Otto has reached the age of seven and a half decades.
From mail-order service to corporate titan: Otto turns 75. No German e-commerce giant is larger. Yet rivals are invading the market, threatening the market leader.
Otto, the digital retailer, is urging politicians to establish a level playing field in e-commerce. As per Marc Opelt, CEO of Otto's retail division, some vendors on emerging marketplaces disregard fundamental fair competition principles. "We expect politics and regulatory bodies like customs to pay more attention to these business models." Otto is set to celebrate its 75th anniversary on August 17.
Originating as a mail-order business on August 17, 1949, in Hamburg, by Werner Otto, the company recognized the end of post-war rationing would reshape consumption and introduced a catalog. The business thrived. In the subsequent years, the company kept pace with the times. Michael Otto, the founder's son, took over as CEO and emphasized environmental conservation while embracing the internet. With the internet boom reaching Germany in 1995, Otto launched an online store. The last print catalog was published in late 2018.
As per the annual report, the Otto Group empire currently employs over 38,000 individuals. Operating in more than 30 countries through 25 major subsidiaries, such as logistics company Hermes, online fashion retailer About You, US furniture chain Crate and Barrel, fashion company Bonprix, and Manufactum stores, the group recorded €15 billion in revenue and reported a €426 million loss in the last fiscal year.
Otto's retail division, which operates otto.de, serves as the group's primary subsidiary. On the platform, the company sells T-shirts, washing machines, and carpets, among other items. The platform also generates revenue through traders utilizing its marketplace reach. otto.de ranked second among the most visited online stores in Germany, with approximately 42 million visits in February, according to the Cologne-based Institute for Retail Research (IFH). Amazon.de topped the list with around 310 million visits.
Renewed Frugality
The German online retail sector accumulated an estimated €85 billion in sales last year, registering a 1% increase from the previous year. The German Retail Association (HDE) forecasts a 3.4% increase for this year. Despite the positive impact of the COVID-19 pandemic on business, consumer frugality persists, as per an HDE consumer survey. Opelt notes that consumers now spend less per order on average. Yet, this is not the only challenge facing the company.
Competition from retailers with Chinese ties is putting pressure on Otto. As per an IFH survey, 91% of consumers are now aware of marketplaces selling Asian goods like Temu, Shein, and Wish. 43% use these platforms. Both figures represent an increase of more than 10 percentage points over last year. Temu, with parent company PDD Holdings based in Ireland, has seen significant growth. In February, temu.com recorded around 29 million visits in Germany, ranking third behind Otto. Shein is now based in Singapore.
According to the German Retail Association for Textiles, Shoes, and Leather Goods, Germans bought around one billion clothing and shoe items from providers like Shein and Temu last year. These providers typically utilize air freight to ship products directly from the manufacturer to the customer, reducing costs.
According to IFH's Managing Director Kai Hudetz, e-commerce competition is intensifying. "Price has become increasingly important as a selling point due to inflation," said Hudetz. New Asian-based retailers like Temu and Shein are gaining popularity, with half of survey respondents affirming they purchase items they couldn't otherwise afford. "This is placing strain on established players in the market."
The HDE voices concerns. "Fair competition is vital for the advancement of e-commerce, but this is not the case in the current competition against Eastern companies like Temu and Shein," states CEO Stefan Genth. Some products do not comply with EU standards for product safety, environmental protection, and tax law, potentially endangering consumers and distorting competition. Genth urges the federal government and the EU to intervene. "Wild growth and the Wild West in e-commerce must be reined in." Temu replies that it strictly adheres to laws and regulations.
The Otto Group acknowledges the new competition in a statement. "They're technologically advanced, using AI and gamification, and they're fast. We can learn from our competitors, and we do."
Otto's CEO, Marc Opelt, has expressed concerns about vendors on emerging marketplaces disregarding fair competition principles in postal trade, urging politics and regulatory bodies like customs to pay more attention. With the rise of marketplaces selling Asian goods like Temu and Shein, which are now popular among German consumers, the postal trade sector is facing intense competition, potentially leading to distorted competition and consumer safety issues.
