AO World chief executive John Roberts says the retailer must cement the shift to online that emerged during the lockdown by ensuring that its customers need never look back.
Roberts says its focus must now be on “brilliant service”, after a year that already saw it focus on the customer experience and put it in the “best possible position” when Covid-19 hit.
AO World today reported revenue of £1.05bn in the year to March 31, up by 15.9% from £902.5m in the previous year. In the UK alone, revenue grew 20.3% to £901.6m. Pre-tax profits of £1.5m represented an improvement from a loss of £20.2m a year earlier.
AO World chief executive John Roberts said: “Covid-19 has accelerated a shift in customer behaviour towards online shopping and we now need to cement that change. In short, we must drive forward so those customers never look back.
“At the start of the financial year, we went back to basics, bringing clarity and leadership to the fundamentals of our business. AO’s model and vertically integrated ecosystem is a structural advantage when properly leveraged. The whole business is now fixed on delighting our customers, driving innovation and creating growth. As a result we made significant headways against our four priorities of double-digit MDA [medium-sized domestic appliances] growth in the UK, becoming cash generative as a group, celebrating our journey to profitability in Germany and operating as One AO.
“That progress ensured that we were in the best possible position when Covid-19 hit in the final weeks of the financial year. Investing to make sure our operations were safe so that our customers and people were protected allowed AO to be a proud lifeline for customers during lockdown. Many experienced AO for the first time and were delighted with what they found. AO now has the opportunity to become a new habit that lasts – by delivering brilliant service for customers.”
The Covid-19 effect
AO says that the electrical market almost completely moved online during lockdown from March 23. The retailer saw strong demand and grew market share across many key categories from the start, and says that the online market has continued to grow even though customers are now able to return to bricks and mortar shops.
That growth in demand has meant operational challenges. Although its distribution network remained open during lockdown, the retailer had to pause most installation services as well as third-party logistics services. Now that social distancing has eased, it is able to offer these services again.
In the UK, AO says it has continued to invest in the customer journey and improve its overall retail experience. That includes, during the year, the launch of AO Finance and AO Mobile. The retailer is also adding payment methods and making its marketing more tactical though the use of social media and influencers. It says it achieved a record net promoter score in the first quarter of the current financial year.
AO reviewed its European business model at the start of the current full year and took the decision to focus on its German business and close its Netherlands business by the end of the year, at a cost of £2.5m. Now it is creating a ‘One AO’ model and centralising its ecommerce and marketing functions into the UK. The retailer says it is very encouraged by its sales growth in Germany, where it expects to be profitable once its revenues reach about €250m.
AO is currently seeing revenues for its current financial year ahead of expectations, but warns that a fall in consumer confidence and GDP in both the UK and Germany may result in a delay in buying big-ticket items. In the UK, purchases may decline as a result of restrictions in the mortgage market – although it also says that 70% of electrical purchases are to replace an existing item. It added: “there is also an additional level of uncertainty over a hard Brexit in December.”
The retailer’s B2B business won business from a number of housebuilders in the UK during the latest full-year but says that this work has now been delayed as sites closed during lockdown.
AO.com is a Top50 retailer in RXUK Top500 research.