher – It is an electronic stored value voucher, which could be redeemed through SMS and be transferred instantly in a user’s account for immediate use.
  • Prepaid Card – A payment card with monetary value stored into it, without maintaining an account with a bank.
  • Bank Transfer – The transfer of funds from one account to another within the same or interbank, as long as supported.

[5]

Digital Invoicing/Returns

German customers are used to ordering with open invoice as the payment method. Returning items they don’t like or that don’t fit must be easy and for free. As a matter of fact, return rates can exceed 40% depending on the industry segment. However, on the upside, conversion rates when offering open invoice often outperform the European average, thus compensating or exceeding the return effect. [6]

Customer Experience

German consumers will value a number of different requirements in a different way to other markets. Particularly, the following are presented in order of importance, in general, by German consumers: 1. Clarity over consumer rights 2. Concern over ease of redress rights 3. Genuine high quality goods reassurance 4. Fear of fraud 5. Track and trace services 6. Returns and exchange 7. Ability to compare international retail offerings 8. Website speed and convenience 9. National and international delivery arrangements 10. Payments made in local currencies [7]

German consumer reasons for not making online purchases from foreign retailers: Delivery charges too high 56% Difficult to return faulty/unsuitable goods 50% Takes too long to arrive 49% Don’t know enough to feel comfortable 41% Have concerns about credit card fraud 33% Concerns about the quality of the goods 35% Sorting out customs is a hassle 53% Currency conversion rate unfavourable 10% Language problems 18% Difficult to navigate foreign websites 17%

Customer expectations around service availability and provision differ slightly from other territories. For example, telephone contact, chat service and email support/response is expected between 08:00 and 20:00 Monday to Friday. During that time, prompt responses are required; via email within 24 hours. 1st and 2nd level support is demanded immediately. On principal, all communication is expected to be in German; if the retail site and marketing has been translated (localised) then so should customer service.

The Hermes survey mentioned above also cites 79% of consumers saying that email is easy to do and importantly, 60% say it gives them a record of the correspondence. 57% say that telephone is a good way of communicating the problem. Whatever channel is used however, it is clear that a combination of communication methods need to be available to the consumer. This is another example for the need of localised support.[8]

Payments Regulation

In common with other markets, there are a number of issues that regulators are wrestling with, either due to domestic demand or in response to changing requirements coming out of the EU. For example, there are changes underway as to how interchange rates are set (the cost of processing a credit/debit card transaction), concern over additional charges for using certain types of payment methods, e.g debit card versus credit card, and in the German context, moves to ensure that “Sofortüberweisung” isn’t the only ‘free’ option available to customers.

To combat some of these concerns around payments and redress, a number of schemes are run that offer buyer protection. In the UK, a degree of protection is offered to consumers who use a credit card for certain transactions. In Germany, PayPal and Amazon now offer buyer protections. Trusted Shops offer a scheme that protects the buyer, promotes the merchant and includes customer reviews. Open invoice and direct debit payment types include a six-week window during which the buyer can claim a refund. [9]

Local entities

SOFORT enables shoppers to make payments to merchants directly from their online banking. It is a very popular method of payment in Austria, Germany and Belgium.[10]

Mobile payments

Only four percent of German mobile phone users, on average, turn to in-store mobile payments, which is long behind the rest of the field. Two reasons particularly stood out in a Deloitte study on the matter; 45 percent cited a lack of “discernible value” added as a result of mobile payments, and 38 percent considered security a major problem, problem enough to keep them out of the fray altogether. The next biggest reason was 18 percent who said the option wasn’t even available on their device. Eleven percent cited a lack of places to use the system, nine percent called it too complicated, seven percent didn’t understand the options available and another seven percent considered the phone screen too small for such things.[11]

Logistics & Delivery

With 10% of German online customers already having purchased cross-border and the total ecommerce market being worth nearly €50bn in 2015, the marketplace is already open to distance-selling. On the back of a strong catalogue shopping heritage, there is a well-developed B2C delivery network in Germany. Customer expectations are high with 14% expecting a 1-2 day delivery service but they are also open to collecting their packets from parcel shops or locker locations. Deutsche Post having 2,500 locations nationally provides good infrastructure for convenience and a wide range of delivery options to the customer.

For flexible parcel deliveries, Germans are more likely than other European markets to choose a parcel locker solution, such as Deutsche Post DHL’s ‘Packstation’, as their preferred delivery location, and as for returns, German businesses, such as Zalando, have set a high service standard – e.g. 100 day free returns – which domestic online customers now expect from any online vendor. [12]

Custom and Duties

If goods are imported from outside the EU, import duties may become due based on the tariff classification, customs value and origin of the goods. The customs/VAT warehousing procedure allows the storage of goods without such goods being subject to import duties (neither VAT nor customs duties are due).

Infrastructure

Track & Trace/Exchanges/Returns

Fulfilling a customer’s order is the most physical representation of the merchant’s proposition. As part of the user experience, providing a potential customer with details of the delivery services on offer, including information about track and trace services used can improve conversion rates. The service offering is then further enhanced post-purchase by communicating the parcel number, link to track & trace the dispatch, email confirmation, push messaging (SMS/email) and as a self-service option in a customer’s account. These elements all help with customer retention; a good service will encourage repeat purchases.

Returns and exchanges are always at the forefront of a German customer’s mind. Clear information on processes and policies are expected. This information should be included in the help / FAQ section of the website, emphasised in automated emails and on delivery documents. Free returns are also expected by many customers, as a legacy of the catalogue industry. Return handling fees / restocking fees are not popular.

There is a statuatory right to return goods during a period of 14 days. Customers are traditionally used to mail order and the right to send it back, which combined with the popular payment method ‘open invoice’, returns are typically around 40% in most sectors. Fashion might even exceed this. The usual metrics and expectations around website performance across multiple devices are applicable to any territory. However, it is important to highlight that the German legal requirements around the use of cookies and gaining consent from website users before they are downloaded is much stricter than in other EU territories. [13]

Import Duties

The standard VAT rate for importing items into Germany is 19%, with certain products, for example books, newspapers and magazines, attracting VAT at the reduced rate of 7%. VAT is calculated on the value of the goods, plus the international shipping costs and insurance, plus any import duty due.[14]

Marketing

The German ecommerce market is a strong force, both in Europe and worldwide; accounting for 25% of the European ecommerce turnover, and ranking 5th in the world with online sales volume. Germany also sits among the world leaders in cross-border ecommerce, behind only the US and the UK. Mobile commerce is a significant trend in Germany, with 10% of all online sales being made via a mobile device.

Where brand awareness is the factor, trust schemes can play a major role whilst clear and concise information about the product, returns and customer support is vital. Communications also include localisation of the offer and customer support channels. Germany ranks behind some smaller countries in the number of consumers that speak English. [15]

The proliferation of social media, online communities and mobile communication have generated large amounts of consumer data of interest to marketers. Simultaneously, technologies to collect and analyze the data have improved greatly. The result is insight into the preferences of individual consumers and the ability to implement one-to-one marketing with unprecedented effectiveness. In fact, it can be argued that mobile technology will be central to all the future trends, e.g. Internet of Things, virtual or augmented reality, and wearables. Mobile is already the main focus of innovation and increased ad spending for countless major brands. This is no surprise, bearing in mind how rapidly smartphone penetration is rising globally.[16]

Demographics

  • Total Population 82.6 million
  • Age Breakdown 42% of the population in Germany are between 25 and 54.
  • Religion Christianity is the dominant religion in Germany, with 34% Protestant and 34% Roman Catholic.
  • Urban Population 74%
  • Internet Penetration 86.8% or 71.1 million
  • Mobile Penetration 139.9%
  • Tablet Penetration 24.9%
  • Smartphone Penetration 62%
  • Online Shoppers 63.9 million 90% of all internet users buy goods or services online
  • Ecommerce Sales EUR 49.7 billion (goods and digital goods)
  • Ecommerce Penetration 77.3%
  • Ecommerce CAGR (2012 – 2013) 39.2%
  • Mobile Commerce Mobile commerce sales in Germany reached over 10% of the total online retail sales in 2013. EUR 4.97 billion
  • Mobile OS Platforms Android is the preferred mobile operating system in Germany, with the lion’s share of the market at 77.8%.

Cross-border Ecommerce Opportunities

  • Germany is the third most active country worldwide both in import and export ecommerce, third to only the US and the UK.
  • Estonia has a developed trade route with Germany; the largest proportion of cross-border ecommerce purchases arrive from Germany. As a result, Eesti Post and Deutsche Post DHL have agreed to develop additional services to facilitate and develop cross-border ecommerce.
  • German online merchants mostly sell, in number of cross-border sales, to France (5.9 million), Austria (5.5 million), Italy (5 million), Spain (3.9 million) and the Nordics (3.5 million).
  • German online shoppers mostly buy cross-border, in number of cross-border sales, from the UK (11.1 million), the US (8.6 million, and China (6.2 million).

Language as a Key Driver

  • The official language of Germany is German, spoken by 95% of the 82.6 million population.
  • German is spoken in neighbouring Austria (7.5 million people) and Switzerland (5.2 million people) Other European countries with a German-speaking majority include Luxembourg (0.48 million) and Liechtenstein (0.03 million).
  • There are German speaking communities in the US (5 million people) and Brazil (1.4 million people).
  • Non-native languages include Turkish, spoken by around 1.8% of the population, and Kurdish, by 0.3%.
  • German is spoken natively by about 100 million people, making it the most widely spoken native language in the European Union.

Shoppers

Demographics show that females are more likely to make purchases via mobile devices in most categories. The gender gap is biggest in the clothing and book sectors with electricals the only sector where this is reversed. 18 to 44 year-olds are also the biggest user group in these sectors but older groups are still showing a strong propensity to use mobile channels. [17]

Social Media

Social media growth has stabilised and even showed a modest fall in 2014. However, with over 40 million user accounts, the social consumer is an important segment in the market. Social media ad revenue is expected to exceed €2.2bn in 2015; a significant proportion of total digital ad spend. There is a strong trend of users engaging with adverts on social media and becoming buyers as a result.

Facebook, Twitter, LinkedIn, Google+, YouTube, Pinterest and Instagram are the top seven platforms used by marketers, with Facebook leading the pack by a significant margin. Social media advertising is also about personalisation. The better you know your customer, and for that you need to have data and analytics capabilities, the better you can offer personalised marketing and increase conversion.[18]

Major shopping categories

Mobile is of increasing importance with smartphone penetration at over 60% and clothes and electricals being the most popular sectors for the mobile consumer. The German ecommerce market survey in 2010 (market survey of the 1,000 largest online-shops of physical and digital goods) highlighted the following as the top 10 ecommerce brands. amazon.de otto.de telekom.de conrad.de neckermann.de thomann.de weltbild.de bonprix.de baur.de notebooksbilliger.de [19]

German consumers are most likely to purchase fashion from foreign websites with the UK and US the favourite markets to buy from and at the same time, highlights the appetite for cross-border trading. 46% of online consumers have already purchased from a foreign website.[20]

Major retail holidays

Special promotion days:‘Mother’sDay’ in Germany is on the second Sunday of May, as opposed to the English equivalent in March. ‘Black Friday’ has recently gained prominence, with the first dedicated sale activities taking place in 2014. [21]

Legal / Regulatory

Ecommerce, privacy and data protection in Germany are regulated by different laws, which will be presented in the information below. It will include also law information of consumer protection, digital signature, custom and duties.

Privacy and Data Protection

Data protection in Germany is governed by various laws and regulations on the federal and state level. If personal data is being processed by a private entity or the federal public sector, the federal legislation, in particular the Federal Data Protection Act (Bundesdatenschutzgesetz – BDSG), applies. Germany transposed the European Data Protection Directive 95/46 into national legislation which came into force on 23 May 2001. Until now, Directive 2009/136/EC which, inter alia, contains provisions that are relevant for the use of “cookies” has not yet been transposed into German law. In addition, there are data protection regulations that apply to specific areas and that are contained in special laws which take precedence over general legislation. Examples include the German Banking Act (Kreditwesengesetz – KWG) and the Money Laundering (Prevention) Act (Geldwäschegesetz – GwG), the Telemedia Act (Telemediengesetz – TMG) and the Telecommunications Act (Telekommunikationsgesetz – TKG).

Consumer Protection

In Germany, various laws contain regulations that deal with consumer protection in the context of Ecommerce. In particular, the German Civil Code (Bürgerliches Gesetzbuch – BGB) as well as the Introductory Law to the Civil Code (Einführungsgesetz zum BürgerlichenGesetzbuch – EGBGB) transposes the European Directives on distance selling and distant selling of financial products into German law. On June 13, 2014, the Law implementing the Directive on Consumer Rights (2011/83/EC) came into effect, amending several provisions of the German Civil Code and the Introductory Law to the Civil Code.

The Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb – UWG) includes rules on advertising while the Regulation on Price Quotations (Preisangabenverordnung – PAngV) regulates labeling and price indication.

Digital Signatures and Authentication

In 2001, the Law governing Framework Conditions for Electronic Signatures (Signaturgesetz – SiG) came into effect, transposing most of the regulations contained in the European Electronic Signature Directive 1999/93/EC into German law. In addition, the German Civil Code and the Regulation on Signatures (Signaturverordnung – SiGV) also include provisions that govern the use of electronic signatures.

FX Policies

As a member of the Eurozone, Germany uses the euro as its currency, along with 18 other European Union countries. The Eurozone has no restrictions on the transfer or conversion of its currency, and the exchange rate is freely determined in the foreign exchange market.[22]

Technology

The German customer tends to be much more sensitive than their European counterparts when it comes to data protection. This is also reflected in a rather strict legal framework. Likewise, gaining the German customer’s trust is not a given. Online shop operators need to diligently check their website with regards to spelling and overall professional appearance. Trust symbols might help if brands are totally unknown or reputation still needs to be built up.[23]

Security

Overall fraud levels in the German market are lower than European averages, coming in at around 0.5%. Direct debit is the highest at 1.5% whilst open invoice follows a number of credit checks, allowing fraud levels to be kept down but increasing conversion rates. The risk management tools used in Germany would be familiar to managers in other territories although only those used to running customer credit accounts would be aware of the additional risk and credit checks required by open invoice. Another interesting point with direct debit is the longer period that chargebacks can be implemented by the customer; up to 8 months. [24]

The Federal Data Protection Act (BDSG) applies to all organisations that are responsible for processing personal data. Personal data is any information relating to an identi ed or identi able natural person (data subject). An identifiable person is one who can be directly or indirectly identified, in particular by reference to a name, an identi cation number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity.

The following principles must be adhered to: Legal Prohibition, unless permission is granted/Consent: The collection, processing and use of personal data are permitted only if authorised by a law or if the data subject has consented to it. Direct survey of data: Personal data shall be collected directly from those affected. Without the involvement by parties affected, collection is only permitted by exception, provided that no legitimate specific interests of the data subject prevent collection. Data economy: Personal data should not be kept for longer than is necessary and should be adequate, relevant and not excessive in relation to the purpose for which it is processed. Personal data should be anonymised if possible. Purpose limitation/Necessity: Personal data must be obtained only for specified and lawful purposes and should not be processed in any manner incompatible with that purposes. Furthermore, data processing must be necessary regarding its purpose. Transparency: Each data subject must be informed of the storage, the type of data, the purpose of the collection, processing or use and the identity of the responsible authority. There is stronger legal protection for “sensitive personal data”. Sensitive personal data is personal data consisting of information about an individual’s racial or ethnic origin, political opinions, religious or similar beliefs, trade union membership, physical or mental health or condition, sexual life or commission of or proceedings for any offence committed or alleged to have been committed by the individual and the outcome of such proceedings. [25]

Mobile appetite

Some commentators are reporting an increase in the order of 23% whilst average spend per online consumer ranges from €600 to €1,000. The ever-increasing sophistication of the German shopper includes 75% having made a purchase online, 10% having made a purchase cross-border and 39% having used their mobile phone to purchase goods. Overall, ecommerce represents 15% of all non-food retail. [26]

Smartphone (45%) and tablet (11%) ownership in Germany is neither high nor low enough when compared to other nations to have a significant impact on purchasing. Currently, 12% of shoppers there buy online using their smartphone, with 6% doing the same on tablet. We do see expected growth for mobile purchasing, but this growth is unlikely to be dramatic - 23% planning to purhase by mobile in the next year. [27]

References

  1. ECommerce News. "The Most Common Payment Methods in Europe"
  2. ECommerce News. "Online Payment Methods in Europe."
  3. Expert Market. "Online Payment Methods Around the World."
  4. GoInterpay [www.gointerpay.com]
  5. The Paypers. "Payment Methods - Germany"
  6. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  7. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  8. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  9. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  10. WorldPay "Sofort"
  11. PaymentWeek "German Consumers Not Enthusiastic About Mobile Payments"
  12. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  13. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  14. Pitney Bowes "DutyCalculator"
  15. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  16. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  17. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  18. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  19. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  20. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  21. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  22. Export.gov "Germany - Conversion and Transfer Policies"
  23. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  24. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  25. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  26. eCommerce Worldwide. Germany Country Guide. "eCommerce in Germany"
  27. Worldpay. [www.Worldpay.com/global_shopper "Global Shopper."]