Online grocery shopping is on the rise, this is what Wolfgang, Stephan and Michael Otto have experienced too. While their business was already doing well in pre-COVID times – facilitated by a revolutionary business idea, premium products, and the right technologies – the customer base of their Otto Gourmet online meat store has grown substantially in 2020.
When the Otto brothers founded their startup in 2005, they dived into a ‘blue ocean’. This term, coined by the French professors of management, W. Chan Kim and Renée Mauborgne, denotes an undeveloped market, where the water is not yet tainted by the blood of cutthroat competition – in contrast to the ‘red ocean’. E-commerce with premium meat products: this is the niche the brothers discovered, deepened, and defended.
Today, they are the market leader in the premium segment. Otto Gourmet makes the heart of gourmets beat faster with Spanish Iberico pork, French Mieral poultry, or Hereford rib-eye.
Food commerce needs ERP
It all began with Wagyu cattle on the endless meadows of Nebraska. During his time as a business consultant in the USA, the eldest of the three brothers, Stephan, tried a piece of the marbled beef and was amazed.
“He called me immediately and said, ‘let's import Wagyu into Europ’,” said Wolfgang Otto. A short time later, the meat from farmer Dan Morgan was on the menu of nearly every top chef in Germany, with Otto Gourmet supplying the restaurants directly.
The aspiring company founders quickly found out that selling grocery online is a complex matter, from both operational and legal aspects.
“We have to guarantee an unbroken cold chain when the ordered products arrive at the customer. We also need to comply with all HACCP requirements. This is a great challenge, and IT plays a vitally important role,” said Otto.
Early on, finding the right ERP system therefore was one of the most important decisions the young company had to make.
“We have chosen the CSB-System because my brother, Michael, got to know it at another company and knew it had the right functions for us.”
Looking back, the CEOs say that CSB gave them all the support they needed as a startup. They were able to gradually expand the system, building up optimal processes one step at a time. Starting out with invoices and delivery notes, they soon added labeling with integrated scale connections, followed by rolling stocktaking.
Today, the ERP system manages the entire goods and information flow – from quality tests in receiving to cutting of premium meat parts, batch-based inventory management, EDI for supplying food retailers, and to shipping.
Add to that the topic of traceability. Where does the meat come from? Which stations did it pass? Coming from all over the world, how did it get to Oberbruch? Seamlessly representing these data flows is another task of the ERP system.
Otto said: “Traceability is essential in the meat commerce. I definitely need to know where the meat comes from, in case we have a product recall. But luckily, this never happened in the last 15 years.”
ERP and e-shop: united through data warehouse and data trade
The team behind Otto Gourmet do not see themselves as salespeople. They want to advise and inform. With great enthusiasm, the company’s 120 employees support around 1,000 chefs from top restaurants and in excess of 65,000 private customers.
“Our sales in the food serving industry have declined due to the coronavirus. On the other hand, we now have even more retail orders coming in through our online store,” Otto explains.
While consumers are usually rather price-sensitive for their normal grocery purchases, they are ready to go to great expense for particular products when online shopping at Otto: the price for one kilo of steaks easily adds up to 60 euros.
“You surely owe your customers an explanation why this is so. You have to provide a great deal of information. Origin, age, date of slaughter. In our web shop, we have to tell the full story."
More and more consumers appreciate this and indulge in buying their viands online for home delivery. If you order online on Tuesday, you will receive the products on Thursday. This can only work well if the Magenta online store and the ERP system interact efficiently: two different software worlds, united via interfaces.
Such integration is crucial for the success of the digital business model, as it encompasses price maintenance as well as all food-relevant aspects like weights, sell-by dates, and lot sizes.
Through the direct communication between the ERP modules and the web shop, availability of the products is ensured automatically upon placing an order in the online store, taking into account the delivery times. Picking and dispatch can be initiated as soon as the order comes in.
“In this way, we guarantee extremely fast response times and, ultimately, a high level of customer satisfaction,” said Otto.
There is certainly potential for improving. “There is always friction when you work with two systems. Classic interface management with an add-on data warehouse – we have our specialists who deal with that every day. But we want to improve ourselves. This is why we will soon do the order entries in the ERP system instead of the online store. Then we no longer need to deal with the issue of data transfer.”
Complete data availability
The right strategy, a fundamentally new marketing approach, leading-edge technology: this combination has ensured the success of Otto Gourmet.
Since the beginning, the entrepreneurs have found a great way to share their tasks. Michael is in charge of the technical systems, Stephan is the strategist, and Wolfgang is the marketer. And they can no longer imagine their daily routines without ERP, reports Wolfgang Otto.
“I'm responsible for purchasing, so I work with the system every day. For example, pulling data that I need for sales or coverage planning. The system provides me with all the details that I personally need, so I can also use it as an analysis tool. I'm more than happy.”