As a retailer, you would never invent a payment option today that increases your returns rates and delays your payments by a month, but the Open Invoice or ‘Rechnung’ does exactly that, and having just spent a week in Germany speaking to customers, it’s a payment option they’re not willing to give up just yet.
Even with the rise in popularity of PayPal in the last few years in Germany, from a customer perspective it’s hard to beat a system that allows you to place a huge online order, try on the items at home and only pay for the products you keep, 28 days later. Which explains why usage of the Open Invoice payment in Germany remains stubbornly high, even amongst younger customers who you might expect to have adapted to mobile-friendly payments like PayPal.
Which then led me to ask the question: why do so many international retailers, who’ve gone to the effort and cost of translating and creating a German website, still not offer the Open Invoice payment and can you actually grow a large business in Germany without it?
Looking through the British fashion retailers with localised German-language websites the following brands don’t offer Open Invoice: Ted Baker, White Stuff, New Look, M&S, Boohoo, Joules, River Island etc etc – in fact the only two that I found offering Open Invoice (other than Boden) were Next and Asos. With Open Invoice accounting for anything from 60% up to 80% of online orders in Germany I’m staggered that these brands are even bothering to manage a local website and run marketing campaigns, knowing they will struggle to convert customers without offering their preferred payment option.
Open Invoice effectively de-risks the purchase for a new customers (especially when combined with free delivery/returns) as they can order multiple sizes and colours without having to pay in advance, making them far more likely to try your brand for the first time. This is something I’ve been hearing all week (and many times before) and is not something you can avoid, even by offering other payments like PayPal or Sofort (bank transfer) which are reasonably popular in Germany but still far less attractive for most customers.
I can only assume that most of these retailers not offering Open Invoice are doing so because they are either unaware just how important it is, they are worried about the impact on returns rates or they don’t have the capacity to implement it – but even that is no excuse now with partners like Klarna who will set up and manage the risk for you, all for relatively limited pain and cost when compared to the upside.
In my experience you WILL see an increase in your returns rates from introducing Open Invoice to your German website, but this is an unavoidable side effect, albeit a potentially expensive one. But who, in their right mind, would launch an initiative that increases cost and returns? However what you will get in return should far outweigh the negatives – you should see a higher average order value, higher new customer conversion/lower new customer recruitment costs, higher LTV and most importantly it gives you credibility in the market and the opportunity to grow your business in a highly attractive and lucrative market.
Germany offers far bigger opportunities than most other European markets with a higher earning/spending, more loyal customer and your potential for growth there should be significant and worth the effort, even if that does mean having to factor in the higher returns rate to your business model and ensuring your returns process is as cost-effective as it can be.
So can you build a significant eCommerce business in Germany without Open Invoice? Having led the German marketing operations for two of the most successful British retailers online there I would say a resounding NO. The uplift to your business when adding Open Invoice is significant, conversion rate increases hugely and no other single improvement (or even collection of improvements to your proposition) give you that uplift and the platform for growth in the German market.
My advice to any brands running a German website without Open Invoice would be, stop playing around the edges, pull back your marketing spend, re-evaluate your business model and put all of your efforts into launching Open Invoice – trust me, you won’t regret it
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