Digitization: Thousands of businesses without online trading are threatened with extinction

EActually, Patrick Kriebel just wanted to be nice. In Corona spring 2020, the founder of an advertising agency started an advertising campaign on social networks. For 1,800 euros plus advertising costs, he wanted to pave the way for boutique owners, gift shops and other small retailers to sell quickly on the Internet – in his opinion a “very affordable price”. After all, it was at this point in time that the first lockdown and the run into online trading became apparent.

But Kriebel had a nasty surprise. “I was naive enough to believe that the merchants would see the step into online business as a compulsory exercise and run into me,” says the agency founder from the Bergisches Land. “Instead, we were insulted and sometimes insulted. We were accused of wanting to capitalize on the misery of others. “

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Around 30 years after the invention of the commercial internet and more than 20 years after the start of e-commerce, hundreds of thousands of medium-sized and small retailers are still offline. According to a new study by the Ibi-Research research institute at the University of Regensburg, every second of the approximately 320,000 retail companies in Germany confines themselves to their own sales rooms when it comes to customer contacts, advice and the opportunity to generate sales. 14 percent don’t even have a website.

As a result, they are practically non-existent in the digital world. Relying on traditional regular or walk-in customers to come into the store by themselves is more than risky. For years only the online business has been growing. Now comes the Corona crisis. The “lockdown light”, which has been in effect since November, offers buyers little incentive to go to inner cities, where masked people dominate the streets and where there is neither coffee nor cake during shopping breaks because the restaurateurs have to close.

“Digitization allergy” takes revenge

The German Retail Association (HDE) reported that consumer sentiment is now clearly on the downside. And the Gesellschaft für Konsumforschung (GfK) compares the situation with the proverbial sword of Damocles over the city. Particularly affected are fashion stores, previously the economic support of the inner cities, but also toy stores, decorative stores and others.

For many smaller retailers, it takes revenge that they ignored the trend on the Internet for years. According to the analysis by Ibi-Research, carried out in cooperation with 46 German chambers of industry and commerce, there is a huge gap in digitization across the industry. On average, 78 percent of retail companies do not have a separate budget for digitization measures. 52 percent do not pursue any projects.

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“It is noticeable that it is only small dealers who do without digital applications,” said the researchers. While around 90 percent of large companies (with 500 or more employees) and 76 of medium-sized trading companies pursue an explicit digitization strategy including suitable projects, just 36 percent of small companies (with fewer than 50 employees) are involved in e-commerce.

If one asks merchants about the reasons for their abstinence, as the Ibi researchers did, one speaks of too much organizational effort, too high fees and too fierce competition. “Digitization means hard work and high investments,” says economist and trade expert Gerrit Heinemann. The race to catch up is also becoming increasingly difficult: “For many, it’s too late. You missed the start. “

Skepticism towards Amazon and Ebay

Georg Wittmann, head of Ibi-Research, also urges us to hurry: “Retailers must act now. Digitization will never again be as slow as it is today. ”What he means by this: In the future, the transformation will happen even faster, if you don’t jump on the bandwagon, you are in danger of missing it forever. Smaller dealers would, however, need specialist help and support programs.

There is already support from many sides. Many chambers of commerce are ready to offer advice, and companies also want to make the move easier for hesitant businesspeople. Platform operators such as Amazon, Zalando and Ebay advertise small trading companies with discounts, special promotions or the waiver of fees.

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Increasing numbers of infections

But the big tech companies in particular are skeptical. In the concern hit list of the Ibi survey, fear of being too dependent on the platforms ranks among the top three of the most frequently mentioned reasons for online refusal. This is probably one of the reasons why not even every eighth retailer is present on Ebay, only one in ten on Amazon.

In order to get the overdue catch-up process in motion in digitization in motion, the trade association is now calling for financial help. A public fund filled with 100 million euros is to be found. “This is not about subsidies”, HDE boss Stefan Genth averted obvious objections. “It’s about helping companies that got into trouble through the Corona crisis through no fault of their own and now no longer have the financial means to invest in their future.”

Successful retailers on Instagram

Digitization can also take place in steps, says Eric Maier, junior professor at the Leipzig Graduate School of Management, dampening the fear of the threshold of many shop owners. “Not every small tea shop has to have its own web shop,” he says. A shop is only worthwhile when it reaches a certain size: “Small traders can get quite a long way with a website.” Gerrit Heinemann, Professor of Commerce at the Niederrhein University of Applied Sciences, advises against building up their own web shops as a first step: “There are alternatives. “

In the crisis, a number of retailers successfully presented themselves with their own Instagram account, delivered the goods to customers themselves and thus successfully kept themselves afloat. A prime example is the Zumnorde company, a Münster shoe store that has existed for 130 years and now has 24 branches. The concept of locations and online shop was so well received that it was awarded the German Retail Prize in the SME category in 2019. But such cases are the exception rather than the rule. Owner-managed retail is a reflection of society, according to Maier: “For some, digitization is not a problem, others find it difficult.”

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Behind many small dealers are affiliated companies such as Bäko für Bäcker, Intersport in the sports retail sector or EP Electronics Partner. The primary task of these cooperations is to help the affiliated dealers with issues such as purchasing, logistics, IT or shop fitting. Heinemann accuses them of having reacted far too late when it comes to online trading. “The associations have literally missed out on e-commerce for 25 years,” he says.

Although most of these SME associations are poorly known by the general public, what they do or fail to do has a major impact. According to the industry association ZGV, 230,000 trading companies with a total of over 2.5 million employees are connected to the 310 German associations.

Internet is still “new territory” for many

It was only the Corona crisis that shook the industry – a delay with foreseeable fatal consequences. “Specialty shops will die like flies,” Heinemann predicts. “There will be no more after Corona, because the pandemic affects the trade like a hardcore restructuring program.” In the end, the crisis could cost 50,000 medium-sized companies the existence, the trade association Germany fears.

Despite the threat, many businesspeople are not ready to enter the supposed “new territory of the Internet” – as the Chancellor used the legendary phrase. “Anyone who has a digital allergy cannot be helped,” says Heinemann. Agency owner Kriebel had the impression during his stranded advertising campaign that some owners do not lack money, knowledge or time, but simply the will to dare to try something new. “Some retailers are maybe just happy that Corona provides them with an excuse for processing,” he speculates.

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According to Heinemann, a market shakeout would not cause any supply problems for end consumers. 94 percent of the retailers – this corresponds to several hundred thousand businesses – achieved just 20 percent of the retail turnover.

The remaining six percent of the companies, mostly chain stores and other large chains, share the lion’s share of 80 percent of the retail market among themselves. The big companies are, however, easily able to market the manageable additional flows of goods from small companies if necessary, according to the expert.

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