Germany: Distributing a product

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Distribution

Types of Outlet

Kaufhäuser: Non specialized department stores, located in the city center.
Kaufhof, Karstadt, Kadewe
Einkaufszentrum: Shopping malls, located in the city center, bringing stores together on areas of 10 000m2 to 50 000m2.
Arcaden, Passagen, Carré, center
Textil-Kaufhäuser: Large stores specialized in textiles.
Peek&Cloppenburg, H&M, C&A
Fach-Kaufhäuser: Specialized department stores: for example electronics, DIY (Baumarkt)
Saturn, Media-Markt, Conrad Electronic, Bauhaus, Obi, Hellweg
Supermärkte: Supermarkets, located in the city center, specialized in foodstuffs.
Kaiser, Edeka, Rewe
Getränkemarkt: Supermarkets specialized in beverages, located in the city center.
Fristo, Hol'ab
Biosupermärkte: Organic supermarkets, located in the city center
LPG-Biomarkt, Bio-Company, Naturkostladen
Märkte: Fruit and vegetable markets, in the city center, open air or covered markets.
Markthalle, frische Märkte
Einzelhandel: Small local shops, grocery stores, located in the city center, often selling regional specialties (Turkish, Italian, Greek).
Verdi
Discounter: Hard discount stores located in the city center and on the outskirts.
Lidl, Aldi, Netto
Cash & Carry: Hypermarkets and fresh produce markets reserved for professionals.
Métro, Frische Paradies, Beussel Markt

Evolution of the Retail Sector

Growth and Regulation

With more than 84 million inhabitants, the German market is the largest in European Union with one of the highest income in the world. The measures put in place in the context of the Covid-19 pandemic strongly impacted German consumers. Price adjusted household final consumption expenditure was 0.2% lower in 2021 than in 2020, and down 5% from the pre-crisis level of 2019 (Destatis).

After growing by 5.7% in 2020, retail turnover increased by 2.9% in 2021, reaching a new record (Bundesbank). However, parts of shop-based retail trade, such as retail trade in textiles, clothing, footwear and leather products, suffered losses in turnover during the pandemic (Destatis). Traditional department stores were negatively impacted by the pandemic, whilst online shopping increased significantly. E-commerce increased by 14% in 2021, and generated a revenue of USD 109 billion (ecommerceDB). Online grocery shopping, which was still a niche market in 2019, showed the highest growth in e-commerce in 2020, with sales increasing by 60% (USDA). The boom in internet and mail order trade continued after shops reopened. Online trade turnover increased by 36% during May-September 2021 compared with the same period in 2019 (Destatis).
The German retail food market is characterized by consolidation, market saturation, strong competition and low prices, although there has also been a consumer preference towards smaller grocery formats, including convenience stores, small grocery retailers and independents. In this way, all major grocery retailers have been investing in modernizing their existing stores to fit with this new trend. The top four retail groups together (Edeka-Group, Rewe-Group, Schwarz-Group, Aldi-Group) account for around 74.5% of the revenues (USDA). While Germans are very price sensitive in general, many wealthy consumers are looking for premium quality products and are willing to pay a higher price.
The growth of discount stores is slowing down due to market saturation, while sales in supermarkets are increasing. During the pandemic, supermarkets recorded the best performance in terms of revenue growth among all retail channels. This underlines the growing trend towards small, quick but high-quality grocery shopping in the cities, as well as the new shopping behaviours developed by consumers spending more time at home. Thus, the rise of smaller grocery formats has hampered growth of hypermarket sales. Although, hypermarkets are still widespread amongst consumers in rural or suburban areas due to their convenience and attractive prices.

Market share

According to Euromonitor, the German distribution structure is characterised by:

the high level of consolidation of the market
the large number of small independent shops
the sector's low level of concentration (as compared with the main European markets such as France, the United Kingdom and Belgium)
the predominance of distribution in city centers and urban areas
small number of "hypermarket" style stores, mainly in the suburban and rural areas

According to the German Retail Business Federation, in 2020 specialty stores represented 16.4% of total retail trade market, followed by discount stores (15.4%), specialised chain stores (14%), traditional supermarkets (11%), hypermarkets (11%), department stores (1.7%)

According to USDA, the four leading German distribution groups are Edeka, Rewe, Schwarz Group and Aldi, which together held 74.5% of value sales in 2020 (latest data available). The rise of discounters such as Lidl or Aldi has forced distributors to wage a price war. As a result, narrow profit margins may slow down the modernisation of sales outlets and the development of new distribution concepts. Other online food retailers in Germany are Amazon, getnow and Picnic.

Retail Sector Organisations

German Retail Business Federation (German only)
Foreign Trade Association of German Retailers

E-commerce

Internet access: With a population of 82 million, Germany is the largest country in Europe and benefits from a strong and stable economic environment. In 2017, revenues in B2C ecommerce recorded a 39% growth in Germany. Internet access is widespread in the country with 89% of the population using the internet (World Bank, 2016). The number of smartphone users in Germany was about 55 million in 2017. Google is the leading search engine in Germany, both on mobile and desktop devices, with Bing and Yahoo the other key players.
E-commerce market: E-commerce is developing at a steady pace in Germany. According to German e-commerce association Bevh, the market’s total revenue in 2017 reached US$ 63.5 billion and is expected to be US$ 69.7 billion in 2018. The two biggest online stores in Germany are American giant Amazon and German founded Otto. Berlin based online clothing store Zalando comes in third place. These three actors dominate the e-commerce market in Germany. A few other stores are smaller: Notebooksbilliger, Cyberport, Bonprix, among others. In 2017, consumers bought more frequently and spent more on average than the previous year. 79% of internet users in Germany are considered online shoppers, which is a higher share than ever before. In Germany, 10% of online sales are made with smartphones. The country is the third most active market worldwide in terms of import and export e-commerce, behind the USA and the UK. In Europe, Germany ranks third for B2C online turnover, after the United Kingdom and France. Cross-borders online sales made by Germans come mainly from the USA, the UK and China, and lower prices are among the main reasons to shop from foreign websites. Moreover, Estonia benefits from a privileged relation with Germany as private distributors from both countries have developed business agreements in order to facilitate e-commerce between the two markets.
Social media: At least 75% of internet users in Germany have an account on a social media platform and use it frequently. Facebook is by far the most popular social media in Germany, with about 32 million users (38% of the population). Instagram accounts for 9 million active users, according to the company, and is popular with people aged bewtween 14 and 29, but isn’t used much by older demographics. So far, Twitter’s use has been limited in Germany, with 5.7 million people using it in the country. The German language is made of long words and is very descriptive while Twitter only offers a limited number of characters to communicate. Google+, Linkedin and Youtube are present in the country as well but there are also homegrown social media platforms, like Xing (the German version of LinkedIn) and StudyVZ (a students’ network). It is also important to note that almost 80% of Germans say they use WhatsApp for daily communication.

Distance selling

Evolution of the Sector

The European Direct Selling Association (SELDIA) shows Germany's direct selling market grew 3.7% in 2017, reaching EUR 14.82 billion and involving 884,932 independent representatives. More than 80% of German enterprises use direct marketing. The most frequently used formats are email and Internet marketing, telephone marketing (31%), direct mail (24%) and catalog sales. In addition, Germans particularly enjoy 'sales parties' at home as a mean to socialize. Companies using direct marketing must follow stringent data protection, consumer protection and advertising laws.

According to Euromonitor International, direct selling is expected to grow despite increased pressure from internet retailing given Germans' appreciation for direct selling consultants. Main products sold directly include housewares, home furnishing, and consumer appliances. Vorwerk was the market leader and Tupperware Deutschland had with modest growth in 2017. Other relevant companies include Otto, Quelle, Neckermann, Klingel, Schwab, Heine, Conrad, and Baur.

Direct Selling Europe, the DDV, and the German DSA also promote best practices in the industry.

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