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As Brexit impacts margins, British brands eye Germany for expansion


Germany is one of the most lucrative markets for British brands looking to expand operations internationally. As per a Drapers Online report, Germany’s large network of independent retailers and opportunities offered by marketplaces such as Zalando are attracting many international fashion brands despite Omicron hitting the industry hard.

German clothing market to grow

Figures released by research firm GlobalData in early December indicate, the German clothing market will grow 9.6 per cent year-on-year to € 74.2 billion (£62.7 billion) in 2022. The re-election of Social Democrat Olaf Scholz as the new German Chancellor is also likely to boost growth.

Diversification, key to reduce market impact

Emily Salter, Senior Analyst, GlobalData believes it is important for brands to diversify away from a single key market to reduce the impact of store closures, Brexit and weak consumer confidence. Owner of re-usable nappy brand TotBots and re-usable period product company Bloom & Nora, Frugi plans to increase sales share from 14 per cent to 25 per cent. In 2021, the company appointed a new European sales team for the German market with plans to expand German operations by partnering Zalando and independent retailers. It also plans to launch a new German-language website for 2022, and potentially owned stores in the future.

Other UK brands like Boardies are foraying into Germany through distribution partnerships. These partnerships will help the company manage logistics, says Nick Crook, Founder. They will also provide an opportunity to increase brand awareness through online platforms, such as Zalando. The ecommerce market in Germany also boomed during the pandemic. As Salter reveals, online penetration in Germany is expected to increase from 25.9 per cent in 2019 to 33.6 per cent in 2022. Zalando expects its gross merchandise value to exceed €14billion (£11.91billion) in 2021.

Targeting both online and offline expansion

A few brands are also betting on own stores and websites to foray into the German market. Swedish premium footwear and lifestyle brand Axel Arigato, opened its first company-operated store in Munich, Germany in November 2021. The brand aims to expand in Germany through more collaborations, marketing and events, says Albin Johansson, Co-Founder and CEO.

Other brands like Frugi, are setting up German websites. Localized website of British lingerie and loungewear etailer Lounge Underwear has enjoyed a huge success in Germany since its launch in 2020. The website aims to provide seamless customer experience to German shoppers, says Dan Marsden, CEO. Localized website helped the company build a direct relationship with the customer, he adds.

Brexit impact on German foray

Brexit has also impacted the foray of British brands into Germany. It has changed brands’ relationships with the UK as they will no longer incur tariffs associated with trading in the country, adds Salter. Brexit also presented a conundrum for Frugi as it sought to expand internationally, says Clark. The brand opened a third-party distribution centre in the Netherlands in February 2020 to counter this red tapism. Brands Asos and JD Sports Fashion have also opened distribution centers or warehouses in Germany to reduce Brexit-related tariffs. Despite these challenges, Germany remains one of the most favored destinations for international expansion for British brands.