Germany’s Otto Group steps up Brazilian invasion

If any more evidence was needed of Brazil’s increasing attractiveness for technology investment, Redpoint e.Ventures has just come up with a $130m fund for the country’s booming startup scene. And, continuing a trend we’ve been discussing recently, the Europeans are right in there.
A significant chunk of that fund comes from Germany’s Otto Group, the largest mail-order company in the world. Otto itself is playing coy, saying only that it’s “a double-digit million sum”, but Der Spiegel has the figure at $20m.
Despite the slowdown in Brazil’s economic growth – the government lowered its GDP growth forecast for the year from 4.5 percent to 3 percent a few days ago – it still makes complete sense for Otto to be targeting Brazil’s burgeoning startups.
There are two reasons for that. Firstly, as Otto spokesman Robert Haegelen told me, the Brazilian boom of the last few years has expanded the middle-income class, but the country is still in the process of adapting to shopping over the internet – plenty of growth still to be had there.
Secondly, as of earlier this year, Otto is already deep into Brazil, much the same as it is with the developing Russian, Chinese and Indian markets.

Growing ambitions

Indeed, when Otto released its latest results a month ago, it noted that its annual Russian revenues had reached €487m ($590m) and said it hoped to beat that figure in Brazil within five years. Otto has all three of its main businesses running in the Brazilian market – namely multichannel retail (mainly fashion), services (helping retailers become e-tailers) and financial services (Otto’s EOS operation).
“Brazil is a strategically important market for us,” Haegelen said. “Our aim to see what is happening in the e-commerce market, to be really up to date with the evolving models in order to be able to adapt our own business, and of course e.Ventures is aiming to make exits if they are profitable.”
Other German companies, such as Axel Springer’s KaufDa, are also targeting the Brazilian market.
e big one there is, of course, Rocket Internet. Haegelen downplayed any idea that there was a “one-to-one competition” between Rocket and Otto in Brazil, but conceded that the country did provide an extra battleground for the two teutonic outfits.
That battle will be fought for the Brazilian online fashion market, at least in part. Rocket’s big play there is Dafiti, while Otto barged its way in back in May by forming a joint venture with Brazil’s Posthaus. Rocket also has financial services ambitions, providing another opportunity for the two German outfits to square up to one another in São Paulo and Rio.