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A Closer Look at E-tailing in Germany

Two recent studies come to varying conclusions on the country's e-commerce customer.

HAMBURG — How off or on is the German consumer? Off- or online, that is.

This story first appeared in the March 27, 2013 issue of WWD.  Subscribe Today.

Two recent studies come to varying conclusions. “What Customers Really Want,” a survey investigating multichannel retail in Germany, suggests that consumers in Europe’s largest economy remain primarily brick and mortar bound, even as e-commerce is growing faster than official statistics indicate. The survey says that online shopping accounts for only 7 percent of all retail transactions but generates 16 percent of total retail sales. However, 64 percent of the population still buys almost only offline, with brick and mortar representing 84 percent of total retail sales in Germany.

When it comes to their involvement with social media and its influence on purchasing, a second study concluded that social media has already become a mainstream tool used by all strata of the German population, independent of age, income or region. In 2012, according to “The German Social Media Consumer Report,” social media had as important an influence on purchasing decisions as TV ads, traditional direct marketing and public advertising, and was more important than radio.

The multichannel report by Roland Berger Strategy Consultants and shopping center giant ECE surveyed 41,178 participants in shopping malls all over the country. It further screened 1,872 shopper diaries listing all purchases made in a month, for a total of 84,233 shopping transactions for a value of about 2 million euros, or $2.6 million at current exchange.

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It separated customers into seven segments. Mainstream offline shoppers (average age 28.4); traditional senior shoppers (average age 64.1), and simplistic shopping minimalists (average age 46) all largely refrain from online purchases, though many in the twentysomething mainstream segment are active Internet users. “So Generation Y has not been lost to offline retail” as has often been claimed, said Björn Bloching, senior partner at Roland Berger. “There’s no question it will be more and more of a multichannel world, but there are still massive offline opportunities to be had.”

As for the joy-seeking multichannel natives (average age 24.5); well-off shopping enthusiasts (average age 45.6); efficient multichannel shoppers (average age 32.6), and nonurban shopping pragmatists (average age 33.6), the study countered the widely held assumption that price is the most important factor driving online sales. While price holds more sway in determining purchases online than off, “the most crucial criterion is how and when customers receive their products,” followed by greater variety online and then price, said the survey.

Decision criteria for offline purchases are headed by the ability to take the product home, the touch-feel experience to reduce risks of making the wrong purchase and information-advice from sales personnel. Price placed eighth out of nine factors. The biggest online challenge for traditional retailers, the study concluded, is the high emotional loyalty generated by online shops. Offline stores, it said, “can only hope for about one-third of this loyalty.”

Looking into other widespread assumptions about the multichannel world, the study countered the idea that so-called showrooming is a major sales threat to brick-and-mortar retailers. “Showrooming is a current phenomenon, but more in discussions and less in cash registers!” the study said regarding consumers’ use of brick-and-mortar stores to merely check out merchandise they then buy online. “Ten times more revenue is generated offline with prior online information than the other way around.”

Will multichanneling solve retailers’ problems? Only if it’s done right, the study concluded. It’s not sufficient to simply connect on and offline channels. Consumer needs, which range from pure pleasure and the shopping experience to organized shopping efficiency, have to be understood and met.

The same could be said for social media. “The German Social Media Consumer Report” from The Social Media Think:Lab, a joint research initiative of the University of Munster’s Marketing Center and Roland Berger Strategy Consultants, reported that 92.6 percent of all German citizens with Internet access had at least one social media account in 2012. And these are used “quite intensively.”

Facebook is the largest social media platform in Germany, reaching 72.1 percent of German Internet users, followed by YouTube, StayFriends, Wer-kennt-wen, Google+, VZ-Netzwerk, Xing, Twitter, MyVideo and Jappy. Users of Xing and Twitter are the most educated, while Xing users are also the top-earning group.

When it comes to influencing purchasing decisions, the study indicated that 22 percent of consumer purchases can be attributed to traditional Web sites and social media. German companies, on the other hand, currently allocate only 12 percent of their ad budgets to these channels, an unequal distribution, the study claimed, in favor of TV and print media.

At the same time, even when they use social media, companies are not managing to effectively communicate with consumers, the study stated. Sixty percent of the consumers screened said they found little value in the social media messages they receive from companies.

Many brands misjudge social media as “just another new communication tool…. The change caused by social media in terms of consumer perceptions and behavior…must be reflected much deeper in company value chains,” the report’s initiators declared. They warned that it will become more expensive in the future for companies to underuse social media channels but pointed to the enormous business potential for those who learn to work with social media progressively and proactively.