Erfurt 1200 natural white synthetic fiber flokati are stacked up at the incoming goods gate, they were delivered by truck from Turkey. The sender printed the name of the fashion designer “Guido Maria Kretschmer” on the label. Other carpets, which forklifts are transporting into the six-storey high racks that afternoon, are sold by the Hamburg Otto Group under the names “Bruno Banani” and “Paco Home”.
Around 300,000 carpets should be on the shelves by the beginning of March, when the goods hub just outside of Erfurt goes into full operation. The stored lengths of fabric would be enough to cover a third of the Principality of Monaco if that was what one wanted. “We are not aware of a larger carpet warehouse in Europe,” says Kevin Kufs, CEO of the Otto subsidiary Hermes Fulfillment, to which the 50,000 square meter warehouse building belongs.
Until now, Germany’s most powerful mail-order group had stored its rolls of fabric, including 15 hand-knotted Persian carpets costing 120,000 euros each, at a wide variety of locations – primarily in Löhne in Westphalia and in Ohrdruf in Thuringia. But such a decentralization, decided the family business with an annual turnover of 16.1 billion euros, they no longer want to afford.
Hamburg’s warehouse district is losing importance
With the new building in Erfurt, built and rented by real estate developer Goldbeck, Otto has even surpassed Germany’s traditional carpet warehouse center, the historic buildings of Hamburg’s warehouse district, since the turn of the year. Competitors with oriental-sounding names such as Rahvar, Farhadian or Sherzada still store their rolls of fabric there – the supplier Rugway alone offers hand-woven goods from Isfahan, Turkmenistan and Anatolia in the 20,000 square meter brick warehouse. But the number of providers has fallen considerably in recent years. Of the several hundred companies that once existed, barely two dozen remain today.
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“The spaces in Hamburg are absurdly expensive today,” complains Kufs. In any case, the Elbe metropolis is not sufficiently centrally located to conveniently supply households in the country. That is why Supervisory Board Chairman Michael Otto preferred the Thuringian state capital to his Hanseatic homeland.
It should be even more surprising that the group, according to its own statements, is investing tens of millions in the sale of Berbers, Persians or fleece goods, the value of which in the warehouse is also in the hundreds of millions. Because the business is by no means a sure-fire success.
For 2022, the Institute for Trade Research (IfH) determined a trade turnover with textile floor coverings of only 1.9 billion euros. In the past nine years, carpet sales in Germany have fallen by 15 percent, reports the Cologne institute.
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This slump apparently went unnoticed by Germany’s largest mail order company, which sells its carpets via the online shops “Otto.de”, “Heine.de” and “Baur.de”. “With carpets we are not experiencing such rapid growth as in the fashion range,” reports Kufs. However, sales are “relatively constant” and have even grown slightly in recent years. In addition, from Hermes Fulfillment’s point of view, this product group is one of the most important components in the mail-order range.
The fact that this is likely to remain the case in the coming years is due to a special feature of the carpet trade: money is not earned with the knotted goods in sales, but in purchasing and logistics – two disciplines in which the Otto Group has long since surpassed most of its competitors .
Hermes Fulfillment warehouse
is operated by the Otto Group through its subsidiary Hermes Fulfillment, which employs almost 10,000 people.
“The business thrives on large volumes,” says manager Kufs. In order to achieve the lowest possible prices, bath mats, for example, are often bought in batches of 50,000 to 60,000 pieces. Because the sale often lasts for more than a year, enormous storage capacities are necessary – including complex fire protection and sophisticated returns management.
From shopping to the last mile
The Otto Group knows all of this like few others. In Europe alone, it operates 17 warehouse locations through its subsidiary Hermes Fulfillment, employing a total of almost 10,000 people. In addition, there is delivery by the Hermes Paketservice and – for bulky goods over 1.20 meters in length and 31.5 kilograms in weight – by the Hermes furnishing service, a delivery and installation service that always has two employees ringing the customer’s doorbell at the same time.
The mail-order company has also invested heavily in so-called “sourcing”, the procurement of carpets abroad, in order to compete against rivals such as the furniture retailer Höffner or the US group Amazon. The Otto Group maintains its own purchasing offices in Pakistan, India, China and Turkey, among other places.
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The Hamburgers were even able to master the accident in the Suez Canal in 2021 and the container bottlenecks during the corona pandemic. “Our supply chain management has become a market differentiating factor,” believes Kufs.
But the 35-year-old is not completely satisfied. Additional robotics are required, refined as much as possible with artificial intelligence (AI). “We are planning a partnership with Boston Dynamics,” reports Kufs to Handelsblatt. Together with the US start-up, they are currently testing the use of driverless transport systems, which will in future be used to store pallets, for example.
The cameras being tested, which automatically recognize items via AI, for example to pick them for outgoing goods, are also promising. Work is also being done in the fulfillment warehouses on gripper robots, which will soon be able to unload entire containers. “What we are still missing,” remarks an Erfurt location manager, pointing to the meter-high storage shelves, “is actually only the magic carpet.”
More: Mail order company Otto finds a partner for the logistics subsidiary Hermes