Alexander Birken feels a bit like he did two years ago, when the Covid pandemic broke out in Germany and nobody knew exactly what was going to happen next. “The uncertainties are as great today as they were at the beginning of the Corona crisis,” said the CEO of the Otto Group when he presented the balance sheet. Everything had gone well for Otto back then. In the second year of the coronavirus, the group achieved one of the best financial years in the company’s history, mainly thanks to the online boom. But now the big hype seems to be over, also because the shops have opened again.
However, the fiscal year that ended at the end of February was still dominated by e-commerce. Online sales rose in double digits to a good twelve billion euros worldwide. Eight billion euros of this came from Germany, where the Otto Group is known for brands such as Bonprix, About You and Manufactum. Furniture retailer Crate & Barrel grew strongly in the USA and Canada.
But not only did the fiscal year end at the end of February, Russia also attacked the Ukraine at the end of February. Since then there has been war in Europe, a war Birken calls “disgusting”. A war that changes a lot for the largest German mail order company, such as the outlook for the current financial year. “We steer on sight,” says Birken. A sentence that many used at the beginning of the Covid crisis to express a lack of predictability.
Birken is torn about it. On the one hand, he is “extremely optimistic” because there are also opportunities. On the other hand, he expects “significantly reduced profitability”. However, the profit in the current year will probably not be quite as huge as last year, when earnings before taxes rose to a good 1.8 billion euros. The cost increases for paper, energy, wood and raw materials are generally too great for this. “We will not be able to fully compensate for the cost increases,” said the CEO.
Fast delivery from the new plant in Poland to Germany
The group of companies wants to counter the uncertainty with investments in technology, logistics and a new business area. Significant funds flowed into the development of an own e-commerce platform and an IT infrastructure. In addition, a separate payment service provider will be created in order to be able to offer customers and marketplace partners on Otto.de invoices from a single source in the future. In logistics, the group has cut jobs at the Hamburg location and is now in the process of building a new logistics center in western Poland. Customers in Germany will also be supplied from there.
The operator is the subsidiary Hermes Fulfillment, which is to process orders for Otto.de and Mytoys faster in Poland. The goal is delivery the next day. The previous Mytoys logistics location in Gernsheim, Hesse, is to be expanded and converted during ongoing operations. At Mytoys, the development of sales had recently been rather disappointing. The Otto Group is sticking to its investments despite weaker online trade growth.
Birken and CFO Petra Scharner-Wolff see particularly large growth opportunities in telemedicine. The government coalition in Berlin is planning simplifications in the field of digital health. According to Birken, there is still “too much regulation” at the moment. In the coalition agreement of the traffic light government, however, it is stipulated that telemedicine will be promoted. This is how the e-prescription should come.
At the Otto holding Better Doc, customers can obtain a second opinion from a doctor
With a stake of 66 percent, the Otto Group recently acquired a stake in the Swiss digital health service provider Medgate, which has over 200 of its own doctors, as Birken said. The Group is thus expanding its business areas in a targeted manner by another strategic area. The German specialist broker Better Doc belongs to Medgate. The Cologne-based tech company has developed a system for placing specialists that uses a combination of human and machine intelligence. The company sees itself as the European market leader in the search for and placement of highly specialized doctors. According to Birken, the first thing to do with the help of Better Doc is to be able to get “a doctor’s second opinion”.
Birken considers the health sector within the group to be further expandable. He does not see any major takeovers in areas such as retail, but rather wants to “buy more in digital health”. Birken certainly sees synergies between the individual business areas in the group. “We have access to a trusted audience of millions,” said Birken, indicating that this includes potential telemedicine Oklahoma customers.
Birken considers the health sector within the group to be further expandable. He does not see any major takeovers in areas such as retail, but rather wants to “buy more in digital health”. Birken certainly sees synergies between the individual business areas in the group. “We have access to a trusted audience of millions,” said Birken, indicating that this includes potential telemedicine customers.
Many companies have identified the area of digital health as a promising field of investment. The Nivea manufacturer Beiersdorf, for example, joined Dermanostic, the provider of an app for dermatological diagnoses. And the perfumery chain Douglas bought a Dutch online pharmacy. According to a study by management consultancy Roland Berger, the digital health market in Europe has a volume of EUR 240 billion and in Germany EUR 59 billion. The Otto Group wants a share of this so that it can survive the next crisis well.