Germany is an appealing market for the fashion sector. Within Europe, it is the largest and one of the richest markets. Many multinational firms have discovered a solid key market in Germany. But on the other side, numerous brands and stores have tried miserably to conquer it. What was the rationale for that? Here - on the eve of Berlin Fashion Week - is an introduction to the German market and some information you should know before trying your luck with German clients.
The German Market
Germany is the largest market in the European Union, with a population of over 84 million - by comparison, France has around 65 million residents and Italy around 60 million. Germany is also Europe's top performer in terms of gross domestic product, which means that the population as a whole has high income levels and consequently great purchasing power. Before the pandemic, consumers in Germany spent 76 billion euros on apparel and footwear in 2019 alone, according to Statista. This puts Germany just below the United Kingdom in Europe and sixth in the globe behind the United States, China, India and Japan. These data could give you the impression that selling fashion and clothes in Germany is straightforward. Unfortunately, it is not.
A contemporary example is The Hudson's Bay Company (HBC). The highly established apparel store from Canada joined the German market in 2015 with big aspirations. It bought the Kaufhof department store network for 2.8 billion US dollars, with aspirations to “transform them into Macy's concepts,” as Forbes stated in 2016. Additionally, it created off-price stores under the Saks Off Fifth brand. “The question is whether the off-price stores will resonate with German customers unfamiliar with the Saks 5th Avenue banner,” Forbes queried at the time. They didn't.
Although other off-price concepts such as TK Maxx, the German version of the American discount chain TJ Maxx, seem to perform well, Saks Off 5th was forced to close its stores just a few years later and HBC withdrew from Europe. Galeria Kaufhof was sold to Signa. A combination of insufficient awareness and sensitivity for the German market and a lack of e-commerce orientation was probably to fault.
1. Decentralised Structure
The fact that Germany is a challenging market to tap is attributable to various factors particular to Germany. Unlike France, the UK or Italy, Germany is more decentralised in structure, meaning that there are several urban centres rather than, as in the UK or France, Greater London or Paris's Île-de-France, where much of the wealth and tastemakers are concentrated. Instead, Germany's five largest cities are located in separate regions of the country, and their respective lifestyles differ greatly. A look at per capita income per city in Germany holds even more surprises. Who would have expected of cities like Wolfsburg, Ingolstadt or Schweinfurt to launch their first fashion boutique? And yet, these are the places in Germany with the highest income per working population.
2. High Demands On Service And Price
German buyers are extremely informed and very demanding. They compare and look for the best bargain - ‘value for money’ is essential concept to the German mindset - before making a purchase. According to a 2015 global study by Accenture, Germans have the greatest aspirations in the world. “Compared to consumers in other mature markets, Germans are particularly demanding,” Accenture’s managing director Sven Drinkuth said in a statement about the survey. “Price alone is no longer the main focus. Customers essentially anticipate great quality and are rapidly disappointed.”
Read Also: Accessories for German Men's Outfits
3. Protestant Culture
Although pretty evenly divided between Protestants and Catholics in terms of denomination, Germany is, culturally speaking, a Protestant society. After all, it is the land where the reformation began. That is what sets it apart from the French and Italians: the Germans are more pragmatic in their aesthetics and pay less attention to status symbols: Think of Jil Sander, Hugo Boss or even Adidas. German style is more like a Protestant church interior - clean, minimalist, efficient - than the majesty of a Catholic cathedral.
Also following a Protestant ethic, Germans tend to save and invest their money. According to ING Germany and Barkow Consulting, the typical European invested 3,121 euros in savings assets such as shares last year. In Germany, the figure was 4,671 euros.
4. Germans Spend Less On Fashion Than Other Nationalities
In Germany, “[S]tatus is demonstrated by smart investments in cars, watches and technical devices,” according to a study by consultancy 'Join The Dots'. This phenomenon is also reflected in the budget allocation of Germans. According to statistics from Statista, German women spent an estimated 719 euros per person on apparel in 2019, much less than Italy (834 euros) and the UK (1,133 euros). According to the Luxury Spending Index, this could be owing to the fact that pricey items such as handbags and jewellery - status symbols, after all - are more popular in other nations.
5. Price-sensitive And Pragmatic
What is certain is that Germany has been the top-selling market for the Swedish fashion firm H&M for decades, and the second largest for Amazon. During the Corona crisis, price sensitivity in the lower price sector intensified again this year. From February to the end of May, the C-market, which includes 50 percent of Germans, lost 19.7 percent in value, and 13.6 percent in volume, reveals Ulla Ertelt, general director of Frankfurt-based market research firm HML Marketing in an interview with FashionUnited [in German]. “That means people have been buying at even lower prices.”
Brands should also be practical when it comes to style. German consumers tend to be conservative and pragmatic when it comes to fashion. They want outfits that are functional and can be used on various occasions. “The most common fashion style is comfortable or casual, and classic, practical and sporty styles are also popular. It is crucial to constantly be nicely dressed,” sums up a recent study by Magdeburg-based market research institute IWD.
Conclusion
For brands and shops, this means that there is not only not the one German lifestyle, but also diverse locations and population groups.
If manufacturers want to acquire a presence in the German market, it would be good to visit the main cities and take a stroll along the high street. Look closely at the people you see on the streets to get a feel for who they are and what they could be looking for. Do market research in advance and consider about smaller towns where the retail landscape is not as saturated as in the big metropolis. Be realistic with your target demographic, which is in no doubt not young and fashionable. Be sure you work with a sales agency specialist in the German market and listen to their feedback.
Mercado Wolski
Germany is an appealing market for the fashion sector. Within Europe, it is the largest and one of the richest markets. Many multinational firms have discovered a solid key market in Germany. But on the other side, numerous brands and stores have tried miserably to conquer it. What was the rationale for that? Here - on the eve of Berlin Fashion Week - is an introduction to the German market and some information you should know before trying your luck with German clients.
The German Market
Germany is the largest market in the European Union, with a population of over 84 million - by comparison, France has around 65 million residents and Italy around 60 million. Germany is also Europe's top performer in terms of gross domestic product, which means that the population as a whole has high income levels and consequently great purchasing power. Before the pandemic, consumers in Germany spent 76 billion euros on apparel and footwear in 2019 alone, according to Statista. This puts Germany just below the United Kingdom in Europe and sixth in the globe behind the United States, China, India and Japan. These data could give you the impression that selling fashion and clothes in Germany is straightforward. Unfortunately, it is not.
A contemporary example is The Hudson's Bay Company (HBC). The highly established apparel store from Canada joined the German market in 2015 with big aspirations. It bought the Kaufhof department store network for 2.8 billion US dollars, with aspirations to “transform them into Macy's concepts,” as Forbes stated in 2016. Additionally, it created off-price stores under the Saks Off Fifth brand. “The question is whether the off-price stores will resonate with German customers unfamiliar with the Saks 5th Avenue banner,” Forbes queried at the time. They didn't.
Although other off-price concepts such as TK Maxx, the German version of the American discount chain TJ Maxx, seem to perform well, Saks Off 5th was forced to close its stores just a few years later and HBC withdrew from Europe. Galeria Kaufhof was sold to Signa. A combination of insufficient awareness and sensitivity for the German market and a lack of e-commerce orientation was probably to fault.
1. Decentralised Structure
The fact that Germany is a challenging market to tap is attributable to various factors particular to Germany. Unlike France, the UK or Italy, Germany is more decentralised in structure, meaning that there are several urban centres rather than, as in the UK or France, Greater London or Paris's Île-de-France, where much of the wealth and tastemakers are concentrated. Instead, Germany's five largest cities are located in separate regions of the country, and their respective lifestyles differ greatly. A look at per capita income per city in Germany holds even more surprises. Who would have expected of cities like Wolfsburg, Ingolstadt or Schweinfurt to launch their first fashion boutique? And yet, these are the places in Germany with the highest income per working population.
2. High Demands On Service And Price
German buyers are extremely informed and very demanding. They compare and look for the best bargain - ‘value for money’ is essential concept to the German mindset - before making a purchase. According to a 2015 global study by Accenture, Germans have the greatest aspirations in the world. “Compared to consumers in other mature markets, Germans are particularly demanding,” Accenture’s managing director Sven Drinkuth said in a statement about the survey. “Price alone is no longer the main focus. Customers essentially anticipate great quality and are rapidly disappointed.”
Read Also: Accessories for German Men's Outfits
3. Protestant Culture
Although pretty evenly divided between Protestants and Catholics in terms of denomination, Germany is, culturally speaking, a Protestant society. After all, it is the land where the reformation began. That is what sets it apart from the French and Italians: the Germans are more pragmatic in their aesthetics and pay less attention to status symbols: Think of Jil Sander, Hugo Boss or even Adidas. German style is more like a Protestant church interior - clean, minimalist, efficient - than the majesty of a Catholic cathedral.
Also following a Protestant ethic, Germans tend to save and invest their money. According to ING Germany and Barkow Consulting, the typical European invested 3,121 euros in savings assets such as shares last year. In Germany, the figure was 4,671 euros.
4. Germans Spend Less On Fashion Than Other Nationalities
In Germany, “[S]tatus is demonstrated by smart investments in cars, watches and technical devices,” according to a study by consultancy 'Join The Dots'. This phenomenon is also reflected in the budget allocation of Germans. According to statistics from Statista, German women spent an estimated 719 euros per person on apparel in 2019, much less than Italy (834 euros) and the UK (1,133 euros). According to the Luxury Spending Index, this could be owing to the fact that pricey items such as handbags and jewellery - status symbols, after all - are more popular in other nations.
5. Price-sensitive And Pragmatic
What is certain is that Germany has been the top-selling market for the Swedish fashion firm H&M for decades, and the second largest for Amazon. During the Corona crisis, price sensitivity in the lower price sector intensified again this year. From February to the end of May, the C-market, which includes 50 percent of Germans, lost 19.7 percent in value, and 13.6 percent in volume, reveals Ulla Ertelt, general director of Frankfurt-based market research firm HML Marketing in an interview with FashionUnited [in German]. “That means people have been buying at even lower prices.”
Brands should also be practical when it comes to style. German consumers tend to be conservative and pragmatic when it comes to fashion. They want outfits that are functional and can be used on various occasions. “The most common fashion style is comfortable or casual, and classic, practical and sporty styles are also popular. It is crucial to constantly be nicely dressed,” sums up a recent study by Magdeburg-based market research institute IWD.
Conclusion
For brands and shops, this means that there is not only not the one German lifestyle, but also diverse locations and population groups.
If manufacturers want to acquire a presence in the German market, it would be good to visit the main cities and take a stroll along the high street. Look closely at the people you see on the streets to get a feel for who they are and what they could be looking for. Do market research in advance and consider about smaller towns where the retail landscape is not as saturated as in the big metropolis. Be realistic with your target demographic, which is in no doubt not young and fashionable. Be sure you work with a sales agency specialist in the German market and listen to their feedback.