How to achieve the development from the classical ‘Otto-catalog’ business to a successful eCommerce merchant? We asked Dr. Michael Otto, Chairman of the Otto Group. The company now generates 93 percent of its sales online.
Mr Otto, you have been very successful in taking the step into the digital revolution, so much so that you're now the world's largest online retailer after Amazon. How did you manage to take your customers along with you into the online world?
Michael Otto: We got into the Internet very early – as early as 1995 in fact, a good 20 years ago now – and this of course gave us the opportunity to develop our know-how step by step, allowing us to address our customers effectively. Because back then only maybe 0.5 or 1 percent of our customer base were interested in the Internet. Of course, the dynamics of the process have accelerated over the last ten years due to the emergence of mobile devices on the market and as a result of improvements in infrastructure. And what that meant for us is that we have been forced to drive on the process of digitization strongly within our company culture. And in my view, we're on the right path.
So you know more about your customers these days, then?
Michael Otto: Yes indeed, we now have much more information on our customers. We can monitor exactly what they are buying, where they go on their "customer journey," as it is so elegantly put – that is to say, we can identify what they have viewed, what sort of things arouse their interest. And customers are very happy to give us information about their preferences if they know that we can offer them products that really interest them. They're quite willing to say what their preferences are, what colors they like or what shapes they tend to favor. And this of course allows us to customize what we offer them much more precisely. It's the way of the future.
So what opportunities and challenges do you think digitization poses for the Otto Group in particular?
Michael Otto: We've always been a mail-order retailer, and I've always said that if the Internet were not there we'd have had to invent it, because it is the modern version of mail-order retailing. Naturally enough, I see enormous potential in the concept. These days, of course, the entire online sector now dominates our business. Let's take a look at just the Otto company itself: in that business we make 93 percent of our sales online, and only 10 percent via our catalogs. The reality is that these days the catalog's actually more a marketing instrument to encourage and inspire our customers to make a visit to our homepage. That's why we now have more frequent purchase stimuli, monthly stimuli with new fashion, using new technology. So the right way to engage more deeply in the online world and in the digital revolution is through our website.
There's one final question I'd particularly be interested in knowing: When can I expect the first Otto drones to deliver my packages to me?
Michael Otto: Well, I'm not quite convinced that drones will ever be routinely delivering packages as standard. For special situations – for example when medicines need to be delivered out to the middle of a moor – it makes sense to use a drone, but I can't really imagine millions of drones flying packages all around our cities. No, but something we're about to test is a sort of mobile parcel box that travels along sidewalks and can navigate to the front door of the customer, who then uses the appropriate digitized numbers to open the box and take delivery of the package. This is one potential way of doing things that we'll be testing in the near future.