Otto Group

On Amazon's Heels

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Little known in the US, the Otto Group owns the more familiar Crate&Barrel. Picture source: Reuters

Long gone are the times when Germany’s largest retailer was making its business from mail-orders through its catalog. And while many Germans still associate the name Otto with the thick quarterly fashion and home appliances catalogs that were once shipped to nearly every household, the company has evolved in recent past years.

Today, the Otto Group, which employs some 50,000 across more than 30 countries and runs 123 subsidiaries, is Europe’s largest online fashion and lifestyle retailer, leaving behind US rival Amazon on the continent. While the firm is largely unknown to an US audience, it wholly-owns Crate & Barrel, the popular home furnishings and accessories retailer in the United States.

Otto Group, founded in 1949 by the eponymous family, reported €12.5 billion ($13.9 billion) in 2016 annual sales, far outpacing German mid-cap listed e-commerce company Zalando, which posted a mere €3.6 billion in comparison.

Once decried as a toothless paper tiger, it has transitioned to the digital world more smoothly than other old-economy firms. And its new chief executive, Alexander Birken, who took the helm this January, has ambitious plans.

In an exclusive interview with Handelsblatt, the 53-year-old manager said he wants to increase revenues to €17 billion over the next years. To finance the far-reaching expansion, the group is considering placing additional bonds and is open to the idea of more investor participation, he said.

 

“Otto will become a wholly digitized corporation.”

Alexander Birken, CEO of Otto Group

“Otto will become a wholly digitized corporation,” Mr. Birken said. “Consequently, we’re targeting investments in promising, digital business models.”

Otto today generates more than half of its sales online and has worked with technology experts at Boston’s MIT, as well as a variety of startups to develop its online offering.

But Mr. Birken also believes in the potential of popular brands in his portfolio. As such, he said the group plans to invest a “substantial triple-digit million amount” into the brands Crate & Barrel, the European low-cost fashion brand bonprix and senior women fashion firm Witt Group.

While the executive doesn’t deny global market leader Amazon’s success in conquering European market share over the past years, the competition doesn’t scare him. “We are not rejecting the comparison, but it simply is too short-sighted,” Mr. Birken said in reference to the Seattle-based company. “As Otto Group, our brands are represented across more than 30 countries on a much broader front and we want to continue along our very own path to the customer,” he said, adding that Otto was already collaborating with Amazon when it came to logistics.

Grischa Brower-Rabinowitsch leads Handelsblatt’s coverage of companies and markets. Thomas Tuma is a deputy editor in chief at Handelsblatt. To contact the authors: brower@handelsblatt.comtuma@handelsblatt.com

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