eCommerce in Germany 2024: Marketplaces

Temu in Germany: Key Insights

• Explosive Growth: Temu's launch in 2022 was followed by a worldwide surge in GMV (gross merchandise volume). Germany is one of temu.com's top markets, accounting for 7.6% of GMV in 2023.

• Amazon Seller Dissatisfaction: Germany's eCommerce market leader, Amazon, is using its dominant position to capture an increasing share of seller revenues for marketing and logistics services. While it is currently uncontested, Asian competitors are actively targeting Amazon's disgruntled sellers and customers.

• Zalando, Otto and Media Markt Most at Risk: Amazon's lead over other competitors in the market makes it hard to reach, but the other ranks with significantly less activity can be easily overcome by emerging low-cost competitors from Asia. This is especially the case if the latter start to implement a workable infrastructure that would improve their offering and customer conveniences such as returns and fast delivery

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The German eCommerce market is the 6th biggest worldwide, projected to reach US$120 billion in revenue by 2024. Some key drivers are eCommerce marketplaces, which allow sellers - large and small - to showcase their products to a wide audience. 

While U.S. online retailers Amazon and eBay occupy the top spots in the ranking of German eCommerce marketplaces, domestic platforms like Zalando and Otto are also well established.

However, Chinese eCommerce giant PDD Holdings has joined Germany’s top 10 with its marketplace Temu, and is enjoying great successes with annual global GMV growth of over 4,500% in 2023. At the same time, Amazon is facing backlash from sellers and competing retailers. 

With its low-cost strategy, Temu could undermine the other players in the market at a dizzying pace. Let’s assess the likelihood of that happening.

Temu: “Shop Like a Billionaire”

Temu was launched in 2022 by the eCommerce conglomerate PDD Holdings, which also operates China’s fourth largest marketplace Pinduoduo. Knowing about this affiliation is important, because PDD’s established position and expertise benefit Temu’s business. 

Temu’s most distinctive feature is its low price strategy, coupled with additional benefits such as free shipping and returns. Together with its extensive marketing on social media platforms and during major events such as at this year’s Super Bowl, Temu is becoming increasingly well known among global consumers. 

Check out Temu’s GMV development, which measures marketplace activity, as seen on Temu.com’s ECDB Marketplace Page:

Germany was not exempt from this surge. Quite the contrary: Germany is Temu.com’s third-largest market in terms of GMV, with over US$1 billion worth of products sold in 2023.

While the United States is clearly Temu’s most important market, with 42% of GMV on Temu.com generated by U.S. consumers, Japan is a distant second with 10% of GMV in 2023. 

Germany is currently the third most lucrative market for Temu.com, accounting for 7.6% of global GMV. The remaining top 5 markets are two other large European economies: the United Kingdom (7%) and France (5%). However, Temu.com’s wide reach and high diversification are apparent in the presence of many smaller markets, which together account for 28% of GMV.

What Makes Temu Stand Out?

Temu incorporates features like gamification and social referrals to create a sense of accomplishment when consumers use the app, with which they are incentivized to participate and earn discounts. 

As a result, Temu has already outperformed Amazon and Shein in the average time consumers spend on their respective apps.

While Temu’s engagement strategy drives platform growth, market leader Amazon is facing frustration from sellers offering their products on its marketplace.

Amazon: Falling Merchant Profits Meet Platform Dependency

Amazon has recently come under fire for increasing merchant service fees on its platform. An investigation by German consulting firm Oliver Wyman found that since 2018, Amazon has been steadily increasing the fees it charges for providing the platform and related services. 

As the chart shows, by 2023, Amazon incurred 41% of net sales for platform services, increasingly eating into sellers’ profits.

Note that these are maximum values, since Amazon charges a fee for providing the platform in any case, while marketing and logistics services are more or less voluntary. However, recent reports indicate that sellers are under pressure to spend an increasing share of their revenue on Amazon’s marketing services, because otherwise products will not be visible at a high enough rank for consumers to notice the items. 

This also happens when consumers are searching for a specific brand: If that brand hasn’t paid for Amazon marketing, its products will appear on a later page, reducing the likelihood that consumers will see them behind the number of sponsored pages. 

While some brands have already stopped selling their products on Amazon, smaller sellers and those without other significant distribution channels really have no choice but to sell on Amazon. 

A Collective Outcry Against Amazon’s Seller Fees & Shein’s Adverse Recruitment Strategy

Then there are Amazon's discount events called Prime Days (which occur 1-2 times a year). Prime Days are extremely beneficial for consumers to shop on the platform, but sellers’ margins decrease even more during these events, resulting in profit losses. 

Amazon is the leader in most European eCommerce markets, including Germany. This is due to its extensive network and capital, which allows it to offer consumer conveniences like next-day delivery and competitive prices. But the competitiveness of this approach is being challenged by growing seller dissatisfaction. 

Chinese ultra-fast fashion eCommerce platform Shein understands this fact. According to Marketplace Pulse, Shein is actively recruiting Amazon’s largest sellers with more favorable offers (such as free advertising and a commission-free trial period). 

In German eCommerce, Temu and Shein are not yet a credible threat to Amazon, but they could be to the market’s homegrown platforms.

Germany’s Top 5 Online Marketplaces: Temu and Shein Threatening to Lower Ranks

While Amazon struggles with sellers and emerging competitors from Asia, Germany’s leading online retailers face their own challenges. 

Amazon stands on its own at the top of the list, having recorded US$56.3 billion GMV in 2023. Marketplace transactions are notably smaller on the other platforms, which is also why they stand a greater risk of Temu and Shein surpassing them in the coming years. Temu.com already stood 8th place in 2023, with a GMV of US$1.04 billion in the market. 

Therefore, fashion and electronics retailers have a choice to make: Adopt the Asian low-cost strategy or stand out with Amazon-like conveniences, such as fast (same-day or next-day) delivery, easy returns and discounting events.

Otto, Zalando & Media Markt: Strategic Moves to Stand Their Ground

A clear choice for Otto and Zalando: Both platforms rolled out new concepts for logistics network expansion and software services they offer B2B. In this way, Germany’s largest domestic retailers work to establish an additional financial branch, as well as improve networking and algorithmic efficiencies using big data. 

Still, the threat of Temu, Shein, or AliExpress managing to build a functioning supply chain in Europe is looming. This would enhance their service even further and in turn hurt the domestic retailers that do not have Amazon’s head start. As of now, established eCommerce players in Germany have their extensive logistics networks and customer service capabilities to thank for their continued success, but what happens when Temu and the likes are starting to compete in this facet of the supply chain as well? 

For the fifth-largest marketplace in the German ranking, Ceconomy-owned mediamarkt.de, low-priced consumer electronics offered on Temu are equally alarming. However, a contributing factor to the longevity of Media Markt and Saturn is their physical store network and omnichannel capabilities on the one hand as well as consumer recognition and trust on the other.

Is Temu A Threat to Amazon, Zalando & Otto? Closing Thoughts

Amazon’s confidence causes the market leader to claim an increasing share of revenue from sellers, who in turn are frustrated by this dynamic. While it does not currently appear like Amazon is about to relinquish its dominant position, competing networks are already being launched by domestic retailers. 

Based on recent developments, with Asian marketplaces entering the scene to capitalize on disgruntled sellers and consumers looking for a bargain, it is probable that more networks of domestic online retailers will emerge, and/or merge with existing platforms. Using technological capabilities like Shein and Temu, retailers can keep inventory and costs down while offering a wider range of products and responding more immediately to consumer preferences. 

The present media outrage over the success of Shein’s and Temu’s low-cost approach suggests that there is likely to be collective action against them by interest groups in their respective economies. Presently, Temu is making losses per order, which is made possible by PDD Holdings’ outstanding position through Pinduoduo. But if PDD Holdings, Shein, or Alibaba were to build a functioning logistics network in Europe at their current low-price model, even Amazon's market dominance would be at risk.

Sources: CNBC: 1 2 – manager magazin: 1 2 3 – Marketplace Pulse