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Germany's Passion for Cash Could Cramp E-Commerce Growth

A recent study projects that Germany will become Europe's leader in Internet purchases next year. Most of these purchases, though, will be business-to-business not consumer.
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BERLIN -- Plagued with surly sales clerks and inconvenient store hours, Germany would appear to be the perfect market for all things e-commerce. Unfortunately, the country's love of money will likely keep the German consumer in-store rather than online for some time yet.

According to a study published last week, Germany is poised to become Europe's leader for purchasing goods and services via the Internet next year. The

Institut der deutschen Wirtschaft

, or IW, an economic research institute in Cologne, Germany, estimates that Germany's trade in e-commerce will top 7 billion marks ($3.73 billion) in 2000, placing it ahead of the U.K., Scandinavia and France.

As promising as that may sound, the IW study points out that the vast majority of e-commerce in the world's third largest economy will take place business-to-business. The consumer will continue to push a shopping cart down the store aisles.

Nobody Beats the Media Markt

The reason why Juergen won't buy his airline tickets online and Franziska won't be ordering flowers for Mutti from is pretty simple: Very few people use credit cards here. And that's because you're lucky to find someone who'll accept them, as anyone attempting to fill their living room with shiny durable goods can tell you.

A trip to

Media Markt

, the local equivalent of

Circuit City



Nobody Beats The Wiz

, and you are quickly disabused of the notion that paying for goods is the same simple and painless process that it is in the U.S or U.K. Eager to bust out the trusty gold card to pick up a new VCR so you can watch the director's cut of

Das Boot

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in letterbox format? Sorry, you'll run into a big, fat sign at the cash register explaining that the store would rather not have your Deutsche marks if you can't pay with cash or by debit card.

"There are still some retailers of the opinion that accepting credit cards isn't worth the fee they'd have to pay," says Oliver Kulter, a spokesman for


in Germany. "We do a lot of groundwork here to try and point out the benefits of accepting Visa to merchants.

However, I believe the Germans are generally more cautious ...

in accepting some innovations, especially if it has to do with financial matters."

Germans use plastic to make a purchase only six times a year on average, according to recent study by


. Remarkably, that paltry figure even includes debit cards, which are far more widely accepted, as well as typical Visas and


. Highlighting just how far behind the plastic curve the Germans are, the study says Danes used such cards 10 times as often as their neighbors to the south, and the British and French charge items on an average of 45 and 39 times per year, respectively.

Infatuated With Cash

Compounding the plastic problem, or perhaps contributing to it, Germans love their cash. After the hyperinflation of the 1920s, during which time a German grandmother had to push a wheelbarrow full of paper money to the baker to buy a loaf of bread, the stability of the rock-hard mark was something postwar Germans learned to cherish in their pockets. Walking around with 1000-mark notes ($532) is not uncommon, especially if you've really got your heart set on seeing

Das Boot

and need that VCR.

Naturally Germany's anticredit-card tendencies have also been carried into cyberspace and as one can imagine, e-commerce without credit cards isn't pretty. Long accustomed to fishing for cheap airfares on the Web in the U.S., your correspondent happened upon a leading German travel site, that was anything but. While the fares were good and the selection process was pretty routine, attempting to close the deal on a bargain ticket back to New York proved considerably more difficult than a trip to or


would have been.

In fact, it might very well have been easier to drive out to the airport and buy the ticket there. Since airline-direct didn't accept credit cards, after making the reservation online, a toll call had to be made to complete the transaction. As the distance between customer and the physical location of the travel agent made cash payment impossible, a wire transfer from a German bank account had to be authorized complete with signature.

After a volley of faxes back and forth, the ticket was finally sent on its way. The whole transaction would have been more antithetical to what e-commerce stands for only if your correspondent had been forced to drive the 200 kilometers to Cologne and pick up the ticket in person.

Ultimately, such ridiculous hurdles to making a purchase can't survive very long in cyberspace, considering the increasing irrelevance of borders in e-commerce. The readiness of U.S. interlopers, such as bookseller


, to accept a wide range of payment options online is but one example of the serious competitive disadvantage local sites will have as German customers discover that e-commerce is all about the convenience of being parted from one's money.