Appliances Online: The £1 bet that turned into a £480m fortune

How one man went from pub bravado to being one of the biggest players in the electrical retail market.

Fourteen years ago 26-year-old kitchen salesman John Roberts bet a friend in a pub £1 that he could change the way white goods like fridges and washing machines are purchased. He not only won his bet but Roberts has now joined the ranks of the mega-rich with the stock market floatation of his domestic appliance business.

Roberts is the chief executive of internet retailer Appliances Online (or AO.com as it’s now known). The Bolton-based company, which employs about 1,000 people, made its stock market debut on 26 February 2014 with a £1.2billion valuation and an initial share price of 285p.

The listing saw Roberts take home a £86million fortune from selling part of his stake in the business while the soaring share price (398p by midday on the first day of trading) leaves him with a paper fortune of more than £480 million from his remaining 28.6% stake.

The best ideas happen in the pub

It was back in 2000 when Roberts realised the long supply chain for white goods such as washing machines was inflating the prices paid by consumers. But for all the big ideas, the story goes that it didn’t translate into action until friend bet him £1 that he wouldn’t quit his job with kitchen fitter Moben to set up a business. He did.

Together with Alan Latchford and John Dutton (neither still with the business) he set up DRL and launched its flagship website Appliances Online. The website aimed to streamline the electrical retailing process and cut costs for customers. Back then online retailing was still in its infancy and some critics doubted whether it would take off in the electrical market. Unperturbed, DRL also launched Appliance Deals which sold kitchen appliances at a low cost. Both sites focused heavily on customer service as well as price, offering next-day delivery seven days a week.

DRL went on to build and maintain online platforms for other companies such as Boots, Next, House of Fraser, B&Q and Iceland to sell kitchen appliances. The next few years saw the company grow by acquiring new corporate customers and providing white label services for them. However, AO remained the bulk of the DRL business, accounting for around three-quarters of sales.

In 2009 DRL acquired Icelandic distribution company Expert Logistics enabling it to have complete control over distribution and offer next day delivery as standard.

Keen to do more for its customers than just sell appliances, DRL launched review website Appliance Reviews in 2010. As well as product reviews written by customers, the site features demonstration videos, price comparison and real-time chat with product experts to help people researching appliances.

Socially mobile

Facebook has played a big part in Appliances Online’s success. In 2013 – the same year the website was rebranded to AO.com – its Facebook page reached the milestone of more than 1 million fans. Appliances Online was also named as the most engaging brand on Facebook in the UK in Social Bakers’ Social Media Report for August 2012.

The AO Facebook page invites customers to share stories about their purchasing experiences and a quick glance suggests AO is true to its word about keeping customers happy – there are numerous posts from customers impressed at how quickly their new appliance turned up and positive interaction from company spokespeople.

The company regularly posts new content too, including competitions and prize draws for free appliances. AO also uses Facebook ads in users’ news feeds to display the names of people’s friends who had already liked the brand, inviting them to like it as well.

As well as interacting with customers on social media, AO has stuck to its early pledge to concentrate on customer service. When rival electrical retailer Comet went into administration in November 2012 Roberts wrote a blog post for the Huffington Post in which he blamed Comet’s bad customer service, rather than cut-price online rivals, for its downfall.

“In a recession, bad customer service is simply economic suicide,” he wrote, “If anything, it was the company's poor attitude to its customers, deficient delivery service and inadequate aftersales offer that caused it to go into administration. Good old-fashioned customer service needs to be integral to any business whether purchasing in person or through the channels the latest technology offers.”

Staff matter

Getting customer service right means having the right staff and Roberts does as much as he can to keep his happy.

Everyone gets free crisps and chocolate at work (at a cost to Roberts of £50,000 a year) and to offset that also get gym membership for £2 a month. At the new premises he plans a nail bar and a massage parlour.

It worked. Today, DRL holds the number four spot in the Times 100 Best Companies to Work For list as well as having been awarded the PayPal Best Large Etailer award.

What next

After floating, AO’s share price surge left the city stunned and was reminiscent of the dotcom bubble of the early 2000s. AO’s valuation gave the company a larger market capitalisation than Debenhams at and wasn’t far behind rival retailer Dixon’.

Roberts is adamant the company is worth at least that much. AO says it has 24% of the electricals market in the UK and reported profits of £8.1million last year, and plan to

“We have a proven base case model, where we already have 10% total market share in the toughest electrical market in Europe that has been through the toughest recession ever seen,” Roberts said.

And what does he plan to do with the money he’s made so far?

“It isn’t about the money. I’ve got all the toys I want... What I want to do is turn this UK success story into an awesome pan-European one,” Roberts asserted.

Not bad for a £1 bet.