Five things companies need to know if they want to enter German marketplaces

Online trade keeps growing and growing, with one record turnover following hot on the heels of the last one. In particular, sales via online marketplaces are rising sharply: turnover figures are exceptionally high and still on the increase. Meanwhile, the German market continues to be dominated by big players like About You, Amazon, OTTO and Zalando. So it comes as no surprise that more and more international brands are seeking access to Germany’s platform business. There are, however, many questions associated with this move. How easy is it in fact to expand into Germany? What challenges do foreign brands face in the platform business? And what do they need in order to succeed?

By MARCEL BRINDÖPKE, founder and CEO of heyconnect

Why do brands want to be represented in Germany’s online marketplaces at all? Zalando, with its eight billion euro turnover in 2020, is just one of many marketplaces showing the considerable potential of the German market. However, brands – especially those from outside Germany – do face various hurdles. They will have to consider a multitude of processes and tasks including localisation, taxation, shipping and logistics, language, currency and a different (online shopping) mentality. But how do foreign brands reach the German market? What are the obstacles and what are the benefits?

The following five tips will help international brands avoid the worst of the potential pitfalls when getting started in these marketplaces, allowing them to look forward to a successful  journey into the world of German platforms:

Platform readiness

When entering the platform economy, there are certain vital, fundamental preconditions which must be met. The first priority is to review these or expand them if necessary. In particular, brands with no prior experience in D2C business should examine whether their in-house organisation is ready to operate on these platforms. Here are eight questions that may prove helpful:

— Does my company have merchandise suited to this form of business as regards factors like price, competitiveness and the desirability of the product category?
— Can I deliver logistics that suit this marketplace?
— Is my IT landscape properly set up to handle connections with platforms?
— Am I in a position to create the appropriate product content and keep it up to date?
— Will I be able to handle cash flows and orders via platforms?
— Are the business models clear-cut, and will my controlling and accountancy personnel be able to replicate them?
— Am I familiar with customs towards Germany?
— And last but not least: can my company afford all the above?

Once a company has established that it is capable of operating on such platforms, it can proceed to the next step.

Regulatory framework and culture of the target country

Companies have to adapt themselves to the different rules, regulations and culture of different countries. They should be aware of the situation as regards personal data (GDPR) and customs and tax laws. Mistakes in this area can create costly problems for companies. They also need to familiarise themselves with their potential customers, because each culture has its own conventions. So as well as their purchasing habits, one should also get to know the customers’ language, customs, routines, leisure activities and interests.

What factors influence their decisions? Which media do they use primarily? These are questions that should be asked while positioning the brand in the market. It is therefore essential to understand a country’s individual particularities and mind-sets in advance. To overcome cultural or linguistic barriers, you need experts from the respective target market. One proven recipe for success in marketing is: know your target group and speak to them as effectively as possible across as many channels as possible. It is therefore essential to find out beforehand about your new target group in the relevant country, using market analyses or similar.

Choosing the right platforms

The number of platforms on which a brand can operate varies according to the product range. For the majority of brands, it is worth considering either Zalando (fashion, beauty, accessories) or Amazon (everything else). Upon inspection, it soon becomes apparent that the two platforms are very different from each other. Amazon is an open marketplace, accessible to any user. This makes it well suited to beginners, especially in view of its relatively simple, clear processes. Zalando is a curated marketplace, and as such access is restricted. In terms of the skills it demands of its users, this online fashion platform is geared a lot more towards the top-level adept. However, brands that gain admission to this marketplace are rewarded with exceptional coverage and (potentially) high sales figures. So far, so good – but what comes next? It makes sense to focus on the marketplace that sets the trends followed by most of the other marketplaces in which you want your brand to appear, in order to cover as many of the competences you will need in the future right away. Furthermore, often it will only be possible to expand to the most important marketplaces by using a service provider that already has access. In principle, the 80/20 rule applies here – in other words, once you’ve covered the three or four biggest marketplaces, you’ve already tapped most of the potential.

Adjustment to the international logistics and fulfilment process

The most important factor for successful e-commerce is logistics. Customers only turn into satisfied, regular customers if the merchandise arrives quickly and in an undamaged state and if the after-sales services are good. Likewise, customer service in the target country should be every bit as customer-oriented, fast, professional and frictionless as it is in the company’s home market. It should go without saying that customer enquiries can be answered by email, via chat function and also if necessary by phone, in German. Companies must ensure that customer enquiries can be answered via every channel they offer. Quickly and capably. A global supply chain consists of a multitude of elements. Fine-tuning the logistics of international e-commerce is crucial to any company aiming to remain competitive in terms of its operational procedures.

Bringing experts on board

When transforming a company into an international business, experts with experience and knowledge can provide assistance and support. Ideally, they will be familiar with the barriers to entry that may be encountered during a process of expansion. The sooner brands penetrate new markets, the better. A timely entry into a new market can pay dividends – especially with regard to trade fairs and seasonal trade. In terms of software, the principle is: standardise as much as you can, customise as much as you have to. The system – ideally, a multi-store system of branches – should integrate as many country-specific particularities into its standard features as possible – including language, script, special characters, currency, length and weight measurements and how the date and time are indicated.

Conclusion

Accessing a marketplace is not just something you do on the side. Going international does however offer tremendous opportunities for growth, plus the possibility of securing your company’s future. However, expansion into other countries brings major challenges, which are frequently underestimated by online operators. . No store can simply be transposed 1:1 into other marketplaces. Brands require processes, structures, time, patience and the right approach. If the company is just at the start of a global expansion, it helps to choose a fulfilment partner that covers the relevant target regions.

20 years of experience in digital business models have shaped and defined Marcel Brindöpke’s career. Starting at OTTO, he helped set up the curated platform Otto.de. In 2011, Brindöpke went freelance as a self-employed e-commerce consultant. In this capacity he enhanced and upgraded the online business side of high-profile customers like OTTO, Breuninger, Peter Hahn, ebay, Quelle and the health and beauty retailer Müller. Eventually, with a concept for a new online trading model allowing fashion brands to connect to major marketplaces, Brindöpke and Florian Curdt founded heyconnect in January 2012. Today, heyconnect looks after over 150 brands from the fields of fashion, living and cosmetics with services ranging from content creation, technical connection and monthly billing through to order fulfilment, while also offering these brands a quick, easy way to access over 45 marketplaces in ten countries.