Germany: A Retail Market with Great Potential

When talking about business opportunities in the retail market, Germany is the number one within Europe. Germany is the largest market within Europe, with a population of 83 million people. As of 2019, their Gross Domestic Product (GDP) was 3.86 trillion dollars (3,250 billion euros), making them the country with the highest GDP in Europe and the fourth highest in the world. Retail makes up 16% (525 billion euros) of the nation’s total GDP, making this the third biggest industry in the country. The retail market is dominated by low price discounters like Lidl, Kaufland and Aldi, and traditional supermarket chains like Edeka and Rewe.  It is important to note that all of the dominant supermarket brands in Germany are in fact German, which just shows how customers tend to trust local brands more than foreign ones, especially when it comes to food products.

German Retail Market Trends

Demand in the German retail sector has been boosted by e-commerce, especially since the pandemic began. Consumers are shopping online more than ever before, for groceries, clothing and other items. In 2020 in Germany, 56% of sales in stores were made via contactless payments. Kamps, the top bakery, even offered a 3% “innovation discount” to customers willing to pay by card back in June of last year. Additionally, more than 20% of people who made contactless payments tried this method of payment for the first time in 2020. This was a result of people’s fear that cash might help spread the coronavirus, although there is no evidence of that. However, payments by smartphone were far less common, with just 13% of smartphone owners using their devices to buy products. 

The trend of “being green” is strong in Germany, as customers are now more environmentally conscious than they were before, mainly due to how easy it is to access this information on the internet and because of many environmental campaigns being all over the media recently. In line with environmental consciousness is the increase in customers that prefer organic foods. In 2021, 24% of customers prefer organic food products because they are grown without the use of chemical fertilizers and pesticides, which makes them more environmentally friendly and socially responsible. 

The average German consumer welcomes discount retail brands as well as big brands, and these customers often prioritize price over brand names. Nevertheless, one of the things that characterizes German consumers is how easily they are able to compare high-quality products. In many cases, they like to research a product online first, and then they purchase it offline at the company’s physical store. Therefore, it is very important that businesses in Germany have an omnichannel strategy, meaning that they have an online shop as well as a so-called bricks and mortar store. Otherwise, German customers will most likely overlook your business simply because you don’t have an online store. Furthermore, Germans like feeling like they can trust a company before buying their products, so being transparent and communicating with customers is a crucial part of being successful in this market. 

Organic Food in Germany

Organic food in Germany, otherwise known as “bio” food in German, has become very popular in recent years. By 2024, the German organic food industry is expected to be worth $19.3 million, which would be an increase of 44.6% compared to 2019. Germany accounts for 27% of the entire European organic food market. Competition in the German organic food market is very high due to the lack of product differentiation. Currently, all supermarket chains in Germany offer around 200 organic products on average, and some of the organic supermarkets have up to 8,000 different organic food products. 

The main German organic retailers are Alnatura, Basic, Tegut and Reformhaus. Additionally, Edeka, the supermarket chain, opened its first organic food supermarket called Naturkind (meaning child of nature) in October of 2019. In Germany, not only are organic food products sold widely, but they are also produced across the country. Organic food agriculture in Germany dates back to the late 1920s.

Market Entry Opportunities

Generally, Germany is not known for being a market that is particularly easy to enter. However, there are some foreign medium-sized companies that have found their way into the retail food market, especially brands that are socially responsible and environmentally conscious. For example, there is Holiefoods from the Netherlands, who are now selling their products at Edeka supermarkets in Germany. Holiefoods is a company that sells granola products. Holiefoods is a certified B-corp company, meaning that they meet the highest standards of social and environmental impact for businesses. At Holiefoods, they use 50% of their profit to restore nature in the Netherlands, Uganda, and Tanzania. Their main products are medium-sized ziplock bags that contain vegan granola products with 0% added sugars. Some of the contents of the bags are almonds, raisins, nuts, seeds, coconut, and cacao. 

Another Dutch company that has found success in the German market is Bioodi. Bioodi is a company that produces and sells sustainable tableware products online. Some of the products they offer include biodegradable coffee cups, lunch boxes, plates and trash bags. Their products are made from different materials such as sugar cane, polylactic acid (PLA), bamboo, palm leaves and paper pulp from trees. Bioodi now has their website in German because of the demand for their products from the German market. They also have a German phone number and a “.de” email address for their German customers. 

These two companies are proof that you don’t need to be a multinational company or a big player in order to penetrate the German retail market. You just need to understand the market and adjust your business accordingly. Considering the language barrier and current consumer trends is also very important. German customers generally prefer high-quality products that are good value for money. Furthermore, consumers in Germany are enthusiastic about environmentally friendly products, which is why companies like Holiefoods and Bioodi have been successful.