Büromarkt Böttcher is one of the largest online OP players in the German market, right up there with the biggest and best of them. Most impressively, it continues to post phenomenal growth rates – 23% in 2014 and an astonishing 40% in 2015. And that’s not from a small base – the company broke through the F100 million barrier ($109 million) in 2014, more than small fry compared with the likes of Staples, Printus and Viking.
Success hasn’t happened overnight, however. Büromarkt Böttcher celebrated its 25th anniversary in 2015, so a timely occasion for OPI’s Heike Dieckmann to catch up with company founder and CEO Udo Böttcher and take a look back at what makes the company one of the most talked-about online resellers.
OPI: Let’s start with Udo Böttcher the man, rather than your company. What’s your background?
Udo Böttcher: I was brought up in a working-class family as one of three children in East Germany, part of what was then the communist Eastern Bloc. From a very early age – as soon as I started school – my parents sent me to gymnastics classes.
When I was 11, I began attending a specialist children’s sports academy where I trained for up to six hours a day, six days a week. I was a child athlete and won numerous competitions during my teenage years. I was the East German junior gymnastics champion and won Spartakiad medals on several occasions.
OPI: That’s a very long way from selling office products. What happened?
UB: I had a knee injury when I was 22 and had to give up my sporting career. I started training to be a gymnastics coach instead, but soon after the Berlin Wall came down in 1989 I lost my job.
I started organising and attending flea markets and there sold a number of things that I made myself out of plaster of Paris – garden gnomes and picture frames, for example. To advertise my services on flyers, etc, I bought a photocopier.
The flea market idea worked well for a while until the competition from what was formerly West Germany became too fierce. At that point I had no idea about tax law, economics, marketing – anything you need in business. What I did have was plenty of stamina and discipline – it’s what you learn in the sporting environment I grew up in. And I still had my photocopier. So that’s what I used to make money – take photocopies for other people.
At the same time, I did a two-year course to become qualified in tax law. Initially, my wife and I used our flat as a base, but after a while we set up a small copy shop in the town of Jena. We then slowly added office products to our offering.
OPI: How long have you had the name Büromarkt Böttcher?
UB: Since 1994. Before that we were called Kopierservice Böttcher, reflecting the early importance of the copy shop business.
OPI: What were the main challenges for you during the early days and when Germany became a unified country?
UB: The biggest challenge was acquiring the knowledge we needed. Like I said, I didn’t know anything about free-market economics and taxation or indeed about market analysis, advertising, etc.
OPI: When did you decide to make Büromarkt Böttcher an online business?
UB: Any entrepreneur wants to be on the cutting edge of what’s going on in their particular industry and I was – and still am – no different. We decided in the late 1990s to create an online shop for office supplies. It was a work in progress to begin with and we finally became operational with the online shop in 2002.
OPI: You must have been something of a pioneer with the concept at that time in the German market. What were the main challenges initially?
UB: The biggest challenge back then – and still now actually – is to provide an outstanding customer experience which guarantees customer satisfaction and retention.
And yes, you’re right. In 2002 it was certainly not the norm in Germany to sell online. Mail order was by far the preferred way of shopping. We started off slowly, of course, and in the early years, we only generated a maximum of 2% of our revenues online – the rest still came from the catalogue.
OPI: Do you still have a print catalogue today?
UB: Yes, we do. It’s revised and reprinted twice a year and sent to our customer base.
OPI: How is Büromarkt Böttcher structured?
UB: The Böttcher group of companies today consists of the online shop Büromarkt Böttcher AG, the logistics business, Werbe-Markt Böttcher (an advertising division) and Adwords-Solutions. In total, we have about 300 staff, but the majority work on the logistics side.
OPI: You are a ‘Aktiengesellschaft’ or ‘AG’ – does that mean that your staff have shares in the company?
UB: No, they don’t. What our employees do get, however, is a share of the profits we generate. For the financial year 2015, for example, we expect a profit of H1.5 million. This means that any member of staff who has been with the company for at least a year will get a gross bonus of up to H8,000.
OPI: Do you foresee the company being listed on the stock exchange?
UB: Not at the moment. We are in a very good position financially and are able to raise capital for new investments from within the company.
OPI: Who are your typical customers?
UB: About 93% of our customer base is B2B, with only about 7% coming from the B2C sector. Within the B2B segment, we deliver to small and medium-sized companies as well as to large corporate enterprises.
OPI: Given that broad customer base, who do you compete with?
UB: Initially, our competitors were hugely varied and included small, regional operators as well as the big mail order companies like Printus and Viking. Today, our head-to-head competitors are mainly the big German and global OP players and, of course, Amazon.
OPI: How dominant are the global OP operators like Staples and Lyreco in the German market?
UB: They are big competitors, but we believe we’re more than capable of holding our own. And as our figures show, no other reseller in the market is growing at the same rate as we are, so we’re clearly doing something right.
OPI: Tell me about your revenues.
UB: Our revenues have steadily grown over the years. In 2014, we breached the H100 million ($109 million) barrier for the first time. That in itself was a real milestone, but what was perhaps even more impressive for us is that we increased sales by 23% compared to the previous year. Our forecasts of 25% for last year have been wildly exceeded – we finished 2015 with total revenues of H140 million, so had a sales increase of 40%.
OPI: That’s phenomenal. How do you generate this type of growth when the overall market is fairly flat?
UB: We invest a huge amount of capital into marketing activities. We look at new advertising opportunities all the time and regularly introduce new campaigns. We also have 15 years of experience of working online and have conducted plenty of A/B testing, so we know fairly well how and where to find new customers and generate more revenues. As a result of our varied advertising campaigns, we are very successful at attracting new customers while at the same time holding on to our established base.
OPI: So what’s your core differentiating factor? What do you do that others don’t?
UB: Our speed to market in everything we do is a real advantage. We can make decisions quickly and then implement the consequences of these decisions very speedily as well.
Another real USP for us is that we’re hugely experienced in the internet business. We’ve been doing this for 15 years and, as such, have gained some valuable experience that others just don’t have. Lastly, outstanding customer service and a user-friendly online shop are vital.
OPI: Can particularly the smaller players keep up with today’s tech requirements?
UB: The market overall is relatively stable for now. There are a handful of large, powerful players and a multitude of smaller operators.
But you’re right. It’s increasingly difficult for smaller operators to defend their territory against the big players. It’s particularly challenging for them in terms of pricing and online strategy. And the trend, as I see it, is definitely more and more towards online shopping. As such, I believe that the big players will continue to gain more market share while the smaller ones will lose out.
I don’t see too many opportunities for some of these smaller firms, as just having a simple online presence isn’t good enough anymore. You need years of experience as well as A/B analysis and testing, not to mention considerable skills and knowledge in the area of SEO, SEM or other online marketing tools. All this takes a long time to acquire and perfect. But it’s more than that. Any company that wants to play a real part in the online game not only needs the know-how, but also a sizeable amount of financial as well as personnel resources.
OPI: How can Büromarkt Böttcher continue to grow at its current rate in the future? Do you have any acquisition plans?
UB: Of course we want to continue to grow and I’m sure that we will. The capacity is there and our logistics operation is set up for more orders. That’s all I can say.
OPI: Do you have any meaningful relationships with the wholesalers?
UB: We receive about 98% of all goods directly from the vendors. As such, we haven’t got a really deep relationship with any of the wholesalers, although we get a few SKUs from ADVEO and Iden.
That said, they might play a much bigger role for us in the future as our warehouse will reach capacity at some stage. When that happens we will look to work very closely with one or two wholesalers. We’ve already started negotiations with one of them. It’s early days yet, but in 3-4 years’ time we could be looking at a very different picture.
OPI: I guess those negotiations also coincide with the need to offer an ever-wider range of products?
UB: Our product portfolio has grown immensely over the years. We started out with traditional products such as copier paper, pens and clear plastic wallets. Now we sell 35,000 SKUs, branching out ever more into the wider facilities management categories, including breakroom, cleaning, food and maintenance. We’re hoping to extract another H200 million from the market over the next 3-4 years and offer our customers all the products that they could possibly want.
OPI: How are the manufacturers bearing up in the face of a changing – and consolidating – industry?
UB: Quite honestly, some manufacturers still haven’t grasped how the internet works and which resellers will dominate the market in the next few years.
Many vendors are strong advocates of a field sales force and I’m sure that’s still important. But in addition, we need online programmes, such as reseller-focused email marketing, social media initiatives and so on, and we are nowhere near where we need to be with the manufacturers here. And the online content of many products – or lack thereof – is still a huge problem.
OPI: What’s your coverage in Germany?
UB: We have over one million customers in Germany. We’re completely nationwide and deliver within 24 hours.
OPI: Do you have any expansion plans to take Büromarkt Böttcher abroad?
UB: No, not in the next few years.
OPI: Paperworld is upon us, so I have to ask: how important is the fair for you?
UB: We are always there, but Paperworld is definitely not as important for us now as it once was. We basically go for the small talk with the vendors.
OPI: What’s your prognosis for Büromarkt Böttcher and the business supplies sector in Germany overall for the next ten years?
UB: Ten years is too far ahead, I think. What I would say is that Büromarkt Böttcher will be one of the few operators in the German market over the next five years that will grow revenues as well as market share.
Our plan is to triple our 2014 revenues in that time period. In my opinion, companies like Printus will also have a real impact and continue to grow. And, as I said before, perhaps Google will become a contender in the next five years. We certainly have to prepare for that possibility.
One thing is certain: anybody who wants to grow in this sector has to invest first to reap the benefits.