Germany: Known for the Oktoberfest, BMWs, the Autobahn, and… alternative payment methods? You might not know about that last one, but it’s just as noteworthy as the others for eCommerce shops. Germany has one of the largest eCommerce markets in Europe and incredible growth potential for savvy online retailers – as long as you understand their local payment landscape. While many countries’ online shoppers rely on credit and debit cards, German shoppers’ avoidance of debt has created a need to provide alternative payment types.
In this article, we’ll take a closer look at the German eCommerce market and shopper preferences to understand how companies can take advantage of local payment heroes to expand into this market.
German eCommerce Market Overview
Germany is a goliath in the European eCommerce market with the fifth-highest online sales volume in the world. More than 78% of internet users in Germany shop online, spending an average of €1,000 online every year. These shoppers have strong payment preferences and high expectations that can significantly impact retailers’ success in the market. However, by offering the correct payment mix, merchants can expect to see more success in Europe’s second largest eCommerce market.
What Makes German Shoppers Stand Out?
Two dominant buying traits set German shoppers apart from others: High quality expectations and risk aversion. It’s true that many shoppers all over the world have high expectations, but coupled with local legislation that protects consumers and an above average return rate, you’ll want to ensure you are offering the proper payment methods – or local payment heroes – to facilitate these added complexities.
Risk aversion is the second major trait of online shoppers in Germany. Germans go out of their way to avoid debt and providing personal information online, which has, in turn, made paying with a credit card relatively unpopular. And it’s not just that credit cards are used sparingly – fewer than 30% of Germans even own a credit card. Instead, Germans rely on more secure methods of payment, such as online bank transfers, direct debit, and Payment-After-Delivery.
German Local Payment Heroes
Every European country has its own preferred payment mix. You can already start to form a picture of the German payment landscape from understanding how consumers prefer to shop online. Here’s a breakdown of German shoppers’ top three payment preferences, and the reason these options dominate their payment mix:
- Payment-After-Delivery (PAD) or ‘Buy Now, Pay Later’. This payment option accounts for more than 40% of Germany’s payment mix. PAD is the perfect option for selective shoppers who prefer to purchase on invoice, and an ideal offering for new merchants who wish to increase their average order value while establishing customer trust.
- PayPal. This option is very similar in popularity with PAD. We mentioned that German shoppers are risk-averse – and that includes offering sensitive information online. PayPal offers high-risk management efforts and secure transactions for peace of mind when shopping online.
- Direct Debit. This is an excellent option for German shoppers, especially those using a subscription service. Since 95% of Germans own a bank account, authorizing direct debit payments is a safe and easy option.
Connecting with the German Market
The German market is appealing for eCommerce merchants looking to expand to Europe, and for a good reason. Online shoppers in this market tend to invest in more expensive products, like fashion items, and most Germans turn to the internet to shop.
So, how can online retailers connect with the market?
Start by understanding the market’s payment mix and the reasons behind it. Then, you will need to work with a partner that understands the complexities to reduce initial friction and ease entry into the market. The German payment landscape may be more complicated than what you are used to, but the opportunity for growth is well worth the effort!