With a massive $73 billion flowing through the German ecommerce market last year, making it the fifth-largest worldwide, Germany accounts for 25% of the European ecommerce market turnover. Taking into account that 85% of the 81.1 million people living in Germany have shopped online within the last year, it is no surprise that major brands and retailers are looking to engage them – particularly in the lucrative fashion and consumer electronics categories.
But what strategies can retailers utilise in order to stay competitive in Germany? As with any market, Germany certainly comes with its own unique challenges that businesses will need to overcome in order to succeed. For example, Germany is known for its high return rate – with some reports claiming that 50% of all orders are returned. Of course, it’s crucial to be aware of these things for any retailer wanting to thrive, so what else should you know when operating in the German market?
As part of the Retail Without Borders Digital Series, host Dilyana Gramadarova (also Head of Partnerships at RWB) was joined by a special guest in an exclusive webinar to explore the German market further. Joining us from Kaufland.de was Julia Lehnkering, International Sales Manager. Uniquely placed to understand what is required to succeed within Germany and on the Kaufland.de marketplace, Julia is responsible for acquiring new sellers in addition to supporting and optimising the performance of current partners.
In this session led by Dilyana, Julia delved into the German ecommerce landscape. What are the latest insights, trends and opportunities? real.de became part of the Schwarz Group that also owns Kaufland – what will this mean for sellers moving forward? What are Julia’s top tips in order to be successful on the marketplace? In this exclusive Retail Without Borders webinar, Julia covered all of these topics and more.
real.de to Kaufland.de
The first topic that Julia tackled was that real.de became Kaufland.de. As Julia clarified, “we have rebranded into Kaufland.de in the middle of April, so roughly two months ago”. Prior to that they were real.de, but the marketplace has been overtaken by the Schwarz Group, which is the largest European retailer and the fourth-largest retailer in the world by revenue. As the parent company of the Lidl and Kaufland brands, they have now also overtaken the marketplace. According to Julia, the domain change “worked out really well”, in addition to the switch being “perceived really nicely by our customers”.
Furthermore, the good news for sellers is that all the offers and services that were available previously are still accessible. Julia also points out that currently they are still in the integration phase, but that they have some “interesting projects in mind”, such as evolving their mobile site to also having a separate app. In addition, the Schwarz Group also has a strong presence in Eastern Europe, so there are opportunities there too. Overall, Julia’s stance is that they are “really happy to have such a strong partner now”.
Factors for Success on Kaufland.de
So we have seen that Kaufland.de is a massive marketplace with huge opportunities for sellers, but what does it take to be successful in the German market? According to Julia, “our customers mostly value price and convenience.” The convenience aspect for consumers comes from the fact that they can buy everything in one place on Kaufland.de – it’s also easy for sellers because Kaufland.de handles the payment processing.
To continue, Julia of course recognises that competitive prices are important, but also adds that there are a lot of other factors to take into account. What about the shipping costs – as a seller do you offer free shipping or are there shipping costs on top of the price? What about the speed of delivery and how quickly can you ship to Germany in an easy way? Also in terms of returns, what might you be able to offer German customers – are returns free or are they charged? In Julia’s opinion, “these are some of the things you should keep in mind when setting up your offers”.
Finally, Julia had some words of advice about data. As she mentions: “German customers are really looking for a lot of information when shopping online”. Therefore, this is something to consider when setting up your product data content – it’s important to include as much information as possible.
Julia explains that they have product data on the Kaufland.de marketplace which describes the product: title, description, manufacturer, pictures, etc. Alternatively, there is also offer data, including the price, delivery time and so on. Julia believes the product data should have “as much information as possible”, so they always recommend filling out the mandatory attributes. However, there are optional attributes which are “super important”, one example being the short description which contains key words – essentially forming a system for improving the findability of your products.
Reviews
Another interesting topic that arose during this conversation was that of reviews. Most of us would typically expect products with good or mixed reviews to perform better, whilst listings with little to no reviews are expected to perform worse. Going against the grain, Julia noted that “on our marketplace it’s actually not so important”. According to Julia, product reviews on the marketplace have only been available for 1.5-2 years, so in reality there are not as many reviews on the platform yet as other places.
In fact, for the German market and for Kaufland.de specifically, Julia believes that product reviews are not among the most important criteria. Instead, they follow ‘Buy Box’ logic where a product is evaluated based on price, delivery time and shipping costs – with the best overall offer leading to the conversion. So although one could argue that the best reviewed product wins or that the lowest priced product is the most successful, ultimately the customer’s purchase decision is based on the total offer at hand (which is composed of multiple factors).
Return Rates
As mentioned previously Germany has a reputation for having high return rates, which is of course another very important consideration for ecommerce companies. This is particularly true these days given the increased focus and attention on living sustainable lifestyles. Julia acknowledged that “the return rates in Germany are super high compared to the rest of the EU or other foreign countries”, in addition to it being a “pain point” for the ecommerce industry.
However, interestingly enough, this does not appear to reflect the experiences of Kaufland.de. In fact, as Julia points out “we actually have really low return rates”. To clarify, for the overall categories “we have a return rate of 5%”, and for fashion “we are at 13%” (which would still be considered good, as return rates for fashion are always higher than other categories).
Julia speculates that this may be due to the fact that Kaufland.de customers already have a good idea of what they are looking for when they come to the marketplace. So rather than browsing around, ordering and then returning half of their basket, they search for a product through external channels, see it at a good price on Kaufland.de, buy it and keep it. Of course not only is this great for the sellers and Kaufland.de, it’s also fantastic for the environment.
Different Models
To finish up the discussion, Dilyana brought up the topic of the direct sales model vs the marketplace model, with Julia confirming that Kaufland.de offers both to sellers. In the direct sales model, Kaufland.de would buy the stock from the seller, who would in turn send the goods to their warehouse. The products would then be sold under Kaufland’s name on the marketplace.
Alternatively, the marketplace model would involve you registering as a seller yourself, listing your products and selling direct to consumer (D2C). So, which of these options is ‘better’? Well as with a lot of things, there are pros and cons for each. As Julia puts it, the marketplace model “gives you way more control about your pricing, how to set up your brand and what to communicate to customers”. Additionally, as a seller who has the capacity to ship to customers (particularly German ones) this approach gives you a lot more control over the distribution of your sales.
On the other hand, the direct sales model would be better suited for manufacturers who are not able to ship to customers (for example you can only do B2B but not B2C). In this case, letting a marketplace such as Kaufland.de handle the sales and shipping would be a much more effective strategy. But of course, which model a business chooses to adopt is always going to depend – usually being on a case by case basis. In Julia’s words: “you cannot really recommend one model or the other”.
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