Otto Group's dual role with Temu deliveries amid e-commerce challenges

Yesterday, the Otto Group publicly criticized Chinese e-commerce platforms like Temu during its financial announcement, though its logistics subsidiary Hermes simultaneously profits from delivering these competitors' packages. This contradiction highlights the complex challenges facing established European retailers in an increasingly competitive global marketplace.

During the financial results presentation on March 26, 2025, Otto Group's management expressed frustration about Chinese e-commerce platforms Temu and Shein. According to Jochen Krisch from Exciting Commerce, "What Otto thereby gladly conceals is that through its logistics arm Hermes, it earns money from many of the so objectionable Temu deliveries."

The criticism comes at a time when Hermes Germany recently announced record delivery volumes, with its logistics network handling over 4.5 million packages in a single day during the 2024 holiday season. The growth in package volume can be partially attributed to the increased presence of Asian e-commerce platforms in the German market.

Industry analysis supports this connection. According to the German industry association quoted by Exciting Commerce, "The Asian online retailers Temu and Shein are keeping Germany's parcel industry on a growth course." This suggests that while Otto may publicly criticize these competitors, its logistics subsidiary benefits from their expansion into European markets.

The Otto Group reported mixed financial results. According to Marc Opelt, Chairman of the Otto Division Board, the company increased its active customer base by over four percent to 12.2 million in the last fiscal year. The company's revenue grew by approximately five percent to about 4.4 billion euros for the financial year 2024/25, which ended on February 28. This represents a recovery from the previous fiscal year when the company experienced an eight percent revenue decline.

Despite these improvements, the company continues to face significant challenges. In February 2024, Exciting Commerce reported that "The Otto Group expects e-commerce revenues of 10.8 billion euros (-11%), in Germany with 6.6 billion euros (-12%)." By comparison, competitor Zalando was expecting revenues of around 10.2 billion euros for 2023.

The challenging market conditions have prompted strategic restructuring within the group. As part of its "Elevate" restructuring program, Otto aims to save 80 million euros annually. This follows earlier cost-cutting measures, including the closure of its Mytoys and Mirapodo operations in December 2023.

Hermes delivery performance

While the retail side of the business faces headwinds, Hermes Germany reported strong performance during the 2024 holiday season. According to the company's January 7, 2025 press release, "Hermes Germany delivered 99.8 percent of all packages and parcels on time for Christmas." The logistics provider handled 8.9 percent more shipments from October to Christmas Eve compared to the same period in the previous year.

The growth in delivery volume reached historic peaks on December 3 and 4, 2024, with each day seeing over 2.9 million shipments processed for delivery and pickup, including returns. When accounting for all logistical touchpoints, including sorting at logistics locations, the number of shipments in the Hermes Germany network on these peak days exceeded 4.5 million, representing record volumes in the company's history.

Dennis Kollmann, Chief Executive Officer of Hermes Germany, attributed this success to extensive preparation: "The comprehensive preparations for the peak season have paid off. Thanks to a strong team effort, we as Hermes Germany were able to show very good performance during this demanding time of the year."

Increasing competition from Asian platforms

The Otto Group's criticism of platforms like Temu centers on what it perceives as unequal competitive conditions. During the financial announcement, Marc Opelt expressed frustration with the regulatory environment, stating: "We take responsibility. We strive for sustainability. We fulfill all regulations. But from Asia comes massively subsidized competition into the market. Everything by air freight. Nothing is checked. We demand that politicians address this!"

Opelt characterized the political response as moving at a "snail's pace" and demonstrating "inadequate expertise" in addressing the competitive challenge posed by low-cost vendors from Asia. The Otto executive's comments reflect growing concern among European retailers about the rapid growth of Chinese e-commerce platforms in the European market.

Exciting Commerce pointed out the apparent contradiction in Otto's position: "If the Otto Group really had a problem with Temu & Co., it could look at itself and simply stop delivering anything from Temu & Co. Instead, it remains words instead of actions."

Sustainability initiatives amid cost pressures

Despite the challenging market conditions, Otto emphasized its continued commitment to sustainability initiatives. The company introduced new packaging materials partially made from moor plants, purchased from farmers who are rewetting previously drained moors. Wet moors serve as highly effective carbon dioxide sinks.

According to MOPO, this approach aligns with the company's strategy: "Do good and actively thematize it." To support this communication strategy, Otto is reviving its traditional slogan "Otto – find ich gut" (Otto – I like it) for its current advertising campaign.

However, the company acknowledged that sustainability considerations play a relatively subordinate role for customers compared to pricing. This consumer preference creates additional challenges for established retailers like Otto, which must balance sustainability commitments with price competitiveness against low-cost international competitors.

Platform business model expansion

Otto operates a platform business model, allowing other retailers and brands to sell products through its website for a fee. These partners can also advertise their products on the platform. According to MOPO, Otto generated 223 million euros from advertising alone in the most recent fiscal year. The company currently has approximately 6,200 partners on its marketplace, operating similarly to industry leader Amazon.

This diversification of revenue streams represents an important strategic direction for the company as it faces increased competition in its core retail business. The platform approach allows Otto to leverage its established customer base and digital infrastructure while reducing direct inventory risk.

Timeline

• December 18, 2023: Otto closes Mytoys and Mirapodo operations
• February 27, 2024: Otto Group announces expected e-commerce revenues of 10.8 billion euros (-11%)
• December 3-4, 2024: Hermes Germany processes record volumes exceeding 4.5 million shipments per day
• January 7, 2025: Hermes announces successful holiday season with 8.9% shipment growth
• February 28, 2025: Otto Group's 2024/25 fiscal year ends
• March 26, 2025: Otto Group announces financial results and criticizes Chinese e-commerce platforms

The convergence of these events illustrates the complex challenges facing established European retailers as they navigate increasing global competition, changing consumer preferences, and the need to balance profitability with sustainability commitments. The apparent contradiction between Otto's criticism of Chinese e-commerce platforms and its logistics subsidiary's benefit from their growth highlights the intricate interconnections in today's global retail ecosystem.