E-commerce is becoming increasingly important for German SMEs

• One in five small and medium-sized enterprises sell goods and services online
• Online turnover has grown by one third to EUR 200 billion
• But share in SMEs’ turnover remains low
• Pioneer businesses are mostly young

Digital sales channels are gaining importance for German SMEs, according to a representative special survey conducted by KfW Research on the basis of the KfW SME Panel 2017. It has found that around 780,000 small and medium-sized businesses, or one in every five, are now using digital market places, online shops, procurement platforms and similar channels to pitch their products and services to customers. In 2016, total turnover generated through e-commerce grew to a total of EUR 201 billion – an increase by 32%, or EUR 49 billion, on the previous year (2015: EUR 153 billion).

There are two reasons for the considerable growth in turnover from digital sales. First, the number of SMEs doing business online has risen significantly by 200,000 on the previous year. Second, these companies are using online channels to generate a higher share of total turnover, which now averages 23% (20% in 2015). With an estimated EUR 20 billion in business-to-consumer transactions (B2C), however, e-commerce has not yet fully established itself in the market. Most of the online turnover in the SME sector is likely to occur in business-to-business (B2B) exchanges. KfW Research estimates that this accounts for 90% (EUR 181 billion) of total online turnover.

“Digitalisation of business processes is becoming increasingly important for SMEs, as more and more are using digital sales channels. This is reflected in growing online turnovers”, said Dr Jörg Zeuner, Chief Economist of KfW Group. “SMEs’ total annual turnover is around EUR 4,500 billion and the share of 4.4% generated through e-commerce is still low, but the trend is clearly pointing upward. And for good reason, because the opportunities associated with digital channels are too important for small and medium-sized enterprises to ignore.”

Enterprises that generate turnover exclusively through digital channels are the group that is currently recording the fastest growth. KfW Research has found that young firms which have been operating in the market for less than 10 years are the ones that place the greatest focus on online sales. “E-commerce pioneers can often be found in the young generation of entrepreneurs. On average, they are already generating 43% of their turnover using digital channels, almost twice as much as the average of all enterprises.”

The current analysis on the subject of e-commerce is available at:
www.kfw.de/Economics_in_Brief

Details about the database:

The current analysis on the subject of e-commerce is based on the KfW SME Panel 2017. The KfW SME Panel is the only representative survey of the German SME sector (enterprises with turnover of up to EUR 500 million), making it the most important source of data on issues relevant to the SME sector. It enables projections to be made for all SME size classes and sectors. A total of 11,043 SMEs took part in the current wave of the survey.