Handelsblatt. By Florian Kolf.
This AI Is Trusted by German Retailers
From Otto and Armedangels to Edeka: More and more retailers are integrating Paretos’ software into their supply chains. They save significant money – and reduce waste.
Düsseldorf. For a retailer like Edeka, with over 3,500 independent shopkeepers supplied by dozens of warehouses across seven regional wholesale operations, it’s crucial to know what products to order when and how to distribute them across the warehouses. Only then can customers consistently find their desired products on the shelves.
Until now, this was calculated using Excel spreadsheets. However, with around 10,000 operational constraints for inventory availability, prices, or shipping, this leads to more than ten billion possible combinations per region. Such an effort could only be implemented a few times a year.
Recently, Edeka started using software developed by the startup Paretos. This program uses artificial intelligence (AI) to automatically and continuously analyze all available data and provide ongoing recommendations to optimize delivery routes, warehouse locations, or prices. “Its application provides us with measurable cost advantages for various challenges along the supply chain,” the retailer stated. It also reduces waste from overordered goods.
Edeka is just one of the clients supported by Paretos with this AI solution. Other retailers, like Otto Group, Armedangels, and the delivery service Hello Fresh, also use the software to optimize their supply chains.
“Everyone is talking about generative AI, such as language models like ChatGPT,” explains Paretos co-founder and CEO Thorsten Heilig in an interview with Handelsblatt. “We, however, offer business AI, which is the perfect software for this use case.” Now, the young company is securing millions in funding, enabling further expansion with this business model.
Investors Pour Millions Into Expansion
In a Series A funding round, a group of investors led by Acton Capital is injecting an additional €8.5 million into Paretos. Existing investors, including UVC Partners and LEA Partners, are participating again. Angel investors like Blinkist founder Niklas Jansen and former Vodafone CEO Hannes Ametsreiter are also involved.
“While many AI technologies are still in the hype phase, Paretos has impressively demonstrated that their decision intelligence solution delivers lasting value for businesses,” says Fritz Oidtmann, Managing Partner at Acton Capital. This is reflected directly in their business figures.
Using its "decision intelligence" approach, companies can analyze vast and complex data sets, use AI to automate predictions and decision recommendations, and derive actionable steps from them.
Companies want to know exactly how a technology impacts their business and expect value to be delivered not in five years, but immediately, says Paretos’ founder: “We can document with our existing clients that using our software pays off within the first year.”
Armedangels Reduces Overproduction With AI
Armedangels, a specialist in sustainable fashion, has been using Paretos’ AI for some time to analyze its ordering and return data. This helps the company better assess which colors and sizes sell poorly. As a result, Armedangels will produce 40,000 fewer items annually in the future, reducing unsold inventory that would otherwise need to be sold off at deep discounts and with lower margins.
Otto Group Uses AI for More Precise Reordering
The Otto Group, which has developed numerous AI applications in-house, has also seen measurable improvements using Paretos. For example, its subsidiary Lascana uses the AI to automate demand forecasting and reorder planning for up to 80,000 different items. Decisions are now “highly precise,” confirms Lascana manager Steffen Köhn, with logistical costs significantly reduced.
Experts confirm the technology’s potential. The Applied AI Institute for Europe classifies Paretos as one of 27 particularly promising AI startups in Germany.
How Companies Successfully Implement AI
The market research firm Gartner highlights the startup as one of nine European companies exemplary for the development of decision intelligence. Experts from Markets and Markets estimate that the market volume for this field of AI applications will quadruple to €50 billion by 2030.
Heilig founded Paretos together with machine learning expert Fabian Rang in mid-2020 in Heidelberg. In pre-seed and seed rounds, they had already raised €10 million in early-stage funding to build their company.
AI Applications Beyond the ChatGPT Hype
“When we introduce our technology to clients, the question is no longer whether to use AI but rather when and how,” Heilig reports. He adds, “The crisis is also an opportunity for us.” Pressure on companies to adapt in this dynamically evolving market is growing.
Paretos’ advantage lies in the low technical hurdles for integration, “The only prerequisite is that the data is available in some digital form,” explains the founder. “We can even consolidate data silos within companies.”
Paretos needs funding for development because the company operates on a licensing model. This allows customers to adopt the software easily and cost-effectively but poses a challenge for Paretos, as it requires significant upfront financing – leaving less capital initially available for investment.
An expansion into additional European countries is not currently planned. “The German-speaking market still offers us a lot of potential,” says Heilig, “which is why we want to focus on it over the next two years.”
