Current Developments: Current Trends

Current Trends

Online food retailing is not well established in Germany due to expensive logistics considerations, low margins, high density of supermarkets, and consumer reticence. However, a number of German start-ups have entered the online grocery market. Around 15 million e-commerce users (28% of all internet users) bought food and beverage products online in 2014. This is more than a three-fold increase from 2011, when the number was just 4.5 million. The potential for growth in this industry is also strong - 38% of interviewed people explained that they had not yet bought food and beverage products online, but could easily see themselves doing so in the future.

Buying furniture online has become more popular in Germany in recent years, generating more than EUR 2.1 million in revenue in 2014. This trend is also expected to continue to increase, with projected 2020 revenues climbing to almost EUR 4.8 million (an almost 130% increase). An increasing number of users are also beginning to buy furniture and other home products online. In 2014, there were 11.6 million furniture and homeware e-commerce users in Germany, and this number is expected to increase to 15.1 million (more than 30%) by 2020. The 30- to 49-year-old age group in particular uses the internet like a furniture department store.

Personal Care
Consumers in Germany have also begun to buy personal care and health products online at a greater rate. In an October 2015 study of 13 thousand consumers, Germany ranked fifth in the world and first in Europe in terms of online beauty and personal care shopping rate (41%), trailing only South Korea, India and China. Sixty-two percent of connected Germans also reported buying personal care and health products within the last three months in a 2014 study conducted by A.T. Kearney – a figure above the worldwide average of 57%. Germans spent around EUR 800 million in total on personal care and cosmetic products online in 2014, according to IFH Köln. This represents a 223% leap from 2008 levels; clearly signaling personal care and health products as a high potential income stream for retailers looking to expand their businesses online.

In terms of sales channels, the highly fragmented personal care market is separated into products which sell well online and those which perform better in stationary retail outlets (e.g. essential goods including toothpaste and toilet paper). These products are subject to tough price competition and very low margins. Online retailers make the online purchase of these goods more attractive by offering subscriptions. Goods for everyday use have to be bought on a regular basis with customers often making a purchasing preference for one brand. Luxury products also sell well online. Consumer brand awareness is crucial to the success of luxury products, particularly for perfumes. Here, the internet plays an essential role in raising brand awareness through marketing and advertising.

Niche Markets
Beyond the large market segments occupied by major players, a number of niche markets are growing in importance and providing new opportunities and high growth potential for market entrants.
A number of start-ups have successfully developed innovative concepts that harness the potential of e-commerce to optimize the use and costs of products in a shared economy.

One current online niche market experiencing tremendous growth is the market for pet products. In 2016, the online pet product market generated up to EUR 842 million in Germany - an increase of almost 74% from 2014 revenue levels. This market experienced the largest online growth of all other product segments (despite still constituting a relatively small segment of all e-commerce activity), signaling the potential for even more growth.

Other online shops offer clothes and accessories for hire: customers are able to choose dresses and accessories for any given occasion and have them delivered to their home. After use, the articles are returned to the providing company who clean and refurbish them as needed. Some shops even offer the delivery of several options and additional sizes for free. In total, 20.7 million German internet users bought clothes and accessories in 2014 while 17.8 million bought shoes and leather goods online. These numbers are expected to increase to 32.9 million and 26 million (58% and 46% increase compared to 2014) in 2020 respectively.

Similar business models have also been implemented with businesses specializing in children’s toys. Parents can rent toys for their children through these websites and keep them as long as they like. Returned toys are inspected, cleaned and disinfected by the shop and are available for re-order by another customer. In 2014, 14.9 million users bought toys and baby products online, with the number expected to climb to 19.4 million users (more than 30% increase) by 2020.

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