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Germany's Otto invests to see off Amazon, Zalando threat

The logo of Amazon is pictured on a warehouse in Bad Hersfeld May 14, 2013. REUTERS/Lisi Niesner

BERLIN (Reuters) - Germany's Otto , Europe's second biggest e-commerce player, is investing in its mobile platform and plans to launch a new fashion website as it fights to keep pace with the rapid expansion of Amazon .

The Otto Group, a mail order firm founded in 1949 which made the shift into e-commerce and now runs more than 60 websites worldwide including Germany's OTTO site, said online sales rose 7.6 percent to 6 billion euros ($8.24 billion) in 2013/14.

Otto is facing stiff competition in its home market from Amazon, which saw German sales grow 21 percent to $10.5 billion in 2013, and online fashion retailer Zalando, which increased annual sales by 52 percent to 1.76 billion euros.

Otto's online sales in Germany grew 7.8 percent to 4 billion euros in the financial year to February 28, slower than the average for all e-commerce, which grew 12 percent in 2013 to 33.1 billion euros, according to the German Retail Federation (HDE).

Otto is targeting group sales of 8 billion euros by 2015 and is investing 300 million euros in its online business to that end, including in new software for the OTTO website, mobile payments firm Yapital and other start-ups in e-commerce.

It will launch a new online "ecosystem" for young fashion-conscious women with several special shops and is working on a company-wide "mobile-first" initiative, hoping to drive 50 percent of traffic onto smartphones and tablets by 2016.

Otto currently appeals to an older market than Zalando and Britain-based online retailer ASOS Plc , which targets fashion-conscious 20-somethings. Zalando, whose biggest investor is Sweden's Kinnevik , is considering a possible floatation this year.

Otto noted that every other German already owns a smartphone and one in five uses a tablet, with some of its online stores already seeing 40 percent of visits on mobile devices.

"Smartphones and tablets enable a highly personalised, impulse driven shopping experience that is increasingly demanded by consumers," Rainer Hillebrand, deputy chairman of Otto Group, said in a statement.

(Reporting by Emma Thomasson; Editing by Noah Barkin)