In the midst of a tumbling share price, with AO shares trading today at 175p, down nearly 50% from their high of 330p on the 10th Feb, news emerged that the CEO of online appliance retail giant AO.com, has said that the internet offers a more comprehensive way of demonstrating the features and benefits of sophisticated products than a big showroom.
Speaking at the Retail Week Live in London this week, John Roberts dismissed that point of view that the ability to demonstrate products in showrooms has long been seen as the differentiator between online and showroom retail.
“This is a big debate, do you get a better experience in store or online?” Roberts commented. “Let’s say I’m a national retailer with 500 stores and, therefore, 20,000 staff to train. I would expect the churn of those staff to be 25-30%, so training them is like painting the Forth Bridge. How on earth do you train all those people to understand every piece of technology and every single machine and present it in a consistent way? It’s absolutely impossible.
“However, we have over 100 people who work in our multi-media team and we can bring those products to life through video and animation and explain them in the simplest, most understandable way.”
Roberts then criticised the material produced by manufacturers and brands, saying they thought too much about marketing and not enough about the understanding of the consumer.
“When brands do it themselves there’s loads of [unnecessary] brand stuff. I remember watching one TV advert being presented to me by a brand and at the end of it I thought ‘I know what that is, and even I have no idea what you’re talking about.’
“So in two-and-a-half minutes a consumer can watch a video on our site – but then they can also see the opinion of 10,000 people that have bought it. You can’t get that in a showroom.”
Roberts was quick to qualify that he was talking about big multiple retailers and smaller, probably independent, retailers have a different proposition again.
“If you have an awesome retailer with a great person in store who really truly understands the product and can build a personal relationship with the consumer – I can never, ever, compete with that.
“But 40% of the market has migrated online. And that isn’t all about price so it must be something else.”
Not as simple as Online v In Store
Whilst its easy to take snippets of retail information and make soundbites Roberts was right on one aspect in that this is a subject of debate and whilst he is offering his own opinions on the matter, many many factors are at play.
Many retailers take the integrated multichannel approach with online and offline channels supporting each other so moving forward, whilst AO offer videos, many consumers do want to see the appliances with their own eyes and assess the benefits, features and product quality themselves. Something which price wont overcome no but as physical retailers have been bemoaning for years, there are those consumers who do go into shops just to see the products only to shop around online and whilst this maybe AO’s core market, that market is subject to big changes if multi channel retailers complain to the brands about AO benefiting unfairly from this.
It is true to say that there has been a surge in online sales and a decline in the High Street, and he is right in that the price of any given item being sold online or slightly higher in store is not the sole point to debate. Access to the stores selling appliances in this case is also a factor just as much as more people are using e-commerce so the upwards trend in general ecommerce could mask how online versus off works specifically for AO and that they don’t have more answers is perhaps worrying given the current performance of the share price and the realisation that the IPO did generate a lot of attention that they may not now be able to replicate without a lot of costly brand building and marketing.
However, whilst we can debate macro economic data and themes all day long, the shareholders of AO will expect the board to be able to demonstrate more knowledge in this regard if they are to improve from their current position and reverse the tumbling share price.