Closing Down Sale

The mail-order firm was set up more than 80 years ago and its name is associated with reliable, reasonably priced products. But it was forced to close after no single investor was found to take over the company.

Industry insiders believe Otto paid a double-digit million euro sum for the deal. Neither the companies involved nor the insolvency administrator have disclosed the figure.

Quelle's Russian subsidiary has 280 employees. Executives said Otto was eager to expand in Russia and that the merger made a good fit. The mail-order business is currently seeing double-digit growth in Russia.

Quelle has annual sales of some 170 million euros ($251 million) in Russia, while Otto makes sales of about 200 million euros a year there, which it says already makes it the market leader.

Otto is buying the rights to the Quelle brand, some sub-brands such as Privileg and Universum and its internet domains in Germany and eastern Europe.

Brand with potential

Retail analyst Marco Atzberger described it as a sensible move on Otto's part. "Fundamentally, Quelle is a great German brand. It is a great name that awakens a lot of associations," said the RHI Retail Institute executive.

"It is a name with history that stands for a great past. Everyone remembers seeing the catalog on their table at home. It is a brand that radiates trust and security.

"That has, however, been somewhat shaken by what has happened, but it does not mean that this trust cannot be won back," Atzberger said.

In addition to the problems caused by Arcandor's failure, Atzberger said Quelle had also made mistakes in recent years. "It did not manage to sufficiently expand its Internet business and remained to focused on the catalog."

Quelle, which had satisfied German demand for mail-order goods since 1927, has branches in 18 countries, with some 8,000 employees involved in the business.

Otto has said it is not interested in any other parts of Quelle, for which talks with potential investors are continuing. The administrator decided two weeks ago that Nuremberg-based Quelle could not be saved and has begun a discount sale of its inventory and laying off staff.

Same fate for Karstadt?

It is also looking increasingly likely that no single investor will be found for the Karstadt department store chain, which was also owned by parent company Arcandor.

Metro's CEO Eckhard Cordes said on Tuesday that the retailer was still interested in acquiring some shops, but also reiterated that he was not interested in buying the entire chain.

In contrast to the mail-order market which grew in Germany this year, department stores in Germany have been suffering from declining growth for years, as discounters have increasingly eaten into their traditional share of the market.


Author: Julie Gregson
Editor: Andreas Illmer