AO accelerates shift from acquisition to long-term brand play

The electrical retailer is expecting “longer-term benefits” from a bigger investment in brand marketing, as it chases fame and improved consumer trust.

AO DeliveryAO World invested £40m in marketing last year, as the retail giant shifts its focus from acquisition and chases “fame and trust”.

Advertising and marketing investment grew by 6.6% in 2023, according to AO World’s latest results for the year ending 31 March 2024, accounting for just shy of 4% of the retailer’s overall £1bn revenue.

In addition to decreasing warehousing and other admin costs, AO – which sells 15% of all domestic appliances in the UK – has been siphoning its acquisition spend to TV and brand, where it expects to drive “longer-term benefits”.

“Brand awareness continues to improve, but remains a significant opportunity,” AO said in its results. “In order to drive new customers to our website and ensure customers return, we must maintain and improve our brand awareness.”

The retailer report that this shift from acquisition to brand has delivered growth in two of its key metrics – fame (spontaneous awareness) and trust (‘retailer I trust’ and ‘retailer I would consider first’).

AO World: Building brand awareness is our ‘biggest opportunity’ for growth

Pre-tax profits soared by 186% from £12m to £34.3m in the year ending 31 March. The retailer noted a 54% year-on-year increase in TV sales ahead of the Euros. Despite the increase in profit, AO saw its revenues drop 8.7% year-on-year in line with expectations following a decision to remove non-core channels and loss-making sales.

During the year, the brand reached 600,000 new customers, bringing the total historical customer base on its website to 12 million. Repeat customers accounted for 54% of the total customer base.

The brand emphasised its commitment to investing in methods that “ensure customers repeat purchase”, while also attracting new ones.

As part of its focus on trust, AO claimed to have received more than 500,000 Trustpilot ratings, averaging 4.8/5 stars, which puts it in the “excellent” category.

“This ranks AO as the leading and most trusted UK retailer for the combination of volume and quality, and is an output of the amazing service we deliver every day for customers at scale,” said founder and chief executive, John Roberts.

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AO did, however, report a challenging year for its mobile business, with the wider new contract mobile phone market down 14% year-on-year. The competition for customers led AO to increase investment in affiliate channels and “unsustainable discounts” to win market share.

“The losses incurred prompted a strategic reassessment of our approach to the mobile market, as the then status quo was unsustainable,” the brand said.

To boost mobile sales, AO acquired intellectual property rights and two new websites, opening further sales channels and “strengthening” its position in the mobile market.

Despite ongoing macroeconomic challenges, AO is targeting double-digit revenue growth and a pre-tax profit of £36m to £41m for the 2025 full year.