How German marketplace Otto competes with Amazon

Otto, founded in 1949 is one of the largest ecommerce retailers in the world and one of the few who can compete with Amazon in Europe. A retailer in their own right, they are also a marketplace and Micheal Otto, Otto executive board chairman, previously CEO until 2007, and son of founder Werner Otto shared how Otto competes with Amazon in an interview with Business Insider.

How Otto competes with Amazon – Longevity

Otto started off as a mail order business for shoes, but today is one of the biggest online marketplaces in the world. AS far back as 1995 they put their entire catalogue online even though there were only around 250,000 Germans with an Internet connection. Otto have grown up with the Internet and are along with eBay and Amazon one of the few businesses around at the start of the Internet age who are still online today. Michael states their longevity as a key differentiator.

How Otto competes with Amazon – Transformation

It’s interesting to note the number of High Street retailers and mail order companies who have touted their transformation programs over the past few years, most of whom are still in the early stages of their transformation. Michael points to the many competitors who believe that you can move from a traditional retail model to a digital model in just two or three years but a large number of businesses have failed to do this. A couple of years is too short a time and many businesses have left it too late to fully embrace the Internet.

Here in the UK we’ve seen Debenhams and House of Fraser as just two recent examples of well established traditional businesses who have failed to transform to digital models, hamstrung by their expensive real estate of high street stores. Staples is another, although they split their digital and retail businesses and now Office Outlet (previously Staples retail stores) has also called in administrators but the split has kept the online Staples business alive.

How Otto competes with Amazon – Differentiation

Micheal describes Amazon as the perfect department store – if you know what you want and go looking for it on Amazon you’ll probably find it and Otto doesn’t try to compete.

“Amazon is a perfect department store. If anyone is looking for something, they will usually find it on Amazon. And Amazon does it perfectly. We do not want to copy Amazon, because we have no chance. We differentiate ourselves. We believe that there are two platforms in Germany and Europe. We have good conditions for that. We are more inspirational, fashionable, service-oriented.”
– Michael Otto (via Business Insider)

How Otto competes with Amazon – Technology

Otto have invested in artificial intelligence and mobile apps – for instance the ability to see a new piece of furniture in your own room using augmented reality. They also partner with Google for voice assistant technology – they say that they aren’t big enough to create their own virtual assistant but through collaboration with Google actually have more experience than Google themselves.

How Otto competes with Amazon – Service

Where Otto competes with Amazon and really wins big is with service. They have telephone support for customers and acknowledge that there are still questions consumers have for which the Internet still doesn’t have the answer.

Otto also has a high bar for merchants – you won’t find a Chinese seller not paying VAT on Otto and neither will you find cheap knock offs. Otto is a premium platform with high standards and consider themselves to be the only alternative to Amazon in Europe.

Finally we often think of Amazon Logistics as being a novel idea, who’d have thought of a retailer setting up their own delivery operations. Otto beat Amazon by several decades as they have had their own delivery company since 1972 – you’ve probably heard of them as they are called Hermes and nowadays also deliver for many other businesses… including Amazon.