The rise of FMCG and DIY in German E-Commerce

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The trade organization Handelsverband Deutschland published its annual online monitor presenting the development of German e-commerce in 2017. It reveals the effect of smartphone usage on impulse buying, a geographical divide in buying behavior across the country. And a particularly strong rise in the categories fast-moving-consumer-goods (FMCG) and do-it-yourself (DIY). Overall the market grew faster than expected at a rate of 10.5%. Resulting in an overall net market volume of 48.9 billion Euros.

Market development

The German e-commerce market saw steady absolute growth. It is expected that this growth will continue with yearly increases of four to five billion Euros. The differences between segments declined in terms of growth and the market environment stabilized as a whole. Contradicting many assumptions, segments having high shares of online sales did not show the saturation expected. With 48.9 billion Euros, the german e-commerce market has a share of 9.5% in total sales and grew for the same reasons as in 2016.

The key factors driving this development are versatile. A main driver is the growing customer population, led by a massive increase of 44% in the generation 60 years and older. Further, the amount of small households (1-2 persons) shopping online grew by 15% compared to the last year and the customer population in big cities increased by 14%. The total amount of orders grew by 17% relative to 2016.

Winners in 2017

The fastest-growing categories were FMCG with 15.9% growth, DIY & garden grew by 13.8%, and consumer electronics (CE) by 10.5% in 2017. Strong growth impulses came from the categories fashion and CE, due to their volume and stable development. Handelsverband Deutschland’s monitor gives insight in the retailer’s DNA, pointing out that stationary based retailers for the first time grew faster (12.8%) than pure online resellers (10.8%). A substantial booster of this development is Amazon Marketplace, offering a platform to established non-online retailers. Amazon Marketplace increased its turnover by 2.1 billion Euro in 2017. 

Furthermore, pure online resellers rely on their online sales. Thus, extended this channel more than traditional retailers, who have more potential to expand. Amazon remains the major player in Germany, with Amazon.de and Amazon Marketplace combined accounting for almost half of all sales made. In general, big retailers evolve significantly faster than smaller retailers and the biggest five had a combined growth of more than 13%.

Geography affects buying behavior!

german e-commerce market

Another interesting characteristic is to see how the sixteen states of Germany differ in online shopping. Whilst Berlin (73.2%), Hamburg (71.2%), and Bavaria (68.8%) have high levels of online customers, others such as Mecklenburg Vorpommern (54.6%), Hessen (56.7%), and Sachsen (57.9%) heavily lack behind. These figures tend go in line with other parameters such as the average age, a higher age indicates less buyers and vice versa.

In general, there is higher spending in the South. Whilst the Eastern states, excluding Berlin, are significantly below the average spending. As a whole, 64.8% of Germans are shopping online. Comparing the buying behavior of people living in cities to those living in rural areas, it comes clear that the bigger the city is, the higher the percentage of people shopping online gets.

Game changer Smartphone

Smartphones affect many aspects in our daily life, shopping is no exception. The smartphone is truly the most convenient way to gather information on products before making the purchase. Considering that people carry their smartphones always with them, and use them whenever they have to wait or want to look something up on the walk, it is the perfect tool to do so. Especially in impulse buying, the smartphone scores high with over a quarter of sales made via smartphone having an impulse nature. For brick and mortar stores, the integration of smartphones in their shops will be key to facilitate the potential this technology offers.

The smartphone rivals the desktop pc or notebook as sales generated via smartphones account for almost 30% of total sales. Computers in contrast, saw declining usage from 71.2 percent in 2015 to 57.9 percent in 2017. Aside of smartphone and computer, there are other ways how customers buy online. The tablet, although its impact is limited, also generated a share of 12.8 percent. For the future, voice assistants such as Amazon’s Alexa are likely to play a major role here.

Source:

Roik, Olaf. “Handelsverband Deutschland (HDE) – Kurzlink Online-Monitor”. Einzelhandel.de. Last modified 2018. Accessed May 4, 2018. https://www.einzelhandel.de/online-monitor.

Featured images: Handelsverband Deutschland, 2018

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