Consumer Markets and Retail Landscape in Germany

Trends after Covid-19

One driver of the growth of Germany's retail industry is e-commerce, which generated EUR 99.1 billion in B2C turnover in 2021 – growth of 19 percent compared to 2020.

The retail industry also boasts a large job market, with around three million employees working for 300 thousand different companies.

Despite the challenging years the industry has been and is facing due to the pandemic, 63 percent of consumers in Germany have indicated that they will return to shop in stationary retail to a greater extent after the pandemic. 

Furthermore, 22 percent intend to use “click and collect” services that would generate further traffic for the cities and individual shops thereby increasing spontaneous additional purchases. 

Shifting to sustainability

Consumers in Germany have become increasingly environmentally conscious in recent decades, and companies able to manufacture sustainable and environmentally friendly products find themselves at a significant competitive advantage. Sixty percent of consumers in a recent study consider sustainability as being important to them when choosing a product or retailer. Forty-four percent of consumers are willing to pay a surcharge for sustainable packaging. This accounts more for the younger (more than 50 percent) than the older generation (30 percent). 

Most favored retailers

Among the best retailers from a customer satisfaction perspective are dm, Amazon, Rossmann, Edeka, Rewe, Lidl, Alsi, Thalia, Ikea, Fressnapf and Drogerie Müller. According to the OC&C Retail Index 2021 they achieved customer satisfaction rates between 76 and 86 percent.

The German population is aging. Almost half (49 percent) of the German population will be 50 years or older and one in tree will be above the age of 60 by 2030. Seventy-five percent of Germans in 2020 lived in a single or two-person household, totaling around 30 million households.

Savvy customers

Thanks to the rapid development of the internet as a research tool for purchasing decisions, the typical German consumer is savvier than ever. Information is just a click of a button away, and with the growth in popularity of smartphones and tablets, many can research alternatives to products on the go.

This means it is crucial for retailers to utilize technology in order to get the right information to the right person via the right channel at the right time (e.g. through social media or beacons to attract customers to the store).

Customer satisfaction

Retail service and flexibility are imperative in both the online and offline worlds. Customers are better informed than ever before, and thanks to the development of the strong e-commerce industry, individuals can conveniently switch retailers with the click of a button. This can be seen in the high percentage of individuals who switch retailers when not satisfied. 

Millennials are especially prone to switching from stationary retailers to their online counterparts but also other consumer groups increasingly do so when not satisfied with the offer in the shop.

High demands can also lead to low brand loyalty levels as customers shop around for the brand that meets their individual value-for-money concept. Trust in the shop, relevant product offer and (after) sales services are the top three factors influencing customer satisfaction in stationary retail. 

Covid-19 and changing purchasing behavior

A recent study by the German Trade Association HDE points out that the long-term effects of the pandemic will be a clear change in values regarding shopping motivations. Mindful consumption – reduced to only that which is necessary – will become more important in contrast to consumption at all cost.

The pandemic has shown the various pitfalls of globalization and has pushed the trend for more regional and local shopping activity. Sustainability and fairness – as well as the social and ecological footprints of companies – have become more important in customer perceptions and are rewarded with increased loyalty where the concept is a good one.

Virtual services and retail experience

The demand for service and virtualization that the consumer has come to expect when shopping online (e.g. returning items, goodwill when returning items and virtual fitting) play a part as does a desire for experience (e.g. restaurant or café in the shop). The unique selling point that distinguishes stationary retail from online shopping is exactly this: the provision of a “feel-good” place with service, entertainment, a place to meet people combined with digital technology, efficiency and individualism.

Post-Covid-19 shopping combines environmental awareness with a desire for minimalism and ethically correct consumption in combination with experience and service. Companies that propose a good concept will win the loyalty of consumers and succeed in future challenges.

Cash is (still) king

However, cash payment is still the dominant method of payment (66 percent) when looking at transaction numbers and not just revenue alone.  When looking at card payment in more detail, girocard dominates with 40.1 percent – its share has grown by nearly 70 percent since 2015.

Girocard wins over credit card

In a recent survey conducted by ibi Research, the preferred payment method by customers in stationary retail environments remains cash payment (37 percent) followed closely by girocard (36 percent) and credit card (16 percent). Cash and card payment is the preferred payment method of 90 percent of consumers in stationary retail, with the rest distributed to mobile payment methods.

The popularity of cash payment differs by age – nearly 50 percent of consumers in the 60-69 years of age group appreciate cash payment compared to just 28 percent in the 30-39 age group. Widespread acceptance in shops and high data protection levels as well as anonymity make cash payment so popular in Germany.

Security and data protection top valued

Whether using card payment in either online or stationary retail contexts, data protection and prevention of fraud is very important for consumers. Nearly 80 percent of consumers expect digital service providers to use their personal data sparingly and responsibly. The importance of this rises with age: 57 percent of 16-24 year olds find this important compared to 95 percent of consumers aged 70 years and older.

Protection against fraud or unauthorized access is important or very important to 84 percent of consumers. The most important characteristics for consumers in payment procedures are mainly criteria related to security/risk besides easy handling. Additional functions including cashback programs and insurance are irrelevant for almost 25 percent of all consumers.