A new study shows the significant impact of e-commerce on the German economy, with B2B and B2C e-commerce sales reaching an estimated €369bn and €99bn, respectively in 2019.
The study was commissioned by the Bundesverband E-Commerce und Versandhandel (bevh) and conducted by Copenhagen Economics.
Below is the executive summary in English, although the full report is available for download in German.
“Since the first products were sold online, e-commerce has been evolving rapidly in scope and coverage, becoming an increasingly important part of the economy growing at 14% annually within the last five years in Germany.
Departing from a relatively narrow range of physical products sold by mail order companies, e- commerce has changed, transforming the very nature of the products being sold and the transactions taking place: From a physical book to an e-book to a podcast that can be downloaded and listened to everywhere.
What started largely as a business-to-consumer model is now much more driven by business-to-business transactions that generate three to four times larger online revenues in Germany today.
At the same time, e-commerce is enhancing the space for other buyer-seller relations, where consumers are selling to peers, for example. Today services are an essential part of e-commerce, accounting for 39% of the total e-commerce revenue in Germany in 2019.
Online marketplaces, which make up almost half of German B2C transactions, drive SMEs into the online space where they can start and scale their business on equal terms with their larger counterparts.
Survey evidence concludes that among German companies selling online, the smallest companies sold almost 30% through web shops and apps, while for larger companies this share ranged between 19% and 21%. Direct-to-consumer sales are facilitated, revolutionising the space of commerce and bringing online companies closer to their customers, which moves the area of commerce from a push driven approach towards a more customer centric, pull driven model.
The development of e-commerce is creating substantial economic value for consumers, businesses and the wider society in a number of dimensions.
Productivity increases as efficiency gains are harvested throughout the value chain driven by increased competition, scalability options and specialisation. The ability to tap into wider markets allows for more innovation as costs can be spread on a wider base of consumers.
Mark-ups in the retail link are lowered, decreasing consumer prices by 0.2% relative to offline sale. When modelling a shift from offline to online shopping, it is estimated that the productivity gains from e-commerce could amount to 0.15% of German GDP, which corresponds to €5bn in 2019.
Consumer welfare is also directly boosted by the access to a wider array of comparable products and, as importantly, by the entirely new services being developed. Instead of buying a CD that requires access to a CD player, consumers can subscribe to a streaming service that provides instant access to a large reservoir of music wherever the consumer is situated.
Consumers and producers in rural areas in particular are benefitting from the ability to sell and buy a wider range of products at lower prices.
A wide range of international research shows that this leads to significant gains for consumers, with one study suggesting that the potential consumer welfare gains from e- commerce could amount to 2-3% in Germany.
While these studies are clearly subject to uncertainties, it does provide strong evidence that the gains from E-commerce go much wider than the direct cost savings from having a more efficient retail and distribution industry.
The more direct footprint of e-commerce on the German economy is also evident. During the Covid- 19 pandemic, e-commerce has been helping firms maintain access to consumers and ensure economic resiliency during periods of lockdown, while at the same time unlocking new digital business models in the process.
Today e-commerce is a fundamental part of the German economy. In 2019, B2B and B2C e-commerce sales reached an estimated €369bn and €99bn, respectively. That corresponds to a GDP contribution of €100bn throughout the value chain from production to consumption, which in turn corresponds to 2.9% of total German GDP with 1,260,000 people employed.
This contribution is not directly linked to the wider productivity gains or consumer welfare increases described above, but simply expresses how many resources that are presently employed in E-commerce activities in Germany today.
E-commerce is becoming an increasingly important part of the economy with above market growth rates. In 2019, 15% of the revenue in retail and wholesale sectors was generated through e-commerce, which represents a 6-percentage point increase within the last five years.
All indicators suggest that the journey ahead for e-commerce will see continued growth in both scope and scale. Consumers increasingly demand companies to be present online, while new companies are increasingly starting their business online.
Today, 87% of German consumers expect companies to have an online portal and 67% of new start-ups operate through a purely digital business model, which represents a 5-percentage point increase compared to the previous year.
Increased opportunities to create customer centric products and experiences through technology advancements are expected to take e-commerce up and beyond its current scope and scale in the years to come, where the online channel will shape our understanding of commerce further.“
