Our end of June research – now covering more 7.400 interviews with German online shoppers - indicates that German consumers will reduce their overall purchases in July (i.e. both online and offline purchases). At the same time, German consumers say that they will continue to shift purchases to online channels in July. It is worth noting that July is a summer month, which may impact consumers’ purchase intent.
This is a continuation of the trend we saw in June, when German online purchases picked up to +24% in mid-June (compared to early March) – after a period of stabilized and even decreased growth in May. Even though German society has opened up, consumers’ return to brick-and-mortar stores is – so far - not happening very fast. Only 7% of German consumers say they shopped more in physical stores in June, compared to 17% who say they shopped more online.
Our research also shows that 22% of German online shoppers say that their financial situation has become more stressed and 7% say that their financial situation has improved in June. The most important reason for fewer purchases is the need to save money; this is especially evident in the younger age groups. Secondary motivations are the intention to change lifestyle by reducing overall consumption, along with having general worries about the future. And third tier motivations include the risk of becoming unemployed, as well as wanting to pay off mortgages and loans.
When looking at the development of online product categories, Fashion stands out in Germany, as it is the leading category in acquiring new consumers: in the second half of March, 18% of German shoppers made at least one purchase in online Fashion, and this share has grown to 26% by mid-June.
We asked German consumers to estimate if they would increase or decrease their total number of purchases in general, as well as online purchases specifically. And we find that German consumers project that they will buy less overall, but that they will make a larger share of their purchases online. This means that, providing that consumers act on their intentions, we can expect an accelerated shift of purchases to online channels, leading e-commerce growth to further amplify in Germany in July. This comes at the expense of purchases in brick-and-mortar stores.
Above graph illustrates which segments claim to shift purchases from online and offline channels in July. Only one segment claims to increase both offline and online purchases during July and that is the normally more risk-taking segment of younger males. Overall, we predict that e-commerce growth will be driven by the younger segments, with a mid- to high income. Older segments with a lower income are significantly more restrictive as they claim that they will hold back purchases - both offline and online - in July.
As consumers shop more online, it becomes more likely that they will buy more overall next month. It also becomes more likely that they shift even more purchases from brick-and-mortar stores to online.
As overall consumption for German consumers slows down in July, consumers’ survey responses indicate that e-commerce will grow in July. In most product categories, recent growth has been driven by a combination of an expanding consumers base as well existing online shoppers buying more. But in Germany, Fashion is an exception as purchases are predominantly driven by the inflow of new consumers: in the second half of March, 18% of German shoppers made at least one purchase in online Fashion, and this share has grown to 26% by mid-June.
At the same time, we see that especially purchases within Kitchen appliances have shown a significant increase since end of March, but the future outlook is pointing towards a dampened rate of growth. For Hardware/building materials the situation is almost the same, but the future outlook is slightly more positive.
One of the key drivers for consumers to purchase less online is related to a deteriorated financial situation – and the share of consumers claiming that personal finances are limiting purchases has increased since end of March. In Germany, 29% of online shoppers say that their financial situation today is worse than their financial situation in pre-corona times. But looking at the recent change, the share of consumers who say it has worsened is lower (22%). And looking one month ahead, only 11% of German online shoppers think it will become worse. In fact, the outlook for July is positive as the share projecting it will become better is larger than the share thinking it will become worse.
Looking at shopping frequency, Heavy Shoppers (having made 5 online purchases or more in the past 2 weeks) have a more positive future outlook as 22% think their financial situation will be better in the coming month – which can be compared to 16% among Light Shoppers.
German online shoppers’ worries have decreased continuously since end of March. Worries about personal health have decreased the most, from 51% at the second half of March to 39% by mid-June. In that same period, worries about the personal financial situation also decreased, from 39% to 31%. From this, we can also conclude that – over the past months - German consumers worries have been more health than finance-focused.
When we connect worries to e-commerce behavior, we see that the level of worry has a powerful impact on consumers’ online purchases. A general conclusion is that the more worried a consumer is about health- as well as finances, the more online purchases a consumer does. And when mixing in shopping frequency, we see that Heavy Shoppers (5 or more online purchases in the past 2 weeks) are most worried, followed by Medium Shoppers and Light Shoppers.
Since end of March, the increased number of online purchases in Germany is largely driven by consumers shifting purchases from brick-and-mortar stores to online channels. 17% of German online shoppers say they have started shopping more online and less in physical stores in the past month, and 7% say they have started shopping more in physical stores and less online. And not surprisingly, the more purchases a consumer currently makes online, the more a consumer states that they have shifted their share of purchases from offline to online.
To understand the shift in a larger context, it is important to note that the share of Dutch, German and Norwegian consumers who have shifted to online purchases is higher than the share who have shifted to offline purchases. In this regard, The Netherlands displays the largest difference (24% online versus 8% offline), followed by Germany and Norway.
In the first phase of German e-commerce development, we saw a rapid increase in e-commerce purchases up until the second half of April, with e-commerce up +36% compared to pre-corona times. In the second phase, going into the second half of May, growth stabilized and a plateau was reached at +36% growth. And during the 1st half of June, growth dampened and has now seemed to recover at +24% growth since the corona outbreak.
The share of Heavy Shoppers (having made 5 or more online purchases during the last two weeks) has increased significantly in Germany, from 10% of the online shopper base in pre-corona times, to 15% by mid-June. The share of Heavy Shoppers peaked at 18% during the second half of May, which corresponds to the peak in total number of purchases in Germany. From a merchant perspective, Heavy Shoppers are a relatively small but critical segment, as they only represent 15% of German online shoppers by mid-June but they stand for 48% of all online purchases.
We see interesting developments in the motivations to purchase online over time. In Germany, finding cheaper prices online has become increasingly more important over time, along with the fact that online shopping offers more convenience. It looks like the functional benefits of online shopping have increased in impact, and are possibly leading to a lasting change. And since end of March, the fact that stores and restaurants were closed and having to take care of family at home were two important reasons to increase e-commerce purchases for Dutch, German and Norwegian consumers. But these have now significantly decreased in importance.
As for the barriers for German consumers to decrease online purchases, the share of consumers who have virus-related concerns around receiving packages has decreased continuously. On the other hand, a limited personal financial situation has increased in importance for making less e-commerce purchases.
As the world is still changing at a rapid pace, we will keep monitoring consumers’ e-commerce behavior over the summer and get back with an updated deep dive into German e-commerce at the end of July.
Stay tuned for an updated end of June deep dive into Norwegian e-commerce behavior very soon.