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And the winner is…

We are experiencing some truly unprecedented times in Germany, where 725,000 enterprises (as of April 15th) announced short time work including BMW, Daimler and Volkswagen. SMEs face previously unimaginable rejections by their house banks and entrepreneurs have lost secured financing rounds.  It is this this shadow of today’s dominating news that some industries in Germany show signs of an unexpected upswing and offer interesting opportunities for foreign companies to reap some benefits.

Let us have a closer look at 3 interesting cases, which promise to come out of this crisis as winners.

 

E-Commerce, but not for all

While 2/3 of the German E-Commerce businesses expect declining sales in 2020, in the short-term the market has witnessed a sharp increase in parcel delivery by more than 27% since 13 March. Clearly not all online shops are affected equally – consumers defer more expensive purchases like TVs and cars as well clothes, beauty and luxury products – yet, for some the current situation has led to a boom, driven by new customer and market segments, for instance:

  • E-Commerce goes senior: older people are especially concerned about leaving their houses e.g. to go shopping. A recent study by E-Commerce market research firm IFH-Institut, confirms that older people have switched to online shopping because of the crisis. Experts project these new habits are here to stay, as people have plenty of time to get used to the convenience of ordering online and have goods shipped to their doorsteps.
  • Groceries eventually: whereas only 2% of German consumers have preferred online vs. offline grocery shopping in the past, the present lockdown has teased new behavioural patterns. Over the last three weeks, the grocery E-Commerce market in Germany skyrocketed with grocery delivery company Picnic reporting a 50% increase in demand and competitor GetNow claiming 500% new customer sign-ups. Until 2030 the online grocery market might grow 5-fold to reach a total of 10% market share.

 

ICT – #stayconnected #staysafe #staydigital

Before the current lockdown 75.4% of German employees could imagine working from home while only 45.7% rated their employers technically prepared for that. As the new reality brings a general mindset shift among sceptics and naysayers, home working has finally found its way into corporate life in Germany and is not expected to go away again. On the contrary, new forms of collaboration, team and project work require technical solutions to make it efficient, safe and convenient.

The following subsectors face the largest need:

  • Collaboration and communication tools: Home office and remote work without communication software, conference tools, remote control tools and project management software has become unthinkable. While innovative companies have worked with Zoom, Slack, Wunderlist, Asana and Trello and for many years, corporates and SME have still much to catch up.
  • IT-security: cyber-attacks like phishing, malware and social engineering have grown exponentially in conjunction with the COVID-19 infection curve, driving up demand for IT-security. Even before people moved into less safe home office environments, 96% of German companies reported attacks on their IT systems and half suffered financial and reputational damage. In fall 2019, 2/3 of German companies announced to invest more than 5% of their IT budgets into cybersecurity – a number which will significantly increase in the future.

 

Revival of “good old” Board Games

Whereas the skyrocketing usage of online games in Germany over the past few weeks does not appear unexpected (online gaming traffic jumped by 25% since mid-March), the boom of the more niche board and parlour games market in Germany may come as a surprise for many. With an annual turnover of EUR 550 million and more than 50% growth over the past five years, the German board game market has been the largest and most dynamic in Europe. More than 34 million people (ca. 40% of the country’s population) gather regularly around the gaming table, making board games one of the most popular leisure activities in the country.

At Essen Spiel – the world’s largest public fair for board games – 1,500 new games entered the market in 2019 alone. The social distancing order of the current crisis and the associated lack of alternative activities have propelled sales over the past weeks in new, unknown heights, with online retailers reporting increases of 100% and beyond. This trend is likely to continue and offers excellent market prospects for international board game companies. The following product segments face the greatest demand:

  • Card games
  • Party games and exit games
  • Complex games with extensive features

 

What’s in it for international trade?

While this list of industry sectors is not exhaustive, it certainly pays off to have a closer look at individual, and niche, market segments and not get carried away with the daily noise of recession forecasts. Some industries will indeed experience windfall growth driving their operations to their limits, while market segments are growing and thus offering room for new players.

Please get in touch with our team for a free consultation on the potential of your business in Germany so your company can be part of the inevitable upswing that the German economy will see soon.

 

By Lukas Josten & Dr Kim Zietlow 

 

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