It shouldn’t be a hard sell to expand your business to Germany. It’s the largest economy in the EU, with an extremely robust business environment and a thriving eCommerce sector. Yet persistent stereotypes, cultural quirks and the specter of Brexit have all served to put many businesses off and keep them moored within the US.
With trade tariffs and the rise of international sales, however, many businesses are realizing that they need to diversify their interests — and Germany may be the ideal destination. Here are six simple tips to harness this bustling eCommerce market, and fully capitalize on your German adventure.
1. Don’t be caught out by payments
One of the most unusual differences between the US and the German market is how online payments are conducted. While Paypal is growing as a means of payment for online purchases, the dominant force in online ‘payments’ is an entirely alien concept — that of open invoice payments. More than 90% of merchants in Germany offer this form of payment, and it’s estimated that failing to do so could cost you as much as 25-35% of your revenue.
This method of invoicing allows customers to buy goods with little more than their name and address, with the bill paid within a month of receipt. This not only means they don’t have to enter their card details online – Germans value privacy very highly – but also gives them up to 28 days to try out clothes or other goods before they’re required to pay for them. This might seem like an impossible hurdle if you’re used to receiving payments immediately – but all is not lost.
While open invoicing isn’t going away anytime soon, there are ways to mitigate its impact. A number of companies offer invoice guarantee services, carrying out live credit checks on customers as they purchase goods on your site. If they pass muster, the company will then give you the money on behalf of the client (minus a small fee), and take care of the collection themselves. You’ll still have to pay for refunds, but bear none of the risks of customers defaulting on their invoices.
2. Weigh up the benefits of Amazon Fulfilment
If you aren’t sold on the prospect of expanding wholesale to Germany, you may want to test the water first. A good way to do this is Amazon’s Multi-Country Inventory (MCI), particularly if you’re already on the platform. Instead of shipping to German customers from your US base and incurring hefty fulfillment fees, the MCI allows you to send your goods to Amazon’s fulfillment center in Germany, and have them shipped from there to the customer. This gives you all the benefits of Amazon Prime delivery and discoverability, while also testing your products’ compatibility with the German market.
If this works out, then you may want to graduate to Pan-European Fulfilment By Amazon (FBA). This works in the same way as the MCI but allows Amazon to distribute your stock between half a dozen more fulfillment centers around Europe. This will expand your reach significantly with minimal effort on your part, and again confers all the benefits of Amazon Prime eligibility.
The downside to all of this is the effect on VAT. As you will no longer be shipping goods across borders, your sales will no longer be VAT exempt under distance selling thresholds. Instead, you will be required to register for and pay VAT in all of the countries from which your products are being shipped. However, accountancy firms and software platforms can help to ease this regulatory burden, while the EU is planning to address VAT payments to multiple countries over the next few years.
3. Deutsch, bitte!
Germany is often thought of as having high English proficiency, and this isn’t exactly untrue. Many of the major cities boast a high proportion of English speakers, particularly Berlin, where many districts speak English almost preferentially. The rest of the country is less fluent, however, with 56% of people in Germany claiming to speak English at a reasonable level. This is lower than many other European nations, including the Netherlands, Belgium, Sweden, Denmark, and neighboring Austria.
As such, you will want to invest in proper translation as a priority. Make sure your products and services are being communicated properly, and consider working with a native branding agency to come up with a new slogan or marketing copy. It may be that your product or its name has different connotations in Germany, or sounds similar to an existing word in German. This could be a recipe for disaster, but may also afford you the opportunity to use a funny pun, or play on your outsider status.
Above all, be considerate of your position as a foreign company, and play to this as a strength. You should be deferential, and look to establish yourself as a positive force where possible; if you’re setting up premises in Germany, for instance, you should hire local management as well as lower-level employees. You can also capitalize on your point of origin, though. If you’re coming from the US, it doesn’t hurt to play on a few stereotypes. Despite current image issues, Germans are big consumers of American media and products and aren’t as precious as some of their neighbors when it comes to foreign influences.
4. Cover mobile and desktops
Germany has a reputation for caution, particularly around the adoption of new technology. While eCommerce has now taken hold as a primary form of shopping, the platforms used by German consumers differ to the US. Computers remain the dominant means of buying goods, with 86% of internet users opting to use a desktop or laptop to shop online. Amazon and eBay’s desktop sites dominate this market, with a few other marketplaces and large retailers in the top 10.
If you’re hosting your own store, then, a clear and attractive desktop site with well translated German text will be critical to your success. In spite of the preference for desktops, however, the popularity of mobile payments is steadily rising. 29% of Germans had used their phone to make a purchase in 2017, up 6% on the previous year, while tablet usage increased by 8%. In other words, your store should cater to all users, with a flexible template and a good user experience (UX) on all platforms.
Try using these devices yourself to make a test purchase, and see if there’s anything that would put you off in the process. A pretty site that’s poorly optimized for mobile may be too slow for 3G speeds, as it has to load lots of graphics and interactive elements. Germany also doesn’t have the best broadband infrastructure in Europe, making site speed for desktops and laptops even more of a priority. With your website or online shop forming the core of your business, it’s critical that you make sure it’s functional and attractive to a German audience.
Woman paying by credit card and terminal– stock image