TTWTO VCCI - What are the characteristics of the German distribution system?

German Market

What are the characteristics of the German distribution system?

Question: What are the characteristics of the German distribution system?

Answer:

Goods distribution channels

In Germany, goods are retailed through many different channels, from grocery stores, department stores, discount stores, to markets, supermarkets, hypermarkets, shopping malls, etc., - the current largest retail channels are: discount stores, supermarkets and department stores. According to the German Retail Business Federation, in 2019, German discount stores recorded the highest net turnover with EUR 74.5 billion, followed by supermarkets with EUR 51.2 billion, department stores with EUR 18.5 billion, and hypermarkets with EUR 17 billion.

Table: German distribution system

Type	Features	Popular brands
Department stores	Non specialized department stores Located in the city center.	Kaufhof, Karstadt, Kadewe
Shopping malls	Located in the city center Bringing stores together on areas of 10.000m2 to 50.000m2.	Arcaden, Passagen, Carré
Textile department stores	Large stores specialized in textiles.	Peek&Cloppenburg, H&M, C&A
Specialized department stores	Specialized department stores: for example electronics, DIY (Baumarkt)	Saturn, Media-Markt, Conrad Electronic, Bauhaus, Obi, Hellweg
Supermarkets	Located in the city center Specialized in foodstuffs.	Kaiser, Edeka, Rewe
Beverage market	Located in the city center Specialized in beverages	Fristo, Hol'ab
Organic supermarkets	Located in the city center Specialized in organic products	LPG-Biomarkt, Bio-Company, Naturkostladen
Markets	Fruit and vegetable markets, in the city center Open air or covered markets.	Markthalle, frische Märkte
Small local shops, grocery stores	Located in the city center Often selling regional specialties (Turkish, Italian, Greek).	Verdi
Discounter	Located in the city center and on the outskirts.	Lidl, Aldi, Netto
Cash & Carry	Hypermarkets and fresh produce markets reserved for professionals.	Métro, Frische Paradies, Beussel Market

Source: Santandertrade, 2021

The system of distribution stores in Germany usually exists in both forms: traditional stores and online stores, in which the online form has increasingly developed.

Especially since the appearance of the COVID-19 pandemic, the trend of online consumption has also increased, which is reflected in the increasing number of online shopping orders and email orders. As a result, more and more retailers are turning to omni-channel sales strategy - both maintaining direct retail channels and developing e-commerce channels. Almost 40% of retail businesses in Germany now have an online shop on e-commerce platforms (Centurionlgplus.com). In 2020, e-commerce sales in Germany reached EUR 73 billion, increased by nearly 23% compared to 2019.

Currently, the largest e-commerce platforms of Germany are: Amazon, eBay, eBay Kleinanzeigen, Otto, Zalando, Notebooksbilliger, Cyberport, Bonprix, Idealo, MediaMarkt, Lidl, Thomann and Saturn... Foreign suppliers can access these channels to sell directly to German consumers (cross-border sales). The data shows that cross-border online shopping has become increasingly popular in Germany in recent years. According to a 2019 PwC study, around 70% of online shoppers in Germany ordered from abroad.

Goods import channels

Imported goods can reach the German market through a variety of channels depending on the type of product, financial considerations as well as other factors such as market size, demand and sales potential in the long-term…

Below are some popular channels for importing foreign goods into Germany:

Through a commercial presence in Germany:

Foreign companies establishing commercial presences (establishing foreign-invested enterprises, business cooperation contracts, establishing branches, representative offices, etc.) in Germany to carry out the importation, distribute to agents/stores, or sell directly to consumers. This is an effective way to access a market, but it is only suitable for companies that export in large quantities and want to develop in the long-term in the German market. The reason is that the establishment of a commercial presence requires more capital investment than other forms, the establishment procedure also takes more time and costs.

Through import partners in Germany:

Importing partners can be purchasers for their own use (industrial equipment; raw materials for production…) or commercial importers.

German importers are mainly wholesalers, distributors, or intermediaries who import goods for redistribution (e.g. to stores, shops, supermarkets). Goods imported through these importers are usually small machinery and equipment, common industrial supplies and consumer goods). This is the main form of import to the German market.

Through online shopping channels:

Foreign suppliers can also sell goods directly to buyers in Germany through e-commerce platforms such as Amazon, eBay, etc. This form has become more and more popular in Germany to purchase international goods, however, this form is only applicable to consumer products.

In summary, German import and distribution channels are quite diverse with many options. Therefore, when exporting goods to the German market, Vietnamese exporters should consider carefully all relevant factors to choose the most appropriate import and distribution channels for their products.

Source: The Center for WTO and International Trade