Germany's High Return Rate: Catalogs, Invoicing, and BuyNowPayLater

Germany's High Return Rate: Catalogs, Invoicing, and BuyNowPayLater

Every country has unique purchasing behaviors, and often merchants have no clue what they are or how to fulfill their consumers’ needs. With the competition so high in every market, it’s essential to know how to optimize your ecommerce flow so you can make the sale.

Germany is one of these unique markets that needs more nuanced attention, and it’s often overlooked because of its integration with the Euro. 

I have backpacked through dozens of German cities over the years and have close friends from all over the country. I’ve learned, first-hand, some of their specific and unusual (to me) buying behaviors. On my first trip to the country, I went to a major grocery store chain in Wiesbaden, and they didn’t accept foreign credit cards – only local German credit/debit cards or cash. 

As an American who has had credit card commercial jingles ingrained in my brain from constant advertisements, it was hard to see how everyone didn’t have an average of 3-4 credit cards in their wallet like Americans (how naïve, right?). That’s when I started asking questions to my German friends to learn about their cultural differences, realizing I was missing a crucial element of the shopping experience. As I later jumped into the world of ecommerce, I continued to dig into this behavior and finally got to the root cause described above.

Why are Germans so Debt-Averse?

Merchants who are new to the market might be confused by the high return rates and particular payment methods in the region. It’s interesting to dive into history and see how the past has brought us to the present.

After WWI, Germany was forced to disband much of its military and pay reparations for the destruction of Europe in the treaty of Versailles. The country was in bad shape by the end of the war, and its economy quickly spiraled into a severe depression. The government started to print money, and as a result, it caused hyperinflation of the then-German currency and further economic downturn. 

The general population's frustration about the treaty, along with the depression, was a perfect combination for the rise of a new right-wing leader who would eventually start the second world war.

The Introduction of Catalog Culture

German retailers and manufacturers were desperate to sell their inventory to an increasingly poorer population, so they had to be creative when converting sales - thus creating the catalog culture. 

Retailers would offer their goods in catalogs, where everyday consumers could easily browse different products and order them from the comfort of their homes - something that’s since grown into the modern ecommerce structure.

Not only were consumers able to have the products delivered to their homes, but they were also able to try them out for a couple of days and decide if they wanted to keep them or return them (at absolutely no additional fees and no up-front cost). 

Essentially the retailers were floating consumers free products with no risk of return friction and only taking payment once customers were happy with the product.

Adding to the catalog culture was a significant fear of leveraging lines of credit from banks, which had significantly failed the country during the recession and period of hyperinflation. People wanted to use debit-based payment methods if they paid for anything (meaning they actually had the cash on hand), and now the catalog culture was incentivizing individuals to work on an invoicing method where they didn’t have to pay anything upfront.

How Germans Choose to Shop Today

Fast forward to the ecommerce boom over the last couple of decades, and you’ll likely find that Germany probably has the highest return rate of all the countries you sell to. The catalog culture remains prominent in their societies' purchasing behaviors for over a century and a few generations. With the Millennial generations and younger, we are seeing higher adoption of credit cards and Buy Now Pay Later solutions. However, most consumers still prefer debit-based bank transfers or invoicing options when purchasing from online retailers.

Don’t offer free returns to Germany? Not offering direct debit or invoicing payment methods? You’re wasting your marketing dollars and are killing conversion rates because you don’t understand your audience.

The takeaway is understanding cultural nuances from a global perspective, not just your home country's expectations. The beauty of the internet is that your business is global from the first day your website launches. But the reality is that even if you are marketing and shipping globally, you may miss some critical differences in purchasing behaviors across countries/regions around the world and, as a result, are not optimizing your conversions. 

Germany is just one of the dozens of examples, but the key to global expansion is picking partners that will help you learn about these behaviors and set you up for success. Choose Reach, and we can make sure your payments are optimized for success in all of the unique global markets. Book a demo today to see how our Merchant of Record and Local Acquiring solution can boost your global sales.

Reach simplifies cross-border ecommerce for forward-thinking organizations with ambitious global expansion goals.

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