Dusseldorf The online trade association BEVH has recently made no effort to sugarcoat the situation in the industry. “Any hopes for the Christmas business cannot come true,” complained Martin Groß-Albenhausen, deputy general manager at the BEVH, in December. In particular, apparel and consumer electronics, usually the stars of pre-Christmas e-commerce, saw sales plummet.
Online retail had a boom for two years, and during the pandemic double-digit growth rates became the norm. The upswing ended in 2022, when inflation and the energy crisis reduced purchasing power in the course of the Russian war of aggression against Ukraine. Even industry stars like Zalando now have to fight for every euro of sales.
But has e-commerce really peaked or will sales pick up again soon? And which companies could benefit from it?
Alexander Graf, e-commerce expert and CEO of the software provider Spryker, sees the triumph of online trade only slowed down, not broken. “Online retailing has had one year of growth after the other,” he recalls. Now he is being consolidated for the first time: “But no matter how bad things are going in e-commerce – things are going worse in stationary retail.”
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“There were two, three, four months this summer in which brick-and-mortar retail outperformed when people caught up on their shopping,” explains Graf. After that it went down again because of inflation. Structurally, brick-and-mortar retail has little chance compared to online retail because of its higher costs.
According to the experts, however, many online retailers are likely to benefit from inflation this year. Because Germans want to continue consuming, but pay more attention to money. “The decisive advantage is that e-commerce requires fewer staff, because inflation is also linked to the salary spiral,” explains e-commerce expert Graf. In other words, those who employ fewer staff can make lower prices. Customers should therefore find many cheap offers this year on the Internet.
It is therefore no coincidence that the discounter Aldi of all people wants to sell and deliver groceries online for the first time in 2023. In the stores, Aldi is already seeing from the sales figures that the crisis is driving people to inexpensive providers, and does not want to leave the online business completely to start-ups such as the Norwegian retailer Oda, which is launching in Germany this year.
Low-cost retailer Shein sets the trends in e-commerce
In fashion retail, on the other hand, experts see the greatest potential in the Chinese platform Shein. The Chinese are very successful with their cheapest fashion and are thus contributing to the crisis of previously successful concepts such as Primark. The company does not publish figures, but according to industry estimates, it could already turn over around two billion euros in Germany.
“The former innovators in the e-commerce industry such as Zalando, Otto, Amazon or Asos are no longer able to set trends and reach the youngest generation,” says e-commerce expert Graf. But Shein succeeds in doing just that.
The retailer constantly analyzes data from sales and social media and uses it to develop new products. “Shein is able to get goods from the idea into the shop within three days, test them in a small quantity and then follow up with a larger order when it reaches the customer,” Graf explains the recipe for success.
The former innovators of the e-commerce industry such as Zalando, Otto, Amazon or Asos are no longer able to set trends and reach the youngest generation. Alexander Graf, e-commerce expert
That way, Shein wouldn’t have the risks of pre-financing and overstocking. “They can easily beat the prices and range of products from Zara or H&M,” says the expert. He therefore believes that Shein is already capable of sales of three and a half billion euros in Germany this year – and thus probably the fastest growth in German online trading at the moment.
Despite the often plain quality of its inexpensive products, Shein apparently manages to retain its customers and encourage them to make further purchases.
Every bankruptcy in the city center drives customers to online trade
“It is important to increase customer loyalty so that people buy again and their buying frequency increases,” advises Florian Heinemann, founding partner at venture capitalist Project A Ventures, which has invested in numerous young e-commerce companies.
Since cost pressure increased during the crisis, companies concentrated more on persuading existing customers to place new orders instead of spending a lot of money on acquiring new customers.
In addition, online trade is benefiting from the weakness of brick-and-mortar retailers. Every bankruptcy in the city center drives more customers into e-commerce, says Marcus Diekmann, digital consultant and advisory board member at retailer Rose Bikes. He estimates that “thousands more brick-and-mortar stores will close” in 2023. E-commerce could grow by five percent this year alone. “And for that, online retail doesn’t even have to have done anything better.”
The former Ebay Germany boss and Tom Tailor board member Stefan Wenzel also sees the customer migration from offline to online in retail as unbroken. In some categories, the online share is already 50 percent. For this reason alone, “a return to at least single-digit growth rates is not unrealistic”.
Trade expert Graf also expects a selection among the online retailers. “Many unprofitable companies will exit the market,” he predicts. Strong companies, on the other hand, have good prospects of growing more profitably this year.
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The comeback of online trading is also evidenced by the search queries on the largest German e-commerce platform, Amazon. This was determined by the digital agency Finc3, which oversees the Amazon marketplace business of many brand manufacturers. Traffic on the marketplace fell by seven percent last year. But from July, the numbers fell much more slowly, in October, for example, traffic fell by only two percent.
Cheap and luxury works even in times of crisis
There are no figures for December yet. According to Finc3, however, it is noticeable that some providers have increased their media budgets contrary to their plans. This suggests that the end of the year went better than feared in some cases.
Investor Heinemann says that retailers who improve their customers’ shopping experience are particularly successful. With many online retailers, however, the quality of advice is still too low. Products such as furniture or fashion could be better presented with the help of virtual reality. Artificial intelligence can generate content related to the products and thus give the customer additional information for the purchase.
>> Read also: Delivery times in online retail – when the Christmas present from Amazon takes seven days
“The holistic customer experience decides on success or failure,” agrees Fabian J. Fischer, CEO of the digital consultancy Etribes. “E-commerce then goes far beyond the shopping cart filled with just a few clicks and includes, for example, customer loyalty offers such as special communities or product ranges tailored to specific target groups,” he explains.
From the point of view of retail expert Stefan Wenzel, not only does Shein achieve this with its targeted product range policy, but also luxury companies such as LVMH. In other words, all those concepts that know how to boost the release of the happiness hormone dopamine in consumers beyond price reductions: “Cheap or luxury always works, they say, and that applies all the more in crises.”
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