The online-only electrical goods store AO.com (formerly Appliances Online) on Wednesday launched its much-anticipated initial public offering.

Its offer price of 285p per share valued the company at £1.2 billion (relative to market leader Dixons Retail’s market capitalisation of £1.9 billion). AO.com’s share price quickly soared: a 367p share price on Thursday morning gave it a market capitalisation of £1.5 billion.

In 2013, AO.com had a 4% share of the online electrical goods market, we estimate. We do not comment on the value of a company – but our data does suggest reasons behind the high valuation of such online retailers.

How is online performing in electricals?

Our new report, Electrical Goods Retailing UK 2014, found many encouraging signs for retailers such as AO.com:

  • Online sales of electrical goods surged by around 20% in 2013, we estimate – with the channel gaining from the closure of Comet in December 2012.
  • Our consumer research showed nearly as many shoppers bought online as in-store in 2013 and we expect the Internet to become the leading channel by shopper numbers for electricals in 2014.
  • Our research also found more than one-third of shoppers believed online-only retailers to be usually cheaper for electrical goods than retailers with stores.

But while the online channel records strong shopper numbers, our Electrical Goods Retailing report found average value per shopper is much lower online than in-store. We think the challenge now for Internet-only retailers such as AO.com and Amazon is to move beyond a focus on value-seeking shoppers and push up average transaction values.

Electronics Market

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