The German e-commerce market is an interesting one: the market is relatively mature and a history of distance selling has paved the way for buyers to easily adopt online shopping as a purchase channel. An economically stable situation, paired with a year-on-year growth in e-commerce sales of 22.1 percent indicate the opportunities in this market.
The market in Germany
Sources: Bevh.org, Statista, Statistisches Bundesamt, Trading Economics, Deals.com, CRR, Digital Agenda Scoreboard
As over 17 percent of German online buyers purchase from foreign websites, there is still a larger growth potential visible in this sector. Sellers deciding to localize their webshop for the German market might consider to simultaneously launch Switzerland and Austria, seizing the opportunity to sell to the entire DACH region.
Both countries have an excellent infrastructure and are geographically close to Germany, which makes them favorable destinations for foreign sellers. Moreover, large parts of the population speak German, which makes a market entry easier if you already run a German webshop.
Austria and Switzerland as growth opportunities
85 percent of Austrians have internet access, and 57 percent of this group buys online. More than half of the online shopping budget is spent in foreign online shops. In Switzerland, it is 33 percent of the total e-commerce volume that is made up of orders from foreign countries. In 2013, goods worth €1bn were ordered from abroad. Foreign products are a great hit in Switzerland and Swiss people make a big effort to get their hands on this merchandize: In 2013, goods worth €164mn were ordered to pick-up locations in Germany just across the borders, because the seller did not offer delivery to Switzerland. We will show you some important factors you should keep in mind when expanding to the DACH region.
Does it make sense to make your expansion to the German speaking market a triple adventure? An analysis of the DACH markets will help you evaluate your possibilities. The Google Global Market Finder can help with this. Costs per click, costs per order, search frequencies and competitors are factors that should be evaluated.
Localization for Germany, Austria and Switzerland
Not only language matters when localizing your online shop for Germany, Austria and Switzerland:
- a country specific url
- a local phone number and address
- prices in local currency
- accurate indication of delivery costs in local currency
- local marketing content
Displaying local trust marks and association batches
Showing a local trustmark or a proof of membership in the national e-commerce association creates trust:
Language: German ≠ German
An important aspect here is the fact that German does not always equal German in the DACH region. Tires for instance are called ‚Reifen‘ in Austria and Germany, but ‚Pneu’ in Switzerland. Getting this right is not only relevant for search engine ranking (SEO) but also displays competence and increases consumer trust.
56 percent of European consumers said in a survey of the European Union, that they would rather not buy on a website in a language other than their own[i]. Next to German, 8.3 percent of Swiss households speak Italian, 22.3 percent French and a smaller part oft the population speaks Romansh. Spend some time thinking about how to approach these customers and whether you want to offer a localized website for them, as well.
Since 2012, in Germany there is a new regulation, known as the ‘button law’. This amendment of BGB §312g obliges online sellers and service providers to clearly indicate the obligation to pay for the purchased goods or services on the “Buy-Button”, and also to specify details such as duration of a service subscription and total costs before this button appears on the site.
The Germans love paying by ‚Lastschrift‘ (‘ELV’, direct debit from their bank account), by invoice or use online payment services such as PayPal and Sofort Bank.
Favourite payment methods of Swiss and Austrian e-shoppers:
Swiss consumers are not particularly flexible when it comes to payment options: According to figures released by ECC Köln[ii] 19 percent abandoned a purchase because of the absence of PayPal as their preferred payment method. 31.2 percent left because they could not pay by invoice. According to the Austrian Chamber of Commerce (Wirtschaftskammer)[iii], having a relevant choice in payment options is the number one factor determining the choice of an online shop for Austrian e-shoppers. (Source: Der Internet-Zahlungsverkehr aus Sicht der Verbraucher in D-A-CH – Ergebnisse der Umfrage IZV11, ECC Köln, 2013.)
1. Invoice (63,9%)
2. Credit Card (17,1%)
3. PayPal (7,9%)
1. Invoice (46,7%)
2. Credit Card (21,8%)
3. PayPal (14,6%)
“The Last Mile” & VAT issues: Here is what you need to pay attention to
Germany and Austria are EU member states and are thus regulated by the EU consumer protection law, harmonizing- amongst others- a large set of standards for distance selling and returns.
German consumers were used, even before the EU regulation was implemented, to a right to cancel and return a purchase within 14 days after receival. Many larger sellers were (and are still) covering the return and delivery costs for their customers, even now they are no longer obliged by law to do so. The German consumers are thus expecting much when it comes to delivery and returns.
German online buyers are fans of ‘parcel lockers’, which were piloted by DHL and are now offered by a majority of larger German carriers. An Infographic by Metapack showed that 50 percent of Germans prefer this delivery option, whereas much smaller shares of online buyers would choose a local store for parcel pick-up or opt for click and collect options.
In Germany, distance selling companies exceeding a turnover of €100 000 must register for VAT. The standard rate is 19 percent; the reduced rate of 7 percent applies to foodstuff, passenger transport, books, medical supplies, newspapers, cultural event tickets, hotels and books. More information about applying VAT in Europe can be found here.
Prior to the EU consumer protection law, Austrian customers had the right to cancel a purchase within 7 days after receiving the delivery. The customer usually paid the return costs himself. Postal carriers advisable for delivery into Austria are Post.at, GLS, Hermes and DHL. In Austria, online sellers need a VAT-ID, referred to as ‘UID’ (Umsatzsteuer-ID).
In Switzerland, which is the only non-EU country in the DACH region, all deliveries from abroad are subject to duties and VAT. In order to even out the market situation for Swiss and foreign sellers alike, all imported goods are subject to taxes and duties. In some cases, there are exemptions. The Swiss Post has published up-to-date information on this issue in a video here.
Prices should be indicated including all taxes and additional charges, and we advise not to burden the customer with tax and import duty-handling. A local advisor and a local fulfilment partner can help managing these formalities. The most important thing is that the customer will not be confronted with unexpected costs at the moment he receives his order.
In case of a return, you can receive the import duties back. In this case, the seller must be able to prove what has been ordered and delivered, detailing information on when and by whom. This makes exact accounting indispensable. Swiss customers are used to pay for their returns. We advise to collect returns at a central Swiss return address (logistics hub) and bundle the return shipments to your foreign warehouse. In this way, you can save costs and efforts, sending bulk returns and managing the re-export all at once.
Source for VAT graphics & information: Ecommerce Europe B2C E-Commerce Report Central Europe, 2014.
Search engine optimization for the DACH region
In order to increase traffic and sales, a good ranking with search-engine market leader Google is an absolute must. Options to positively influence your website ranking include paid ads (AdWords) and Search Engine Optimization (SEO).
When entering the German, Swiss and Austrian market, you need to decide whether you wish to have a Country Specific Domain: http://www.Beispielshop.at/, which is more expensive but is easily found by visitors; or a Subdomain: http://at.Beispielshop.de/ or Subfolder: http://www.Beispielshop.de/at/. The latter two have the advantage of being less costly in registration and strengthening the main domain, but are less obvious for the customer.
For a good Google-Ranking it is important to optimize the content of your online shops. Google crawls websites for duplicate content in order to prevent sellers to ‘cheat’ themselves into a better ranking. Shops offering their products in Germany, Austria and Switzerland inevitably have a larger amount of identical content in the same language, e.g. the description of products etc. Google offers a tool to help those sellers identify their duplicate content with a special solution: The tag <link rel=”alternate” hreflang=”language” href=”URL” /> helps sellers to mark several versions of the same site dedicated to different target audiences, e.g. Austria, Switzerland and Germany.
Here follows an example of how to use this tag:
The imaginary webshop used in this example is called ‘Beispielshop.de and is a German site.
Using the tag identifies which version of the site targets Switzerland and which one Austria:
< link rel=”alternate” hreflang=”de-AT” href=” http://www.Beispielshop.at/seite/” />
< link rel=”alternate” hreflang=”de-CH” href=” http://www.Beispielshop.ch/seite/” />
[i] Consumer attitudes towards cross-border trade and consumer protection (Flash Eurobarometer 358)
[ii] Der Internet-Zahlungsverkehr aus Sicht der Verbraucher in D-A-CH – Ergebnisse der Umfrage IZV11, ECC Köln, 2013.
[iii] Internet-Einzelhandel 2014, im Auftrag der Wirtschaftskammer Österreich – Bundessparte Handel, mit Unterstützung des Bundesministeriums für Wissenschaft, Forschung und Wirtschaft, Wien, Mai 2014
Information on Switzerland and Austria has been previously published in a joint Whitepaper by Salesupply and PayPal, which can be retrieved here. (German language, pdf.)