Michael Otto’s family has been as omnipresent in German post-war retail as Walmart, Sears and Target have in the US. 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.”
And then the man with the crown of white hair and piercing blue eyes stops, composes himself and apologises for banging on the table: “It is extremely seldom that I bang on the table, because I think it must be possible to solve problems in a very human and civilised way.”
Human and civilised. That’s the Otto Group, which encompasses 123 companies (including America’s Crate & Barrel) across 20 countries and expects revenue for the fiscal year ending in February to top $16.4 billion. Germans covet jobs with the firm. Its workers have never led a strike against the company, which instructs its managers not to work weekends or holidays. “The increase in burnouts is a problem because people are always on and they are always reacting,” says Otto. “It is so important to relax.”
In 1965 Werner set up a separate commercial real estate business, ECE Projektmanagement, that’s now Europe’s biggest developer of American-style shopping malls and is today run by Michael’s younger half-brother Alexander. (That business, which accounts for two-thirds of the family’s net worth, ultimately insulates the Ottos’ fortune from the whims of retail.)
“We are not the coolest and hip- pest company to the 16-year-olds living in Berlin,” shrugs Otto Group CEO Hans-Otto Schrader, who took over day-to-day operations in 2007. “[Zalando’s] story is not profit but growth.” But others see missed opportunity. “Zalando should have come out of the Otto Group,” says Kai Hudetz, head of the Institute for Research in Retailing in Cologne. “It is not so clear that if you look forward the next five to ten years that they will still be the second-largest e-commerce company in the world.” Even Otto allies are worried. “[Zalando is] a great example of speed and execution,” says Oliver Lederle, founder of myToys. “Otto has to take care.”
(This story appears in the 04 April, 2014 issue of Forbes India. To visit our Archives, click here.)