GERMANY’S STYLE MERCHANTS MARCH ONLINE

Byline: Melissa Drier

BAD HOMBURG, Germany — Watch out America. The U.S. may be leading the e-commerce pack, but there are signs that Europe — and Germany in particular — is starting to catch up.
That was the consensus at the Internet Trade Congress 2000, a symposium held here this month that focused on Internet retailing in Germany.
The Internet’s acceptance is steadily increasing in Germany, according to various speakers at the two-day event, who noted that as wireless technologies are further developed, this land of cell-phone enthusiasts stands well poised to reap the virtual benefits.
Currently, there are about 14 million Internet users in Germany, up from just 800,000 cybersurfers in 1995, estimated Holger Maass, managing partner of Fittkau & Maass, the Hamburg-based marketing research firm. He envisions the number of German users growing by between two million and five million people annually, during the next few years.
“When Internet can be accessed via TV,” Maass added, “there’ll be considerably more potential.”
As for mobile phone hookups to the Net, Maass pointed out that even in these early stages of limited access to that emerging technology, there are already one million Germans linked to the Net via their “handies,” as cell phones are called here.
Books are the best-selling category online in Germany, followed by tickets for music events and travel, and computer software, but fashion is beginning to pick up. Some surveys indicate there are about 1.4 million people in Germany who can see themselves someday buying fashion online.
Much as in the U.S., Germany’s typical cybershoppers are getting older, with early adapters, like students, now sharing the field with employed adults who can and do spend more than their younger counterparts. Germany’s online shoppers generally are concentrated in the 25-to-29-year-old and 35-to-39-year-old age groups, and women now account for 35 percent of the country’s Internet consumers.
Not surprisingly, business-to-business, or B2B e-commerce, was a hot topic at the conference, and there is anticipation of a boom in this segment of Germany’s Internet sector.
Conservative prognoses put B2B transactions in the German retail trade at approximately $11 billion in 2002, a more than tenfold leap over the $1 billion in B2B volume projected for Europe’s leading economy this year, said Thomas Claussen, a partner in Anderson Consulting’s Munich office. He added that more “optimistic” projections see B2B transaction volume reaching $10 billion by yearend and rocketing fourfold to $40 billion in 2002.
The most bullish estimates for the manufacturing sector, by comparison, contemplate B2B volume soaring from $2.5 billion this year to $75 billion in 2002, whereas more conservative predictions suggest B2B transactions will expand from $1 billion this year to $20 billion in 2002.
As Germany’s B2B marketplace is just getting established, however, Claussen cautioned, “What the reality will be is another story.”
Estimates of e-commerce currently conducted by German consumers also range widely — from $2 billion to $10 million — with the overall expectation among Internet observers that online business will someday generate at least 10 percent of Germany’s retail sales
As for fashion e-commerce, at least one estimate puts the sector’s dollar volume at about $6 billion, or 10 percent of the category’s sales, by 2005. Stefan Tewes, associate partner of Munich-based marketing consultant Roland Berger noted, though, that “perhaps 5 to 10 percent of [that] volume will represent new market share.”
“The rest,” he added, “will be a cannibalization of [existing] business.”
Tewes said he expected e-commerce in Germany to develop in the “typical German manner; that is, with smaller marketing expenditures and more concentration on infrastructure.”
“But we’re just beginning,” Tewes continued. “We will know in a year or so what works, and standards must now be developed and spread industrywide. This is a period of Wildwuchs, or proliferation. It’s too early for consolidation, but it will come.”
It could be another two or three years before apparel makers in Germany start selling direct to their customers on the Web, Tewes said. That’s how long it may take for the manufacturers to risk alienating retail accounts, as Germany’s population of cybershoppers is expected to keep increasing over that period.
“If manufacturers can generate 30 to 40 percent of their turnover over the Net, they’ll take the risk,” Tewes predicted.
Today, click-and-mortar retail concepts dominate business-to-consumer e-commerce in Germany, with most of the nation’s major food and general merchandise chains, such as Metro, Otto, Karstadt/Quelle, Douglas, Tchibo, Aldi and Rewe already having established a presence online.
Orsay, a unit of France-based Auchan Group marketing junior fashion, was one of the earliest to go online in Germany. Its site went live in Germany in November 1998; an English version was opened last July.
Beginning last November, Orsay started shipping orders from its Web site to all European Union countries plus Switzerland.
Orsay doesn’t release financial results, but Thomas Schroeder, manager of the retailer’s e-commerce arm, said e-sales jumped fivefold in 1999, and now equal that of the smallest Orsay store. Orsay operates 300 stores in Europe, including Germany.
Orsay’s e-commerce goals are nonetheless modest. A junior fashion specialist, Schroeder says Orsay expects e-commerce to represent a maximum of 5 to 6 percent of sales. The junior chain’s target customer is 15 to 24 years old, whereas German women who shop the Net generally are in the 30-to-40-year age bracket, he pointed out.
“Our customer goes shopping with her friends for fun,” Schroeder said. “Shopping is a social activity. Plus, she’s less of a commodity customer.” And that, he noted, is what’s been driving e-commerce in general as well as at Orsay’s site, which features only about 5 percent of the chain’s assortment.
Orsay now has a separate division for e-commerce and is considering spinning it off entirely, with the support of parent Auchan.
One of the most talked-about presentations at the Internet Congress, organized by Management Forum Bad Homburg, centered on a project mounted by Diamond Technology Partners and Simon Property Group, the U.S. mall developer, to make malls relevant to Internet users. That project, a spinoff business called Clicks & Mortar, contemplates “creating the ultimate retail shopping experience by combining physical assets with digital space.”
Fast Frog was Clicks & Mortar’s first project, aimed at attracting — and holding — the attention of 12-to-17-year-old girls. Pilot-tested this past Christmas with 10 retailers in each of two U.S. malls, girls were invited to sign in at the mall and given a scanner with which they could “zap” the stockkeeping-unit number on the price tag of any interesting item they saw that they might want to give as a gift.
They could then download that data they’d collected at a kiosk in the mall, giving them all the information they needed to draw up wish lists.
In the first 10 days, 10,000 kids signed up, said Sven Lohse, a founding member of Diamond’s London office. “They zapped everything, and people then came back [to the mall] with lists,” Lohse said, adding that Fast Frog will now be rolled out to other malls.
To leverage the Fast Frog infrastructure, Lohse said, an adult-oriented shopping tool called Your Sherpa was launched at one FAO Schwarz store early this year.
Four thousand users, ages 28 to 40, were given palm-size scanners to zap-shop with during the test. “They could download the information [at the store],” Lohse noted, “drive home, decide what they wanted, order over the Net and have the merchandise delivered in 24 hours.”
The upshot? Your Sherpa will be rolled out to 10 FAO Schwarz locations.

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