Tough times for e-commerce in Germany; business not growing as anticipated

Over the last few years, online sales have been weakening. According to the latest estimates of the Federal Association of E-Commerce and Mail Order Germany (bevh), gross sales of goods in Germany fell by 11.8% in 2023, to €79.7 billion, compared to €90.4 billion in the previous year.

The share of e-commerce in overall retail sales in the narrower sense (including groceries, but excluding sales in pharmacies) dropped from 11.8% to 10.2%.

For the first time since 2020, the industry’s turnover fell below €100 billion. Taking into account turnover generated by telephone, fax, or other ordering channels, total sales in 2023 amounted to €93.6 billion.

“We expect the German e-commerce market to bottom out within this year. The fourth quarter of 2023, with a decline of 7.1%, was the first quarter since early summer 2022 with a single-digit decline and indicates sales stabilisation in the future. Last year saw strong e-commerce in categories such as clothing and entertainment, where German consumers particularly saved. However, it remains popular across all age groups, enjoys consistently excellent customer ratings, and maintains its role as a pioneer,” comments Gero Furchheim, chairman of bevh and spokesman for the management board of Cairo AG.

Big drops in turnover across the board

In the case of the D2C sales model, turnover decreased by 11.1% compared to the previous year. Marketplaces and online sellers saw a decline of 8.5% and 14.7%, respectively. The most visible declines in turnover were in multi-channel sales, which fell by 18.1%. However, this is due to the fact that customers used stationary sales points more often again.

Low-cost overseas suppliers may benefit

The economic crisis has also changed consumer behavior. More and more German customers are willing to buy cheaper but well-kept used goods (second hand or so-called “preloved goods”). Among respondents aged 19 to 29, as many as 18.4% declared that they “often” and 31.9% “occasionally” buy used goods online. Among people aged 30 to 39, 11.7% and 40.1% said so respectively.

There is also a noticeable tendency among consumers to buy in foreign stores if the prices there are lower, with 22.1% respondents “fully” agreeing with this statement. This is much more than in the comparative study from 2022 (when it was 16.8%). In total, 61% of customers would “prefer” or “fully prefer” a foreign supplier if purchasing from them was cheaper.

In fact, Chinese suppliers in particular are becoming increasingly popular in Germany. For example, Temu is currently the absolute leader among free applications.

However, in an interview for SWR, Richard C. Geibel, managing director of the E-Commerce Institute in Cologne, expressed concerns that Chinese suppliers, such as the aforementioned Temu, or Shein, may flood the market with cheap products.

Glimmers of optimism on the horizon

The joint forecast of bevh and EHI Retail Institute assumes that the prospects for the e-commerce market will improve during 2024. It is estimated that the nominal increase in turnover throughout the year will amount to 2%.

For many entrepreneurs, in the coming months it will be important not only to survive, but also to create the basis for new growth, emphasises bevh.

“Companies that now streamline their processes, optimise costs, and focus even more on customer needs have a chance to emerge from the crisis stronger and grow faster than the general trend in trade,” says Lars Hofacker, head of e-commerce research at EHI Retail Institute.