IREU 500

AO World: the multichannel analysis

AO World [IRDX RAOC] today reported full-year results, with revenues of £701.2m in the year to March 31, 17% up on the previous year, and pre-tax losses of £7m, up from a loss of £6.7m last time. Most of its turnover came from the UK – at £629.7m this was 12.7% up on last time, while income from its European operations reached £71.5m – 75.9% ahead.

Here’s what the white goods to entertainment systems retailer, whose ao.com website is a Leading trader in IRUK Top500 research and a Top500 retailer in IREU Top500 research said about its multichannel strategy as viewed through the six performance dimensions on which that research rests.

Strategy and innovation

AO aims to be “the best electrical retailer in Europe” and says that by focusing on its strategy of culture, customers, categories and countries, it is “confident we can deliver against that objective.”

It now operates within three European countries – the UK, Germany and the Netherlands – and it says it will bring the same strategy to its overseas markets as it did in the UK. Its launch in the Netherlands was, it says, smooth thanks to the way in which it learned from the start-up on its German operations. It now has the confidence to “replicate this bolt-on model in other territories when appropriate.”

But, it added: “It has been a year of consolidation and whilst financial performance has not met our expectations (with investment losses being more than internally planned), we are nonetheless pleased with the strategic progress made and now have a firm foundation from which to further build our German and Dutch market offerings,” it said.

AO has opened a recycling centre in Telford to handle its obligations under WEEE regulations and says this could also represent an income opportunity.

Brand engagement

The retailer is focusing on building brand awareness in the UK, which it describes as “our biggest opportunity”. That’s particularly the case since it has been known for selling white goods yet has expanded into new categories, including computing in the UK and audiovisual in Germany over the last year. It has tackled this through TV advertising and added channels new to it including radio and print media, including in the press and on billboards. It has also increased its branding on its delivery truck fleet. “This will continue to promote our brand on a daily basis across the country,” it said. Such changes have “slightly” improved brand awareness. In order to build stronger, long-term brand awareness it has sponsored Britain’s Got Talent, both on air and through its companion mobile app. “This investment is designed to build long-term brand awareness rather than drive short-term sales as we seek to develop and instil trust and confidence,” the retailer said in today’s statement. “Going forward we must use our brand investment to very clearly highlight the difference of AO to the customer.”

In the German market, AO started to focus on brand awareness only during the second half of the year, with joint TV advertising campaigns, a branded fleet and print media advertising.

Operations and logistics

The retailer opened a regional distribution centre and head office for its European operations in in Bergheim, Germany. While it mainly uses its own delivery fleet, it is also working with third party logistics businesses to serve customers in more remote areas.

In the UK it added two extra outbases, in Slough and Dundee, to “ensure resilience in our delivery network and maintain market-leading product availability for customers, while reducing stem mileage and improving efficiencies in our logistics.” AO says its premier fleet has grown as it responds to demand for more complex installation services.

Merchandising

A digital content team of more than 40 people creates “innovative and essential content” such as 3D videos and features, in order to serve AO customers who visit the website for research purposes. “This content adds value to the customer journey and to the manufacturers we buy from and we are investing in rolling this out further,” AO said in its statement.

The retailer publishes an online lifestyle magazine and also engages via social media and personalised email programmes with hints on maintaining and using products.

Mobile and multichannel

AO Launched a MyAO app during the year, enabling users to track their orders. In time it will be developed to enable transactions and to tie into the ‘My Account’ functionality already launched on the website.

It said that in the UK, traffic growth was encouraging in the year, with strong growth in visits to its mobile site. On mobile, it added: “we have some work to do to increase our conversion rates to levels similar with those on desktop and tablet devices.”

The Customer

AO now has 4m customers in the UK and has focused on making the customer journey as easy as possible, while staying personal. It has customer labs that enable it to understand customer needs. It has developed its voice response system via the telephone to offer “the most efficient route of service, based on the stage of the customer’s journey” as part of a self-service strategy. Live Chat and automated alternative Nano Chat are also available.

It said it had seen an “encouraging customer response” when it started to sell computing produdcts in the UK and audio-visual items in Germany. It also reported “excellent” customer experience metrics including Trustpilot scores of 9.5/10 in the UK and 9.6/10 in the Netherlands, as well a Trusted Shops score of 4.8/5 in Germany. Net promoter scores reached more than 80 in the UK and more than 85 in Europe.

“Our customer service metrics remain exceptional across all of the countries in which we operate because we make it our mission to care more and we continue to innovate to create the best customer experience for tomorrow,” said chief executive Steve Caunce. “This has helped us to continue to gain market share in our categories and countries, notwithstanding the challenging trading environment in the UK.”

Mentioned in this piece…

AO.com

AO.com

IRDX: RAOC

AO.com (formerly Appliances Online) was the first website of parent group DRL Limited who also sell kitchen appliances through partnerships with Boots, Next, House of Fraser, B&Q and Iceland. In 2009 ao.com acquired distribution company Expert Logistics enabling it to deliver its own products. (more…)

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