Beating Forecasts, Germany Gallops into Online Retail

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Alike other develop markets across the world, traditional retail continues to face pressure from the growing e-commerce sector in Germany. Data from the Germany Consumer & Retail Report Q4 2017 suggests that within 10 years online purchases rose from 37.3% of the population to 70.4%. The response of retailers is typically expanding into the online sales themselves,  increasing competition within the industry.

Keith Knutsson of Integrale Advisors commented, “despite Germany’s conservative market structure, past forecasts regarding online retail were underestimating the adaptivity of the German consumer,” further adding, “analysts might be wrongfully tempted to limit the horizon of technology to retail even though there is a myriad of opportunities for the market to expand.”

Within this online marketplace, Amazon Germany remains the industry leader. It established a workforce of 10,000 people and nine major logistic sites in a rapidly developing market. The opportunity for Amazon’s third party retailers outside of Germany to establish steady cash flows from sales in the market further presents dependency and growth potential on the retailer.

Another major player in the industry is the online fashion retailer Zalando, founded in Berlin in 2008. Spanning over 15 markets in Europe, it has grown to over 10,000 employees and serves as a key entry point for brands new to the German market. The company envisions an increasing demand across Europe for online retail, investigating opening additional fulfilment centers outside the country.

The growth of online sales is eating into the profitability of major department stores, but investors should be careful of completely dismissing opportunities in this sector. While Karstadt’s recent bankruptcy serves as a reminder for the difficulties in this space, M&A activity could predict a reversal in the trend.

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