AO released £50m capital through a share placing earlier this week to underpin its further growth prospects, including international expansion and introducing new categories.
Retail Week met with Steve Caunce – who this week was named chief executive of AO.com – in Germany last month to discuss the company’s direction of travel.
While AO.com founder John Roberts standing down may have come as a shock, the fact that long-time chief operating officer Steve Caunce has stepped into his shoes will surprise very few.
Having worked 12 years at the electricals etailer, closely alongside Roberts in a self-styled “brotherhood and partnership”, Caunce appears a comfortable fit for the top job.
But while Roberts and Caunce share the same vision – to make AO the best electricals retailer in Europe – they are quite different characters.
“As a newbie, trying to disrupt the market, we really needed to gain the trust of the suppliers. These relationships continue to develop and we’ll continue to prove that we’re great to partner with in 2017”
Steve Caunce, AO.com
Earlier in the year after the etailer’s golden quarter trading update, Caunce joked to Retail Week that speaking to him was “not quite the same experience” as a call with the company’s forefather.
And it’s true. Roberts, dubbed ‘the Kitchen King’, is every journalist’s dream – dolling out a quote a minute.
Caunce may not live up to Roberts’ reputation of being, as retail analyst Nick Bubb says, a “motor mouth”.
But, having been heavily involved in AO’s rapid growth, its IPO and its venture into Europe, he has reams of experience and knows the business inside out.
Roberts isn’t going anywhere, of course. He’s becoming executive director of the firm he set up in 2000 as a bet in a pub.
“This is not me exiting stage left, I’ve never been busier. I’m not going anywhere,” Roberts thundered earlier this week.
And his new role, focused on innovation and inspiring AO’s people, is fitting given Roberts’ self-confessed preference for bringing big-picture ideas to the table.
Founder John Roberts and chief executive Steve Caunce
Etailing the Caunce way
Caunce, with immediate effect, is responsible for the business’s strategy and financial performance.
But it shouldn’t be a stretch for the former Phones 4U finance boss, chartered accountant and maths graduate, particularly given the work he’s been doing already.
According to Roberts, on a day-to-day basis Steve “already runs the business and [has] the responsibilities that come with that”.
Where Roberts describes himself as being “useful for challenging people’s thinking and making ideas”, he says Caunce is “very good at extracting value out of things” and firing him “in the right direction”.
Roberts feels he’s better placed at Retail Week conferences (his words, not ours), doing talks and speaking to people rather than “sat in front of an analyst in the City”.
Indeed, in Roberts’ absence Caunce ran the show at AO’s capital markets day for analysts in Germany, which represented a landmark moment for the etailer – the beginnings, in earnest, of its business in Europe.
Caunce showcased AO’s now fully operational 360,000 sq ft distribution centre and headquarters in Dusseldorf and appeared extremely proud to have finally reached this point – and a tad relieved.
Sitting in one of the new building’s bright boardrooms, complete with bright green AO signage and fizzy soft drinks, he takes Retail Week through his plans.
“We realised our competitors could feasibly catch us up on the things we were winning on at the time, like price, proposition and range. So we had to think of something else to differentiate ourselves, and John came up with service”
Steve Caunce, AO.com
“We’re aiming for the European business to be profitable by 2020,” he says casually, seemingly drained from the work it has taken to reach this moment.
Rolling through his presentation – which he shared with the City a day beforehand – Caunce brightens up when he reaches a slide entitled ‘The AO Way’.
“About seven or eight years ago, John had a light-bulb moment,” he recollects.
“We realised our competitors could feasibly catch us up on the things we were winning on at the time, like price, proposition and range. So we had to think of something else to differentiate ourselves, and John came up with service.
“He was pacing around the office and suddenly yelled, I’ve got it!”
“What powers AO now, and turns those cogs, is our culture of caring more and wanting to do it better. That’s what makes the difference. That’s the AO way”
Steve Caunce, AO.com
Caunce shrugs and sits back in his chair with a knowing smile.
He acknowledges that Roberts’ bright idea appears passé from where we’re sitting today. But AO’s culture-first approach arguably set the bar for the future of service in ecommerce.
“From that day on, life became really easy for us. Every decision was easy – we just did what’s right and what would delight customers,” Caunce says proudly.
Leaning forwards again, he adds: “What powers AO now, and turns those cogs, is our culture of caring more and wanting to do it better.
”That’s what makes the difference. That’s the AO way, and that will make us the best electricals retailer in Europe.”
A family business
Caunce, who is softly spoken and relaxed in manner, becomes particularly animated when the discussion turns to AO’s people.
“Recruitment is really important,” he says.
“We have five core values in our business: smart, driven, forward, fun and, the big one, caring. If we can get people to share the values in the same way, then we’re away”
Steve Caunce, AO.com
“You can teach people how to do things, but you can’t teach them how to go about it. Too many businesses recruit on what people have done and not how they’ve done it.”
He admits that people who don’t share in AO’s attitude or values “don’t work out most of the time”.
“In interviews, I ask people questions about their family – how often they visit their mum and things like that. I watch for how they react.
“Family people do very well in our business,” he explains. “We want people who’ll stay and become part of the company.”
As the etailer ventured into Germany, it had to recruit 600 people all at once from different businesses and backgrounds.
“It’s our job now to nurture them and teach them the AO way, while being very respectful to local nuances.
“We have five core values in our business: bold, smart, fun, driven and – the big one – caring. If we can get people to share the values in the same way, then we’re away,” Caunce concludes.
AO, let’s go… overseas
At a time when the UK is pulling out of Europe, AO is making its push into it.
Undeterred by the outcome of the Brexit vote, it’s Caunce’s ambition to get AO’s European business “motoring”.
Now fully operational in Germany, with a bolt-on business in the Netherlands, the new chief is confident the hardest bit is over.
“We’re set up to expand quickly and in a strong position to replicate,” he asserts.
If the business can successfully alter the perception of etail in Germany, where online penetration is still low, it will be able to eat into an addressable market worth £94bn.
AO has made a new appointment to its executive team to support its growth ambitions. Native German Alpay Guener has joined the etailer as retail director, which Caunce says is a ”really exciting step forward”.
Then, in addition to creating rich online content to support its sales and win new customers, AO will continue to nourish its burgeoning relationships with German suppliers.
“We know how to scale countries now, and we know how to scale categories. When the time is right, we’ll grow again”
Steve Caunce, AO.com
Caunce admits this has been one of the biggest challenges about launching internationally.
“As a newbie, trying to disrupt the market, we really needed to gain the trust of the suppliers. These relationships continue to develop and we’ll continue to prove that we’re great to partner with in 2017.”
Following its launch of computing in the UK, Caunce is keen to introduce new categories across all its operating markets, but “only when the time is right”.
“We’re still learning on computing, but we will bring it here [to Germany] when we’re ready,” he says, adding that AO is hoping to launch a full small domestic appliances range in Germany this year.
Since its origins, when internet shopping was in its embryonic stages, AO has endured 16 years of learnings and growth.
“We know how to scale countries now,” Caunce says, “and we know how to scale categories. When the time is right, we’ll grow again.”
But in the meantime, it is focusing on becoming profitable in Europe by 2020.
“The foundation is absolutely laid but we must get on the journey to get to where we said. For now it’s in the oven to bake.”