German retail – opportunity or threat?

Illustration: retailpilot.de

Many companies are dreaming of entering the German retail market and think of it as a consumer goods heaven: elevated average incomes, a high population, an immense number of retail outlets, … et cetera. Judging from paper, these facts must seem tempting for sales executives. During my career I met quite a few of them who – looking at these facts – drew the conclusion to focus their teams‘ attention and sales efforts on Germany as a key market.

But drawing this conclusion is easy from a far away distance. Unfortunately, for quite a lot of companies doing so, it is just lip service without thinking any farther. Often they are forgetting that it requires far more, for example a dedicated product portfolio, accurate logistical data, a different sales organization and so on. And because of so many consumer goods companies declaring Germany to one of their key markets, the market is highly competitive. Not to forget that they are competing with a large number of traditonal local enterprises who are already well introduced in the market.

Opportunities

  • Germany has the largest customer base in Europe with high purchasing power.
  • It is highly urban and with a large number of reseller stores.
  • German retailers are looking for new brands and concepts.
  • New demands are created by a changing consumer behaviour.
  • The growing importance of e-commerce is changing the rules of trade, may shorten the way to end consumers and thus decrease the cost of entering the market.

Threats

  • The German market is highly mature and competitive, dominated by a few large retailers and discounters.
  • There is extremely high competition from German (and international) giants, some of them with outlets spread all over the world, centralizing purchasing power through German headquarters.
  • Low prices are a major challenge.
  • The market entry is timely and often requiring large initial investment and focus.
  • Active sales in German language (and German mentality!) is mostly needed at high labour cost.