Ao.com to accelerate European roll-out after German launch

The German business launched in October and Ao said it is “delighted” with how sales are building. It is now doing the ground work for launches in the Netherlands and Belgium.

Ao chief executive John Roberts said: “We’re really pleased with how Germany is going, how we set it up, and the confidence it now gives us to push ahead.”

Roberts could not give specific timings for launching into the Netherlands and Belgium but said: “Our distribution centre is in Cologne so it will be closer to deliver to the Netherlands and Belgium than some places in Germany so that’s what we’re looking into now. We don’t do anything slowly but we will only launch when we can do it safely.”

Ao launched into Germany with a head office, distribution centre, fleet of vehicles, full IT system and around 170 staff at a cost of £3.3m. Roberts said Ao took a “cookie cutter” approach and that the German operation replicates the UK.

He said: “We have launched six months ahead of time with a better proposition than anyone else in the market. We did all this at the low end of our budget. We don’t mess around with expensive consultancies, we just jump in, get wet and deliver.”

“We just jump in, get wet and deliver”

Ao.com chief executive John Roberts

German competitors include MediaMarkt’s brands and independent shops. Roberts said in terms of price, delivery and service it is a “better proposition”. Ao offers next-day delivery which Roberts said is “better than Deutsche Post” adding “most German retailers deliver in around 5-10 days”.

Ao hired its German staff based on Ao’s “positivity test” said Roberts. The etailer, which is well-known for its strong company culture, wanted to replicate the feel of its UK operation, which Roberts said is “key to its success”. The German staff also spent time in the UK ahead of the launch and adopted “foster families” whereby they stayed with UK employees during their stay.

Roberts said Ao, which floated in February with a £1.2bn valuation which many observers have questioned, is delivering on its promises and if investors buy into its story it will offer “amazing value”. He said the valuation is getting “less punchy”.

Today, Ao reported it had doubled its EBITDA for the first half of the year.

He said Ao “believes the market is moving online” and added: “The dominant player in the market usually takes 30% share. If online becomes the dominant channel, we will become the dominant retailer. That will be 30% of a £50bn market, and we’re confident of that as our long term plan.”

Roberts said the consumer outlook remains tough but Ao’s growth will come from taking market share. He said: “We don’t forecast any market help at all.”

Going forward, Ao will consider click and collect delivery options and other product categories.

Ao is expecting at least a 40% year on year increase in sales on Black Friday but Roberts said that the total sales pot only increases “slightly” because of the event. “Black Friday moves demand around rather than gives a huge increase,” he said. “For us this is good because it evens the load rather than a rush in terms of delivery right before Christmas.”