
Amazon's War On The House Of Otto, Germany's $18 Billion Family - lelf
http://www.forbes.com/sites/adamtanner/2014/03/05/amazons-war-on-germanys-18-billion-patriarch
======
mxfh
If you see how Hermes Group, an Otto owned logistics company,
(sub-)subcontractors have to handle their daily work load at (often below)
minimum wage pay, often with their private cars, it's hard to believe he's
that serious about running a morally superior business for any other reason
than getting good PR.

DHL is not golden either but Hermes is just bad in every aspect. As a private
customer in Germany I would try to avoid getting stuff shipped to me through
Hermes by all means possible, since you never know who delivers your stuff
(high fluctuation of sub-sub contractors) the delivery experience ranges from
unacceptable to slightly above sub-par.

[http://www.spiegel.de/kultur/tv/ard-film-ueber-
lohndumping-d...](http://www.spiegel.de/kultur/tv/ard-film-ueber-lohndumping-
die-paketboten-und-der-milliardaer-a-778200.html) [German]

[http://translate.google.com/translate?hl=en&sl=de&tl=en&u=ht...](http://translate.google.com/translate?hl=en&sl=de&tl=en&u=http%3A%2F%2Fwww.spiegel.de%2Fkultur%2Ftv%2Fard-
film-ueber-lohndumping-die-paketboten-und-der-milliardaer-a-778200.html)
[Google translate]

~~~
PythonicAlpha
I agree. I think, today's Otto Group is not morally superior to Amazon's
business at all, at least judged by their Hermes business. At least, I can not
see any viable differences.

What totally pisses me off is, the aura of "charity" that Otto is surrounding
around himself. He also got a high German medal (the so called "Große
Verdienstkreuz mit Stern") for his charities. With examples like these, German
high medals become the same value as the "Nobel Peace Prize" that is given to
some of the worst persons that have lived.

I now understand, why some people strictly refuse to be dishonored by such
prizes.

~~~
oijaf888
What winners of the Nobel Peace Prize have been the "worst persons that have
lived"?

~~~
levosmetalo
All of the leaders of countries involved in any kind of war during their
ruling would certainly meet the criteria. If Yaser Arafat and Barack Obama
deserved the Nobel Peace Prize, I guess now it's time for Vladimir Putin to
make the list complete?

~~~
oijaf888
Really? That's all the criteria for "worst persons to have ever lived"? That's
a pretty low bar and seems like it would qualify pretty much every head of
state ever.

------
this_user
What isn't mentioned in that article is that two other high profile German
mail order companies ("Quelle" and "Neckermann") declared bankruptcy over the
last couple of years and were mostly liquidated, because their business models
had become unsustainable. Otto so far is the last of those former giants
standing and probably profiting from the death of its direct competition.

An acquaintance of mine actually works for Otto and he told me several things.
First of all, in the heads of many people at that company the catalogue is
still the main driver of revenue. Online is more or less an afterthought. This
is also reflected in their average customer who is older and less educated
than the average Amazon customer. Secondly, their IT is ancient by Silicon
Valley standards. Orders, for instance, are allegedly only processed once at
night by batch job, because their infrastructure doesn't support anything
else.

All in all, my money is on Amazon and Zalando (basically an Amazon clone
supported by the infamous Samwer brothers) who will soon run circles around
Otto if they don't catch up fast which isn't an easy thing to do with a slow
behemoth of a company like that.

~~~
coffeeaddicted
I ordered recently a chair from Otto and was mostly surprised that I couldn't
use a credit card. Instead they send an invoice a few days after delivery.

------
ed
(This was nearly impossible to read on mobile)

    
    
        Michael Otto’s family has been as omnipresent in German
        postwar retail as Wal-Mart, Sears and Target have in the
        U.S. So what does this 70-year-old patriarch of this $18
        billion clan most want to talk about? A factory in 
        Bangladesh.
    
        With gusto he describes how he and Nobel Peace Prize-
        winner Muhammad Yunus hatched a plan to build a humane 
        clothing factory, where all profits would go back into the 
        community for schools and hospitals. At best, the Otto 
        Group would recoup its initial investment. Immediately 
        they faced red tape. Electricity would take five years. 
        Officials wanted bribes. Otto refused to base a social 
        business on a corrupt footing and walked away. “It’s 
        unbelievable,” says Otto, pounding on his wooden desk in 
        his corner office in Hamburg, Germany. “You would think 
        the government must be happy somebody is building such a 
        company and leaving the money in the country.”
    
        ...
    

[http://notehub.org/2014/3/12/httpwwwforbescomsitesadamtanner...](http://notehub.org/2014/3/12/httpwwwforbescomsitesadamtanner20140305a)

~~~
rdl
Corruption is more cause than effect of poverty.

~~~
samstave
Poverty is a tool, leveraged by the corrupt.

~~~
samplonius
How? I'm corrupt, and their are scavengers rummaging through the alley that
runs behind the office. How do I leverage this poverty to make some sweet
green? I've watched them dig through the trash, and they don't have anything,
and they are just collecting bottles and cans for recycling. How do I profit
from this?

~~~
Crito
Assuming that they are poor though otherwise functional (capable of work),
then in order to make money from them you take advantage of them, knowing that
poor people desperate for money to support their families will put up with
more shit.

Have a "recycling" company and need somebody to man one of the electronics
burning pits? Get one of those poor guys in they alley to do it. What are his
other options?

You may need to bribe others to get away with this, but if those people are
also relatively poor, the bribes should be affordable.

~~~
rdl
My preferred way to make money from poverty is that tiny investments can
produce huge returns. There are also high search costs.

If you can find poor people who are really smart and haven't been permanently
damaged by their experience (i.e. internalized failure, still believe success
is possible, etc.), you can find some really amazing employees, partners, etc.
People for whom "find a place to stay in California for a few weeks while
looking for a job" is basically impossible.

~~~
Crito
That certainly works too, but I don't think you need to be corrupt to go that
route.

~~~
rdl
Oh, my argument is that corruption (by other people) causes innocent/good
people to be poor, and then other people who are self-interested (at least)
and potentially altruistic can help those poor people.

Although generally my preferred form of helping would involve the corrupt
people and some rope; much more efficient.

~~~
ericd
I think the Chinese govt. is roughly on the same page as you re rope, though I
don't know how much of that is actually just a weapon to be wielded against
opponents. I wonder how well that's been working at reducing corruption.

~~~
rdl
Unless it's all a shame, a lot of what the central Chinese government does
seems great for China and neutral to good for everyone in the world. Most of
the stupidity in China seems to come from provincial or local governments.

------
aridiculous
I wonder how much of Otto's benevolence is being played up in the article
(discouraging weekend working, tolerance of gigantic strategic failures). If
he truly does what he's saying, it sounds like a very pleasant and productive
place to work.

~~~
PythonicAlpha
I do not agree with Otto's benevolence. I think it is just show. When you see
what he is doing with his Hermes business, he is not benevolent at all but
throws many people even deeper into despair.

There was also a documentary about his life-ruining business but the big
"benefactor" just found covering slogans to disguise what it is really about:
To rip people off. When his other businesses work the same, than it is a big
benevolence show. Of course the German government bought the show (why not,
our politicians are of the same kind!).

~~~
einrealist
You cannot compare Hermes with the rest of the group. Hermes' working
conditions are a result of the logistic market. And that is quite different
from the conditions you find in retail. I worked for Otto in Hamburg and i can
say that the benelovence is not just show.

~~~
PythonicAlpha
I also strongly disagree with the (white-washing) statement, that the working
conditions at Hermes are purely a result of the logistic market!

There are other logistic companies that still have far better working
conditions. So it is possible.

The whole construction of Hermes is made this way, that the conditions of the
workers are bad and Hermes itself can wash their hands of it. Even the small
companies in between this "chain of irresponsibility" are complaining of bad
conditions and many go bankrupt for Otto's billions.

~~~
einrealist
I did not say that Otto is innocent in this case. Most of the bad press is a
result of Hermes' overdependence of contractors, who often have contractors
themselves. Of course, each link in the chain of contractors is obligated to
make profit from the already low shipping price. DHL has this problem too (see
the small "On behalf of" at the logo). Even though, DHL has another history
(Deutsche Post) and therefore some advantages. The logistic companies are
working on this. As a result you find more and more pickup shops. It is even
discussed to make door-to-door delivery a premium service, so less delivery
wo/men are needed and prices for direct shipping can be raised. The standard
service will then be to pickup shops or automated packet stations only. Of
course, this can be prevented if customers would accept higher shippings
costs...

~~~
PythonicAlpha
My critics of this system goes just in this direction. The construction is _on
purpose_ in a way, that responsibility is disconnected from Hermes and the
pressure is made so that the contractors themselves are forced to create bad
working conditions.

There are also contractors that admitted that they had to cheat the tax system
to stay afloat. Many have gone bankrupt and the people involved are often left
without social security. That's all inside the "System Hermes".

------
TrainedMonkey
Moral of the story is - people like their goods to be cheap, quickly
delivered, and convenient to order. Amazon encompasses all of that and it
seems that Otto's companies do not. I applaud his effort to put people ahead
of profits, but unless he changes his business model amazon will continue to
eclipse his empire.

~~~
toomuchtodo
Counterpoint: Perhaps government should enact regulation to lift the floor to
prevent a race to the bottom. Amazon warehouses shouldn't become the
sweatshops of tomorrow.

Governments exist to protect their citizens, not their businesses.

~~~
anentropic
"Amazon warehouses shouldn't become the sweatshops of tomorrow"

They already are...

[http://www.bbc.co.uk/news/business-25034598](http://www.bbc.co.uk/news/business-25034598)

[http://www.bbc.co.uk/iplayer/episode/b03k5kzp/Panorama_Amazo...](http://www.bbc.co.uk/iplayer/episode/b03k5kzp/Panorama_Amazon_The_Truth_Behind_the_Click/)

[http://www.theguardian.com/technology/2013/dec/01/week-
amazo...](http://www.theguardian.com/technology/2013/dec/01/week-amazon-
insider-feature-treatment-employees-work)

~~~
toomuchtodo
I'm aware. I have more faith in the German government protecting its citizens
compared to the US government.

~~~
samplonius
Based on what? The Otto Group is battling unions in Hermes, like Amazon is
battling unions in their warehouses. Is there any difference at all?

I know Europe like to view US as a big monster to scare kids: you better
behave or big mean US will eat you!

But is there anything objective that the German gov't is going to help anyone
anymore than the US gov't? Maybe healhcare?

~~~
toomuchtodo
> But is there anything objective that the German gov't is going to help
> anyone anymore than the US gov't? Maybe healhcare?

A substantial social safety net? Sane workplace hours and practices?

------
trg2
_The Otto Group’s sales are up 17% in Germany since the recession, while
Amazon’s have doubled since 2010._

Huh? This comparison confused me. I wonder why the author didn't use the same
years? What was the baseline?

~~~
iwasakabukiman
I read it as 2010 being the baseline for both, with "since the recession"
meaning 2010.

But it's fairly ambiguous. It could mean any number of things.

It could also be that the numbers for the Otto Group aren't public for
whatever reason.

~~~
blurpin
I edited the story. We had to write it this way bc Otto reports a fiscal year
that ends in February. Amazon's fiscal year is the calendar year. So it wasn't
exact comparison and we had to fudge.

------
atmosx
Did the guy (Otto) pay for front-cover or did Forbes randomly picked up a
_successful billionaire_ who _made up himself_ in the period of the _German
economic miracle_?

I mean, there's nothing attractive to this story: Amazon is bad on workers and
Otto is good, won't get you far. Especially in the Anglo-saxon world.

------
bayesianhorse
"War" sounds so much less boring than "competing".

I can't help but hear a sentiment like "We deserve perpetual success, dammit!"

------
trevoragilbert
Fascinating story of the growth of a giant. I wish they hadn't glossed over
the early growth of the company and how it grew during the Cold War and the
divide in Europe. Anyone know any more about that part?

~~~
eru
I know that Quelle, one of their competitors, got products manufactured in
east Germany.

------
rajacombinator
Awww look at the poor landed nobility. Boohoo.

------
mfrommil
There's such a strong negative connotation to "burning out" in the article. If
an employee puts in a solid 2-3 years and delivers great results for a
company, "burns out", and then moves on to a new role or company, is that
really that bad?

The company (in this case, Amazon) got great results from its employee, the
employee had a good experience (and can leverage it to get a promotion,
internally or externally).

I guess it depends on what employees are looking for in their career - to be
the best they can be, or live a laid back lifestyle.

 _edit_ agree with the comments... this is a too simplified black/white
comment. completely agree that finding the right balance between work/non-work
on an individual basis is important.

~~~
normloman
"I guess it depends on what employees are looking for in their career - to be
the best they can be, or live a laid back lifestyle."

You're not being the best when you burn out. You're killing yourself and your
productivity with it. We have decades of research concluding that productivity
falls when you're overworked.

"The company (in this case, Amazon) got great results from its employee, the
employee had a good experience"

The employee does not have a good experience when they're working themselves
to exhaustion.

"If an employee puts in a solid 2-3 years and delivers great results for a
company, "burns out", and then moves on to a new role or company, is that
really that bad?"

Yes, because companies shouldn't have to work their employees to the bone to
extract value from them. A long time ago, we decided that it's cruel, and
created labor laws. Where have you been?

~~~
tedks
>Yes, because companies shouldn't have to work their employees to the bone to
extract value from them. A long time ago, we decided that it's cruel, and
created labor laws. Where have you been?

Who is 'we'? You're wearing clothes and using a computer and probably
exclusively using products that were made in nation-states that have virtually
no labor laws. Where were you when globalization happened?

Regardless of moralizing in Western countries, you have decided it is not
cruel to work employees to the bone and discard them when they break. You
decided that when you bought the shirt you're wearing and the computer you're
using.

Whether or not the status quo is right is one question; but you are wrong
about what it is.

~~~
normloman
My comment was about the west. It's tragic that such poor working conditions
exist in developing nations. But that should not excuse western companies when
they over work their employees, as the original commenter implied.

~~~
tedks
Why not? Are people in the west somehow worth more than people in "developing
nations"? (Besides their dollar value, obviously.)

If you're willing to condemn a Honduran to sweatshops, but not an American,
that says something about you in more than one way.

~~~
normloman
I'm not willing to condemn a Honduran or anyone to sweatshops.

You seem to want to bring sweatshops to America to make things fair.

How bout we try to just end sweatshops instead.

~~~
tedks
So what clothes do you wear?

~~~
normloman
thrift store, motherfucker.

